8 Stocks Compounding Shareholders' Wealth With Increased Dividends
Some goals for building wealth would include putting kids through college, paying off mortgages, helping family members and enjoying a financially worry-free retirement. If you don't have a generous relative or wealthy parents, you will need to devise a plan to help you reach your goals. My plan includes great dividend stocks that increase their dividends each year.
Below are several companies compounding their shareholder's wealth with increased cash dividends:
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Tags: TXN, GS, KMI, KMP, PAG, VLP, HCSG, WNR,
Weekly Links: October 20, 2014
Each Sunday I highlight any notable articles that I came across over the past week, along with any Carnivals I participated in. For those readers not familiar with carnivals, it's where personal finance bloggers submit their best articles of the week with one blog serving as the host. The entries are separated into various categories such as Investing, Credit, Debt, Budgeting, Frugality, Wealth Building, Money Management, Financial Planning, Insurance, Taxes, The Economy, Real Estate, et. al.
Articles you might find interesting:
- 8 Stocks Compounding Shareholders' Wealth With Increased Dividends
- Verizon Communications Inc. Is Focused On Generating Cash And Lowering Debt
- How Saving Grows The Economy – Comic Book Version
- A Look At Four Great Dividend Stocks
- S&P 500 down almost 50 points, DOW down more than 400 points! Time to buy? Not yet.
- My Dividend Portfolio: Q3 2014
- New Purchases – 10/14/14
The DIV-Net Featured Articles:
- 5 Stocks With Strong Dividend Growth Metrics
- 10 Stocks Giving Investors More Money
- Can General Electric Return to its Previous Blue-Chip Dividend Growth Stock?
- Think Like An Owner – Part 2
- Disney: A Wide-Moat Stock To Hold Forever
Articles from D4L-News:
When Dividend Stocks Become Top Picks
Looking for yield? Who isn’t these days. Now just may be a fortuitous time to snap up some dividend paying stocks to enjoy both the equity growth of a new product cycle, as well as a sweet dividend. The reason: Interest rates worldwide are at all- time lows and not exhibiting signs of rising, at least for the moment. ith the US economy in mid-cycle growth, now might be a good time to add some large cap Technology stocks as income generating equities to your portfolio. Investors might also consider...
3 Dividend Stocks That Have Delivered Cash for Decades
There’s a strong tendency among income investors to seek out safety in dividend stocks. The theory, of course, is that if a company can afford to pay out dividends, or even raise the payout every year, it must be generating enough free cash flow to do so. It also means that said dividend stocks also have plenty of money to both run and grow the business. There’s only one caveat to all this, which is that it is possible for these stocks to become...
5 Dividend Stocks That Could Double Your Money in 10 Years
Now that you're well aware of the big risks associated with yield-chasing, let's have a look at five high-yield dividend stocks that have the potential to double your money in a decade or less based solely on their stipend. Here are five high-yield dividends that could double your money in a decade or less...
3 Top-Tier Stocks With Massive Dividends
Dividend stocks are great. Unfortunately, many of the highest-yielding stocks offer little in the way of capital appreciation. In fact, most tend to pay out 10%-12% annual yields, but their share prices fall year after year. Naturally, I think the best dividend stocks aren't just stocks that can pay a big dividend, but those that can also grow in value over time. Here are three stocks that have historically fit the bill with close to double-digit yields and capital appreciation on top...
Retirees, You CAN Count On Dividend Stocks To Deliver From Here
I just finished reading another article that I disagree with. Not only do I disagree with the author but the article further supports those investors who follow the dividend growth investment path. The author's suggestion is as follows: "While the accumulation stage and spending stage are entirely different beasts, perhaps a retiree should think like a young accumulator whose greatest weapon is investing in stocks on a regular schedule to acquire stocks when they offer sensible or attractive valuations? That would mean...
Click Here For More Dividend News
There are some really good articles here, please take time and read a few of them.
D4L-Premium Services Updated:
The D4L-Dashboard, Analytical Reports, D4L-Data, and The D4L-Newsletter (October edition) have been updated and are available at the D4L-Premium Services web site at: [Click Here] Not a subscriber? [Click Here] for for more information on the benefits of these services, sample reports, pricing and subscription information.
(Photo: Sachin Ghodke)
Verizon Communications Inc. Is Focused On Generating Cash And Lowering Debt
Linked here is a detailed quantitative analysis of Verizon Communications Inc. (VZ). Below are some highlights from the above linked analysis:
Company Description: Verizon Communications Inc. is the largest U.S. wireless carrier, Verizon also offers wireline and broadband services primarily in the northeastern U.S.
