Warren Buffett is arguably the best investor in the world. His main holding, Berkshire Hathaway (BRK.B) has delivered market beating returns during his leadership. Buffett’s strategy is characterized by purchasing stocks which have a long-term durable competitive advantage in a stable industry. Buffett then holds on to these companies and reinvests distributions either back into the business or by purchasing new businesses. In a previous article I mentioned that Berkshire’s portfolio has likely generated over $1.30 billion in dividends in 2009. Some of its holdings included seven dividend aristocrats.
Stocks which are included in the dividend aristocrat’s index represent companies which have raised dividends for over 25 years in a row. The companies included in the index represent some of the world’s most recognizable brands such as Coca Cola (KO), McDonald’s (MCD) or Procter & Gamble (PG). They have strong durable advantages, which have allowed them to increase profits and share the wealth with shareholders by consistently raising distributions, through several economic crises, oil shocks and asset bubbles. In addition to that these wide-moat companies derive substantial portions of their revenues globally, which makes them somewhat immune to local economic downturns.
I believe that by combining Buffett’s strategy of purchasing the companies with strong competitive advantages with my dividend growth strategy would produce exceptional results for enterprising dividend investors. The dividend stocks in Berkshire’s portfolio include:
Becton, Dickinson and Company (BDX), a medical technology company, which develops, manufactures, and sells medical supplies, devices, laboratory equipment, and diagnostic products worldwide. The company has increased its quarterly dividend in each of the past thirty-seven years. (analysis)
The Coca-Cola Company (KO) manufactures, distributes, and markets nonalcoholic beverage concentrates and syrups worldwide. It principally offers sparkling and still beverages. The company has increased distributions for 47 consecutive years. I would be a buyer of KO below $54.66. Check my analysis of the stock.
Exxon Mobil Corporation (XOM) engages in the exploration, production, transportation, and sale of crude oil and natural gas. The company is a component of the S&P 500, Dow Jones Industrials and the Dividend Aristocrats indexes. Exxon Mobil has been consistently increasing its dividends for 27 consecutive years. I would only be a buyer of XOM on dips below $60. Check my analysis of the stock.
Johnson & Johnson (JNJ) engages in the research and development, manufacture, and sale of various products in the health care field worldwide. The company has boosted distributions to shareholders for 47 years in a row. I would be a buyer of JNJ below $65.33. Check my analysis of the stock.
Lowe’s Companies (LOW) is one of the original components of the Dividend Aristocrats . The home improvement retailer which operates the United States and Canada has increased its dividends for 47 consecutive years.
The Procter & Gamble Company (PG) engages in the manufacture and sale of consumer goods worldwide. The company operates in three global business units (GBUs): Beauty, Health and Well-Being, and Household Care. The company has rewarded stockholders with dividend increases for 53 consecutive years. I would be a buyer of PG below $58.67. Check my analysis of the stock.
Wal-Mart Stores, Inc. (WMT) operates retail stores in various formats worldwide. The world’s largest retailer has a 35 year record of annual dividend raises. I would be a buyer of WMT on dips. Check my analysis of the stock.
Full Disclosure: Long KO, JNJ, PG and WMT
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Three well-known dividend aristocrats raised dividends last week. The companies include Coca-Cola (KO), Abbott Labs (ABT) and Sherwin-Williams (SHW). Another promising dividend raiser included Swiss Company Nestle (NSRGY). In dividend investing it is important not only to concentrate on companies with solid competitive advantages, but also ones which grow earnings and dividends along the line.
The Coca-Cola Company (KO) manufactures, distributes, and markets nonalcoholic beverage concentrates and syrups worldwide. The company’s board of directors recently approved the Company's 48th consecutive annual dividend increase, raising the quarterly dividend approximately 7 percent from $0.41 to $0.44/share. This dividend aristocrat currently yields 3.20%. (analysis)
Abbott Laboratories (ABT) manufactures and sells health care products worldwide. The company’s board of directors increased its quarterly dividend by 10% to 44 cents/share. This marks the 38th consecutive year that Abbott has increased its dividend. This dividend aristocrat currently yields 3.20%. (analysis)
Nestle (NSRGY) engages in the nutrition, health and wellness sectors. The company is proposing a dividend increase of 14.3% to CHF 1.60/share ($1.477). This international dividend achiever has raised distributions each year since 1997. The stock currently yields 3%.
