The Dow Jones Industrials had a substantial drop in August. After recovering somewhat, it has largely been trading sideways near 12,000. Lower stock prices bring higher yields, making quality stocks even more attractive, especially for long-term investors. The ultimate long term investments are required for retirement accounts and those objectives have changed substantially in recent times. People are living longer and need more income to pay for inflated and added retirement costs. Of greater importance, higher medical and related costs must be paid for, especially in the later years when costs can skyrocket.
To create wealth in retirements accounts, some of the finest Dividend Aristocrats were selected. All have been increasing dividends annually for at least the last 25 years (many have streaks of 30-40 years or more). Following the brutal recession 3 years ago, these streaks have become more significant. During the financial meltdown, many of the biggest companies with streaks of over 30 years were ended because their financials weren't that good. Dividend Aristocrats felt the effects of the recession but were able to extend their streaks because of stronger financials.
Dow is up 17% since November 2001 (when it was coming off a depressed level). Many retirement portfolios have had only meager growth during that period. Substantial dividends would have enhanced portfolio growth. Below are 8 Dividend Aristocrats with moderate growth in the last 10 years (RPM has more than doubled from a low level) but they generally beat the Dow and have the advantage of raising dividends annually. Their yields are higher than most other stocks and the P/Es are reasonable around 15X.
| Company | Price | Yield |
| Leggett-Platt (LEG) | $21.18 | 5.3% |
| Kimberly-Clark (KMB) | 69.40 | 4.0% |
| RPM (RPM) | 22.32 | 3.8% |
| Clorox (CLX) | 64.25 | 3.7% |
| Abbott (ABT) | 52.69 | 3.6% |
| Johnson & Johnson (JNJ) | 62.90 | 3.6% |
| Bemis (BMS) | 28.10 | 3.5% |
| Genuine Parts (GPC | 55.50 | 3.3% |
Some investors have a more aggressive view of investing and are willing to accept lesser yields in pursuit of greater capital appreciation. Below are 8 Dividend Aristocrats, which have had excellent growth in the last 10 years. APD, MKC and HRL have doubled and the others have at least tripled. However, their yields are lower than the above group with moderate growth:
| Company | Price | Yield |
| Air Products (APD) | $78.80 | 2.9% |
| McCormick & Co (MKC) | 47.31 | 2.4% |
| VF Corp (VFC) | 128.39 | 2.2% |
| Hormel Foods (HRL) | 28.82 | 2.1% |
| Sherwin-Williams (SHW) | 84.71 | 1.7% |
| Sigma-Aldrich (SIAL) | 59.89 | 1.2% |
| CR Bard (BCR) | 83.90 | 0.9% |
| WW Grainger (GWW) | 174.09 | 0.8% |
These stocks are for patient investors with long-term horizons, especially in retirement accounts. Dependability of dividends combined with annual increases provide a sense of comfort for long-term investors. After analysts were busy revising upward forecasts for 2011 at this time last year, the stock market has stumbled badly, unforeseen at that time. But these companies kept paying dividends along with increases.
ABT should be singled out. This is an old line pharmaceutical company, which has diversified over the years. It has paid annual dividends since 1926 and has been increasing the annual dividend for the last 39 years. ABT announced that it will split into 2 companies to (hopefully) give shareholders more value. The company has been growing and raising dividends but has a P/E of only 11X with a 4% yield. Other companies (beginning with JNJ) will watch to see what kind of reception this gets.
HRL, an international food company, just announced quarterly results. Profits slipped 3%, hurt by weak sales and higher ingredient costs. Revenue edged up 3%. HRL expects a modest increase in fiscal 2012 EPS. This is a typical report for the last quarter. Unlike the competition (most other companies), HRL raised the annual dividend 9¢ to 60¢, the 46th consecutive annual dividend increase, and has paid 334 consecutive quarterly dividends since becoming a public company in 1928. This is not presented as a specific recommendation, rather as the type of investment that makes Dividend Aristocrats attractive for the long-term investor. Other Dividend Aristocrats have reported disappointing earnings in Q3 (KMB, BMS, LEG, etc.). Their stocks recovered after initial sell-offs. All the stocks, except for JNJ, KMB and ABT, have market caps under $20 billion (most below $10 billion), leaving ample room for growth.
The consistency in raising dividends does not get enough respect during trying financial times like the last 3 years. These managements are committed to rewarding shareholders with total return, dividends and capital appreciation. Dividends, which are expected to increase in a few months, are important in growing capital and investment income to better enjoy retirement.
Disclosure: I am long VFC.
No comments:
Post a Comment