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Kimberly-Clark Co. (KMB) Dividend Stock Analysis
Linked here is a detailed quantitative analysis of Kimberly-Clark Co. (KMB). Below are some highlights from the above linked analysis:
Company Description: Kimberly Clark Corp. is a global consumer products company producing tissue, personal care and health care products. Its brands include Huggies, Pull-Ups, Kotex, Depend, Kleenex and Scott.
Fair Value: In calculating fair value, I consider the NPV MMA Differential Fair Value along with these four calculations of fair value, see page 2 of the linked PDF for a detailed description:
1. Avg. High Yield Price
2. 20-Year DCF Price
3. Avg. P/E Price
4. Graham Number
KMB is trading at a premium to all four valuations above. The stock is trading at a 21.5% premium to its calculated fair value of $89.25. KMB did not earn any Stars in this section.
Dividend Analytical Data: In this section there are three possible Stars and three key metrics, see page 2 of the linked PDF for a detailed description:
1. Free Cash Flow Payout
2. Debt To Total Capital
3. Key Metrics
4. Dividend Growth Rate
5. Years of Div. Growth
6. Rolling 4-yr Div. > 15%
KMB earned two Stars in this section for 1.) and 3.) above. A Star was earned since the Free Cash Flow payout ratio was less than 60% and there were no negative Free Cash Flows over the last 10 years. KMB earned a Star for having an acceptable score in at least two of the four Key Metrics measured. The company has paid a cash dividend to shareholders every year since 1935 and has increased its dividend payments for 42 consecutive years.
Dividend Income vs. MMA: Why would you assume the equity risk and invest in a dividend stock if you could earn a better return in a much less risky money market account (MMA) or Treasury bond? This section compares the earning ability of this stock with a high yield MMA. Two items are considered in this section, see page 2 of the linked PDF for a detailed description:
1. NPV MMA Diff.
2. Years to > MMA
The NPV MMA Diff. of the $386 is below the $500 target I look for in a stock that has increased dividends as long as KMB has. The stock's current yield of 3.1% exceeds the 2.98% estimated 20-year average MMA rate.
Memberships and Peers: KMB is a member of the S&P 500, a Dividend Aristocrat, a member of the Broad Dividend Achievers™ Index and a Dividend Champion. The company's peer group includes: The company's peer group includes: Procter & Gamble Co. (PG) with a 3.1% yield, Colgate-Palmolive Co. (CL) with a 2.2% yield, and Clorox Corporation (CLX) with a 3.0% yield.
Conclusion: KMB did not earn any Stars in the Fair Value section, earned two Stars in the Dividend Analytical Data section and did not earn any Stars in the Dividend Income vs. MMA section for a total of two Stars. This quantitatively ranks KMB as a 2-Star Weak stock.
Using my D4L-PreScreen.xls model, I determined the share price would need to decrease to $100.40 before KMB's NPV MMA Differential increased to the $500 minimum that I look for in a stock with 42 years of consecutive dividend increases. At that price the stock would yield 3.4%.
Resetting the D4L-PreScreen.xls model and solving for the dividend growth rate needed to generate the target $500 NPV MMA Differential, the calculated rate is 4.5%. This dividend growth rate is above the 3.7% used in this analysis, thus providing no margin of safety. KMB has a risk rating of 1.75 which classifies it as a Medium risk stock.
KMB enjoys stable demand for its household and personal care products. General economic conditions in developed markets has not improved significantly over the past several years. The company's large international presence remains exposed to unfavorable foreign currency translations. Future sales growth should be helped by expansion in non-traditional categories and emerging markets.
The healthcare segment has experienced slowing sales growth. In November 2013, the company announced plans to to divest its healthcare business and focus on its core consumer and professional brands. The healthcare business will be spun off as a separate publicly traded company named Halyard Health, Inc. and will trade with the symbol HYH. It will be headquartered in Alpharetta, GA, near Atlanta and have approximately $1.7 billion in annual sales. The spin off will likely close on Oct 31, 2014 with the new company beginning to trade on November 3rd.
The company's Free Cash Flow Payout at 57% (down from 62%) is slightly below my acceptable level of 60%. However, Debt to Total Capital at 59% (up from 54%) is well above the 45% maximum I look for. The company's last dividend increase of 3.7% was small compared to the 7.8% average over the previous 4 years. In addition, KMB is trading at a 21% premium to my calculated fair value of $89.25, so for now I will wait for a more opportune time before adding to my position.