The Sherwin-Williams Company (SHW) engages in the development, manufacture, distribution, and sale of paints, coatings, and related products. The company boosted its quarterly dividend by 1.40% to 36 cents/share. This marks the thirty-second consecutive annual dividend increase for this dividend aristocrat. The stock currently yields 2.20%.(analysis)
Of the four stocks mentioned, Coca-Cola (KO) and Abbott Labs (ABT) are attractively valued at the moment. Sherwin-Williams (SHW) not only has a low current yield but also the last two dividend increases have been disappointing, making the stock a hold. Nestle (NSRGY) does look like a promising candidate for addition to a dividend growth portfolio, since it would also bring in some international diversification. I would place it on my list for further research.
Full Disclosure: Long ABT and KO
- Coca Cola (KO) Dividend Stock Analysis
- Abbott Labs (ABT) Dividend Stock Analysis
- Dividend Aristocrats List for 2010 - Sherwin-Williams (SHW) Dividend Stock Analysis [more]
Many dividend investors focus on the dividend aristocrats, the dividend champions and the dividend achievers lists, as a starting point in their research. While most investors picture dividend stocks as slow growth and boring utility stocks, the three lists portray a different perspective. The dividend achievers list, which focuses on companies which have raised distributions for at least 10 consecutive years, consists of slightly less than 300 individual issues representing almost all industry groups out there. The dividend aristocrats list, which features companies which have boosted distributions for over a quarter of a century, is also sector-diversified. The dividend champions list also focuses on companies which have raised distributions for over a quarter of a century. I find the champions list more inclusive, whereas the aristocrats list has not included certain companies despite the fact that they have increased distributions for over 25 years in a row. Sometimes it is challenging to determine the actual record of dividend raises, especially when two companies merge.
I was amazed to find several companies on the champions list, which have raised distributions for over 50 consecutive years. The companies include:
Diebold (DBD) engages in the development, manufacture, sale, installation, and service of automated self-service transaction systems, electronic and physical security systems, and election systems and software worldwide. The company recently boosted its dividend for the 57th year in a row. Yield 3.70%.
American States Water Company (AWR), through its subsidiaries, provides water and electric utility services to residential and commercial customers in the United States. The company engages in the purchase, production, and distribution of water. The company has raised distributions for 55 years in a row. Yield 3.20%.
Dover Corporation (DOV), together with its subsidiaries, manufactures industrial products and components, as well as provides related services and consumables in the United States and internationally. Dover has raised its payout for 54 consecutive years. Yield 3.20%.(analysis)
Northwest Natural Gas Company (NWN), doing business as NW Natural, engages in the storage and distribution of natural gas in Oregon, Washington and California. The company operates in two segments, Local Gas Distribution and Gas Storage. This utility company has increased dividends for 54 years in a row. Yield 3.90%.
Genuine Parts Company (GPC) distributes automotive and industrial replacement parts, office products, and electrical/electronic materials in the United States, Canada, and Mexico. It has four segments: Automotive, Industrial, Office Products, and Electrical/Electronic Materials. The company has consistently boosted dividends for 53 years in a row. Yield 4.20%.
The Procter & Gamble Company (PG) engages in the manufacture and sale of consumer goods worldwide. The company operates in three global business units (GBUs): Beauty, Health and Well-Being, and Household Care. The company has increased dividends for 53 years in a row. Yield 2.80%. (analysis)
Emerson Electric Co. (EMR), a diversified global technology company, engages in designing and supplying product technology, as well as delivering engineering services and solutions to various industrial, commercial, and consumer markets worldwide. Yield 2.90%. (analysis)
3M Company, (MMM) together with its subsidiaries, operates as a diversified technology company worldwide. It operates in six segments: Industrial and Transportation; Health Care; Safety, Security and Protection Services; Consumer and Office; Display and Graphics; and Electro and Communications. The company has raised distributions for 51 years in a row. Yield 2.70%.(analysis)
Integrys Energy Group, Inc. (TEG), through its subsidiaries, operates as a regulated electric and natural gas utility company in the United States and Canada. This utility company has increased dividends for 51 years in a row. Yield 6.60%.
Vectren Corporation (VVC) provides energy delivery services to residential, commercial, and industrial and other customers in Indiana and Ohio. This utility company has increased dividends for 50 years in a row. Yield 6.00%.
I did check with the Moody’s dividend achievers handbook and each company’s website in order to confirm whether the companies have actually raised distributions for 50 years in a row. I didn’t include Parker-Hannifin Corporation (PH), despite the fact that it was on the champions list, because it failed to increase dividends in 1991.
Just because a company has raised distributions for 50 years does not necessarily mean that it would continue raising them for over a decade. Back in early 2000’s Winn-Dixie (WINN) had the longest record of dividend increases, after boosting its payout for over 56 years. The company was losing market share however and was heavily leveraged, which ultimately lead to its filing for chapter 11 protection and wiping out all shareholders equity in the process.
The positive factor in the story is that there is a chance that some of the best dividend stocks of today which are included in the dividend achievers or the dividend aristocrats lists could end up raising distributions for 40 more years. Even if a company drops from one of those elite dividend indexes, it typically does so either because it is acquired by a competitor at a handsome premium or because it simply freezes distributions. Kellogg’s (K) is a nice example of a company which had raised distributions for over 44 years, before freezing distributions in 2001. The company then started raising distributions again in 2005 and has been boosting its payout ever since.
Full Disclosure: Long EMR, MMM, PG,
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Last week was like a record week for dividend increases so far in 2010. I have included 20 dividend stocks which increased distributions for the week. I separated the dividend increasers into dividend growth stocks and potential dividend achievers.
Dividend Growth Stocks
The stocks which I classify as dividend growth stocks include the dividend achievers, dividend aristocrats and dividend champions. These are all stocks which have increased distributions for over ten years in a row. A rising dividend payment would increase your yield on cost over time, despite the average current yield on most issues being close to the yields on major market indices.
Colgate-Palmolive Company, (CL) together with its subsidiaries, manufactures and markets consumer products worldwide. The company increased its quarterly dividend by 20.40% to 53 cents/share. This is the forty-seventh consecutive dividend increase for Colgate-Palmolive, which is a dividend champion. The stock yields 2.70%. (analysis)
Commerce Bancshares, Inc., (CBSH) is a bank holding company, engages in general banking business. It offers retail, corporate, investment, trust, and asset management products and services to individuals and businesses. The company hiked its quarterly dividend by 2.80% to 23.50 cents/share. Commerce Bancshares is a dividend champion, which has raised dividends for forty-two years in a row. The stock currently yields 2.50%. (analysis)
Archer-Daniels-Midland Company (ADM) procures, transports, stores, processes, and merchandises agricultural commodities and products in the United States and internationally. The company raised its quarterly dividend by 7.10% to 15 cent/ share. This dividend aristocrat has raised distributions for thirty-five years in a row. The stock currently yields 2%. (analysis)
Bemis Company, Inc. (BMS) manufactures and sells flexible packaging products and pressure sensitive materials primarily in the United States, Canada, Mexico, South America, Europe, and the Asia Pacific. The company’s board of directors approved a 2.20% increase in its quarterly distributions to 23 cents/share. Bemis is a dividend aristocrat, which has managed to boost dividends for twenty-seven consecutive years. The stock yields 3.20%. (analysis)
Health Care Property Investors, Inc. (HCP) operates as a real estate investment trust in the United States. The company raised its dividends by 1.10% to 46.5 cents/share. This is the twenty fourth consecutive annual dividend increase for this dividend achiever. The stock currently yields 6.40%.
Ross Stores, Inc.,(ROST) together with its subsidiaries, operates two chains of off-price retail apparel and home accessories stores in the United States. The company raised its dividends by 45% to 16 cents/share. Ross Stores is a dividend achiever which has raised distributions for 16 consecutive years. The stock yields 1.40%.
Potential Dividend Achievers
AGL Resources Inc.,(AGL) an energy services holding company, engages in the distribution of natural gas primarily in Florida, Georgia, Maryland, New Jersey, Tennessee, and Virginia. The company boosted its dividend by 2.30% to 44 cents/share. This is the eight consecutive annual dividend increase since 2003. The stock currently yields 4.90%.
L-3 Communications Holdings, Inc. (LLL) provides command, control, communications, intelligence, surveillance, and reconnaissance (C3ISR) systems; and aircraft modernization and maintenance, and government services in the United States and internationally. The company hiked its quarterly dividend by 14% to 40 cents/share. This is the sixth consecutive annual dividend increase for the company. The stock yields 1.90%.
J.B. Hunt Transport Services, Inc. (JBHT), together with its subsidiaries, operates as a surface transportation company in North America. The company announced its plans to boost dividends by 9% to 12 cents/share. This is the sixth consecutive dividend increase for the company since 2004. The stock currently yields 1.40%.