Disclaimer: Material presented here is for informational purposes only. The above quantitative stock analysis, including the Star rating, is mechanically calculated and is based on historical information. The analysis assumes the stock will perform in the future as it has in the past. This is generally never true. Before buying or selling any stock you should do your own research and reach your own conclusion. See my Disclaimer for more information.
Full Disclosure: At the time of this writing, I was long in KMB (2.3% of my Dividend Growth Portfolio). See a list of all my dividend growth holdings here.
- AT&T Inc.: Well Positioned And Trading Below Fair Value
- 3M (MMM): An Outstanding Company With An Excellent Future
- IBM: Trading At A Discount And Double-Digit Dividend Growth
- CVS Health Corporation: Trading Below Fair Value And Strong Dividend Growth
- Lockheed Martin Corp. Priced To Buy
- More Stock Analysis
Tags: [KMB] [PG] [CL] [CLX]
Don't Forget: Buy And Hold Is Not Buy And Forget
We have all heard it. Mainstream media pundits talking about 'the lost decade' and that 'buy-and-hold as a strategy is dead and gone, if ever it was a viable strategy.' Sorry folks, but I am not buying or holding their position on buy-and-hold. Buy-and-hold is neither dead, gone or even sick, but I will concede - it is misunderstood.
Walt Woerheide, a professor of investments at American College and co-author of the financial professionals' textbook "Fundamentals of Investments for Financial Planning," shared his views on buy-and-hold in an interview on BankRate.com. Here are some of his notable comments when asked if buy-and-hold was dead:
No, absolutely not, and it never will be. It comes back to the fact that anybody who thinks they are going to outguess the market is going to be wrong as often as they are right.However, buy-and-hold is not buy-and-forget. We must constantly monitor our holdings to ensure there is no deterioration in the underlying fundamentals of the stocks we hold. This concept was reinforced when I came across a couple of articles I wrote back in August 2008.
You had to be correct about 80 percent of the time to beat a buy-and-hold strategy.
The biggest danger in trying to guess the market is being out when the market makes a big jump.
Every time you are jumping in and out, you're paying commissions.
The first article listed my top 5 performing stocks for 2008 through July 31st. The stocks were:
Wal-Mart (WMT) | Yield: 2.5%
Canadian National Railway Company (CNI) | Yield: 1.4%
Health Care Property Investors Inc. (HCP) | Yield: 5.2%
Johnson & Johnson (JNJ) | Yield: 2.8%
McDonald’s (MCD) | Yield: 3.7% (see full analysis)
An interesting note is that I still own each of these stocks and they continue to provide excellent life-to-date returns ranging from MCD's 9.8% to CNI's 18.1% (annualized). In addition WMT, HCP and JNJ have provided double-digit annualized returns since I purchased them. Buy-and-hold continues to work well for all these holdings.
The second article focused on my bottom 5 performing stocks for 2008 through July 31st. The stocks were:
iStar Financial Inc. (SFI) | Yield: n/a
American Capital Strategies, Ltd. (ACAS) | Yield: n/a
SunTrust Banks, Inc. (STI) | Yield: 2.2%
First Industrial Realty, Inc. (FR) | Yield: 2.4%
General Electric (GE) | Yield: 3.6%
This group also shared an interesting commonality - I no longer own any of them. Each stock was sold when the company announced a reduction in their dividend rate. This was a fundamental change that resulted in each stock no longer meeting my criteria as an income investment.
Buy-and-hold is a winning investment strategy when consistently applied over the long term. What is misunderstood by the detractors is that pruning your portfolio of investments that no longer meet your objectives, is just as important as the original selection (and holding) of the stock.
Full Disclosure: Long WMT, HCP, JNJ, MCD in my Dividend Growth Portfolio and long CNI in my International Income Portfolio. See a list of all my dividend growth holdings here.
- 7 Dividend Growth Stocks That Could Make You Wealthy
- 12 High-Yield Managed Distribution Policy Funds
- The 2013 Elite Dividend Stocks List
- 6 High-Yield Dividend Achievers With 25 Years of Increases
- Investments That Pay Monthly Dividends
Tags: [WMT] [CNI] [HCP] [JNJ] [MCD] [SFI] [ACAS] [STI] [FR] [GE]