Boardwalk Pipeline Partners, LP, (BWP) through its subsidiaries, engages in the interstate transportation and storage of natural gas in the United States. This master limited partnership raised its distributions to 50 cents/unit. Boardwalk Pipeline Partners has raised distributions every quarter since going public in 2006. The units currently yield 6.50%.
The Dun & Bradstreet Corporation (DNB) provides commercial information and insight on businesses worldwide. The company raised its quarterly dividend to 35 cents/share. This is the third consecutive dividend increase since the company started paying dividends in 2007. The stock yields 1.70%.
PennantPark Investment Corporation (PNNT) is a publicly listed business development firm specializing in direct and mezzanine investments in middle market companies. The company raised its quarterly distributions by 4% to 26 cents/share. This is the second quarterly distribution increase for this BDC over the past one year. The company is on track to record dividend increases for a third year in a row. The stock yields 11.40%.
Unitrin, Inc., (UTR) through its subsidiaries, engages in the property and casualty insurance, life and health insurance, and automobile finance businesses primarily in the United States. The company raised its dividends by 10% to 22 cents/share. This is the first dividend increase since the company cut distributions in 2008. The stock yields 3.40%.
News Corporation (NWS) (NWSA) operates as a diversified media company worldwide. The company raised its dividends by 25% to 7.5 cents/share. The company currently yields 1.10% and also does not have a history of consistent dividend increases.
Time Warner Inc (TWX) operates as a media and entertainment company in the United States and internationally. It operates in three segments: Networks, Filmed Entertainment, and Publishing. The company announced plans to boost its dividend by 13.30% to 21.25 cents/share. This is the first dividend increase since 2007. The stock currently yields 3.10%.
The Hershey Company (HSY) engages in manufacturing, marketing, selling, and distributing various chocolate and confectionery products, food and beverage enhancers, and gum and mint refreshment products. The company raised its dividends by 7.60% to 32 cents/share. This is the first dividend increase for the company since 2007. The stock currently yields 3.40%.
Source Capital Inc. (SOR) is a close-ended equity fund launched and managed by First Pacific Advisors, LLC. The fund invests in the public equity markets of the United States. The company raised its dividends by 20% to 60 cents/share. Source Capital has fluctuating dividends. The stock yields 9.40%.
Hasbro, Inc. (HAS) engages in the design, manufacture, and marketing of games and toys. The company raised its dividends by 25% to 25 cents/share. This was the first dividend increase for Hasbro since 2008. The stock yields 3.20%.
United Parcel Service, Inc. (UPS), a package delivery company, provides transportation, logistics, and financial services in the United States and internationally. The company raised its payment by 4.40% to 47 cents/share. This is the first dividend increase for UPS since 2008.
Temple-Inland Inc. (TIN), through its subsidiaries, manufactures corrugated packaging and building products primarily in the United States and Mexico. The company raised its dividend by 10% to 11 cents/share. The stock currently yields 2.60%.
Full Disclosure: Long ADM,
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Many investors believe that successful dividend investing consists of identifying the highest yielding stocks in the market and then generating double digit returns on investment each year. The problem with this strategy it that it often overlooks the fact that such dividend yields are most often unsustainable in the long run. A much better strategy that could eventually produce double digit yield on cost to investors is dividend growth investing. Using this strategy a patient investor accumulates a diversified portfolio of stocks which have a long history of consistently growing dividends. The positive factor is that any investor can implement this strategy, especially now that brokerage commissions are almost zero.
Dividend investors are paid for holding common stocks, which is one reason why a company which keeps paying a stable or rising dividend does not fall as much during bear market declines. The dividend returns are always positive, which provides a safety cushion even in the worst times possible. Furthermore dividends cannot be faked, whereas earnings could be massaged within certain limits in order to reach performance targets that are not economically prudent.
This return can be reinvested which further magnifies long-term income growth as well as total returns. Companies that raise dividends also provide a tangible proof that companies do have the cashflows to pay them. A company which does not have a solid business model typically cannot afford to raise dividends for more than a few years.
Paying dividends also imposes a discipline upon companies, which restricts excessive empire building or "diworsification" through overpriced acquisitions. Opponents of dividend investing often claim that dividend stocks are boring and slow moving, and instead recommend purchasing fast growing rising stars, which reinvest everything back in their business. While re-investing back into the business is a good idea, expanding too rapidly might lead to excessive leverage build up with disastrous consequences for the owners of the business. Any solid company should be able to balance its capital investment needs with its shareholders demands for returns on their investment. Successful companies such as McDonald’s (MCD) and Wal-Mart (WMT) have not only grown their business in a smart way, but have also rewarded shareholders consistently as well.
Currently, the market is a little overextended off of its March lows. Many investors are wondering whether they should cash out or keep adding to their positions. Dividend investors on the other hand have the luxury to ignore market movements as long as distributions are intact and growing. After all solid companies with definite competitive advantages which throw off rising dividend payments each year do not lose their moats overnight. Such companies include Johnson & Johnson (JNJ), Procter and Gamble (PG), Chevron Corporation (CVX), Pepsi Co (PEP) and McDonald’s (MCD).
The Procter & Gamble Company (PG), together with its subsidiaries, provides branded consumer goods products worldwide. The company operates in three global business units (GBU): Beauty, Health and Well-Being, and Household Care. Procter & Gamble is a dividend aristocrat as well as a component of the S&P 500 index. One of its most prominent investors includes the legendary Warren Buffett. Procter & Gamble has been increasing its dividends for the past 53 consecutive years. (analysis)
McDonald’s Corporation (MCD), together with its subsidiaries, franchises and operates McDonald’s restaurants in the food service industry worldwide. The company's share of the US fast food market is several times larger than its closest competitors, Burger King (BKC) and Wendy's (WEN). McDonald’s is a major component of the S&P 500 and Dow Industrials indexes. The company is also a dividend aristocrat, which has been consistently increasing its dividends for 33 consecutive years. (analysis)
PepsiCo, Inc. (PEP) manufactures, markets, and sells various snacks, carbonated and non-carbonated beverages, and foods worldwide. PepsiCo is a major component of the S&P 500, Dow Industrials and the Dividend Aristocrats Indexes. PepsiCo has been consistently increasing its dividends for 37 consecutive years. (analysis)
Johnson & Johnson (JNJ) engages in the research and development, manufacture, and sale of various products in the health care field worldwide. Johnson & Johnson is a major component of the S&P 500, Dow Industrials and the Dividend Aristocrats Indexes. One of the company’s largest shareholders includes Warren Buffett. JNJ has been consistently increasing its dividends for 47 consecutive years. (analysis)
Chevron Corporation (CVX) operates as an integrated energy company worldwide. Chevron Corporation is a component of the S&P 500 and Dow Jones Industrials Indexes. The company is also a dividend achiever, which has been consistently increasing its dividends for 21 consecutive years. (analysis)
Full disclosure: Long CVX, JNJ, MCD, PEP and PG
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A dividend increase is generally a bullish sign, which reflects management’s optimistic view on the near term prospects for the company. The sign of dividend increases is especially bullish for companies which have raised distributions for over one decade. One has to be careful however to avoid the excessively high yielding stocks which might not be able to sustain future dividend payments. Investors should also avoid chasing dividend growth stocks which don’t have a long history of dividend increases.
Several companies announced their intent to increase distributions to shareholders. I have separated the dividend raisers of the past week in three groups: dividend achievers, champions and aristocrats; master limited partnerships; and potential dividend achievers
Dividend Growth Stocks
Kimberly-Clark Corporation (KMB), which engages in the manufacture and marketing of health and hygiene products worldwide, announced that a high single-digit to low double-digit increase in the dividend is anticipated effective April 2010, subject to approval by the Board of Directors.. The company typically raises distributions in February. Kimberly-Clark Corporation is a dividend aristocrat, which has increased its quarterly dividend in each of the past thirty=seven consecutive years. The stock currently yields 3.90%. (analysis)
Praxair, Inc. (PX), which engages in the production and distribution of industrial gases, increased its quarterly dividend by 13% to 45 cents per share. Praxair, Inc. is a dividend achiever, which has increased its quarterly dividend in each of the past seventeen consecutive years. The stock currently yields 2.40%.
Energen Corporation (EGN), which is engages in the development, acquisition, exploration, and production of oil, natural gas, and natural gas liquids in the continental United States, increased its quarterly dividend by 4% to 13 cents per share. Energen Corporation is a dividend achiever, which has increased its quarterly dividend for twenty-eight consecutive years. The stock currently yields 1.10%.
SJW Corp. (SJW), engages in the production, purchase, storage, purification, distribution, and retail sale of water, increased its quarterly dividend by 3% to 17 cents per share. SJW Corp. is a dividend champion, which has increased its quarterly dividend in each of the past forty-three consecutive years. The stock currently yields 3.00%.
Master Limited Partnerships
El Paso Pipeline Partners, L.P. (EPB), which engages in the ownership and operation of natural gas transportation pipelines and storage assets in the United States, increased its quarterly distributions to 36 cents per unit. This is the eight consecutive quarterly distribution increase for the company since going public in 2007. The stock currently yields 5.60%.
Holly Energy Partners, L.P. (HEP), which operates a system of refined product and crude oil pipelines, storage tanks, and distribution terminals primarily in west Texas, New Mexico, Utah, and Arizona, increased its quarterly distribution to 80.5 cents per unit. Holly Energy has increased its distribution to unit holders every quarter since becoming a public partnership in July 2004. This increase marks the twenty-first consecutive quarterly increase. This master limited partnership currently yields 7.60%.
Sunoco Logistics Partners (SXL), which engages in the transport, terminalling, and storage of refined products and crude oil, as well as the purchase and sale of crude oil in the United States, increased its quarterly distributions by $1.09 per unit. This master limited partnership has consistently raised distributions since 2002. Sunoco Logistics Partners currently yields 6.00%.
Inergy Holdings GP, LLC, (NRGP), has ownership interest in Inergy, L.P. that engages in the
sale, distribution, storage, marketing, trading, processing, and fractionation of propane, natural gas, and other natural gas liquids to residential, commercial, industrial, and agricultural customers. This master limited partnership increased its quarterly distributions to 94 cents per unit. Inergy Holdings GP, LLC has increased its quarterly distributions since 2005. Inergy Holdings GP, LLC, currently yields 5.20%.
Potential Dividend Achievers
Rollins, Inc. (ROL), which provides pest and termite control services, and protection against termite damage, rodents, and insects, increased its quarterly dividend by 28.60% to 9 cents per share. Rollins, Inc. has only raised distributions since 2002. The stock currently yields 1.80%.
National Instruments (NATI), which is one of the top telecommunications companies in the US, increased its quarterly dividend by 8% to 13 cents per share. This is the 7th consecutive increase in distributions since the company initiated a dividend policy in 2002. The stock currently yields 1.70%.
Airgas (ARG), which distributes industrial, medical, and specialty gases, as well as hardgoods in the United States, increased its quarterly dividend by 22.20% to 22 cents per share. Airgas has raised dividends since 2003 The stock currently yields 2.00%.
CMS Energy (CMS), which is operates as an energy company primarily in Michigan, increased its quarterly dividend by 20% to 15 cents per share. This is the third consecutive dividend increase since CMS Energy started paying dividends again in 2007. The stock currently yields 3.95%.
Full Disclosure: Long KMB
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Universal Corporation (UVV), together with its subsidiaries, operates as the leaf tobacco merchants and processors worldwide. It engages in selecting, procuring, buying, processing, packing, storing, supplying, shipping, and financing leaf tobacco for sale to, or for the account of, manufacturers of consumer tobacco products. This dividend champion has raised dividends for 39 consecutive years.
Over the past decade, Universal has delivered a total return of 11.60% to shareholders.
At the same time earnings per share have grown by 1.50% on average since 2000. Analysts expect UVV to earn $5.25/share in 2010 and $5.63/share in 2011. This is an increase over the $4.32/share Universal earned in 2009. The slow growth in tobacco consumption worldwide and risk of increased taxation and regulation in the sector represent one of the major risks for the company going forward.
The annual dividend has increased by 4% annually over the past decade. A 4% growth in dividends translates into the distribution doubling every 18 years. The current quarterly dividend of $0.46/share is double what it was in 1993-1994. The latest dividend increase was for 2.20% in November 2009.
The return on equity has generally decreased from a high of 22% in 2000 down to 15.30% in 2009. I generally like to see a stable value of this indicator over time.
The dividend payout ratio has generally remained below 50%, with the exception of 2006 and 2007, which struck as outliers.
Overall Universal Corporation does appear to be attractively valued, trading at a P/E of 9, yielding 3.90% and having an adequately covered dividend. The main problem for the company is the slow earnings growth, and concentration in the tobacco industry, which comes with its own inherent risks. I already have exposure to the tobacco sector through my position of already, Altria (MO) and Philip Morris International (PM). However I would consider initiating a position in UVV on dips whenever I have extra cash on hand.
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