Monday, December 3, 2012

15 High Yield Stocks That Have Increased Their Dividends For 30 Years

Dividend investing is certainly back in vogue these days. With the Federal Reserve committed to keeping interest rates low, there has been an increased focus on good old blue chip dividend-paying stocks. I previously  discussed 15 stocks that have raised their dividends over the last 20 years in an article linked here, and now it’s time to do the same for those companies that have increased dividends for 30 years.

While it’s never advisable to buy stocks just for their dividends, a long term history of paying dividends implies a management focused on delivering shareholder value by running the company in the owner’s (your) interests.

Here are the 15 stocks I have selected. I’ve tabulated the current yield and a column of ‘current D/Forecast E.’ This column is to better gauge the capacity for dividend increases in future. The lower the number the more the potential for dividend increases.




Dress Nicely

I confess to being a bit of a fan of mid-market clothing company V.F.Corp (NYSE: VFC), and have covered the company at length in a previous article. It has been doing all the right things over the last few years. The North Face and Vans are two brands of the moment and VFC has been a key beneficiary of the change in fashion towards wearing rugged sporting clothing in a casual manner. Its e-commerce initiatives make sense, and China remains a largely virgin territory for most of its brands. The more problematic areas for VF Corp in future will be its Jeanswear operations in Europe and Timberland (a brand with a large amount of sales in Europe).

Drink and Drugs

Another stock I like is Walgreen (NYSE: WAG) which was discussed in this article. The company has its detractors and no one likes to see declining same store sales at a retailer, but the reason for this –the Express Scripts debacle- is over, and investors should focus on the long-term prospects.  The business is highly cash generative and its end market demand is very secure.

I also think that many investors are underestimating the potential for Walgreen to increase its own store product sales and grow margins via generics sales. Simply put, the future will see more old people needing more prescription and OTC drugs and but wanting to pay cheaper prices. Walgreen can benefit from this trend. It is the branded pharmaceuticals companies that suffer the most from pricing and reimbursement pressures.

The third stock to look at from a long-term perspective is PepsiCo (NYSE: PEP). It is far from being the sexiest stock around, and the company has been under pressure to make a split like Kraft did. Unfortunately, this is unlikely to happen while Indra Nooyi is around. but I guess there is some upside available from getting rid of her. Pepsico is interesting because it still generates the bulk of its profits from the US, a fact which is in marked contrast to its spin off Yum! Brands, a China-focused company these days.

Frankly I don’t think Yum! would have been able to achieve what it has if it was still part of PepsiCo, and it’s time for Nooyi to change tack. The ‘power of one’  tagline seems to resonate stronger as a description of her role as Chairman and CEO then as a strategy designed to release the full value in PepsiCo’s hugely powerful brands.

Get a Job and Move in Together

The next company is Automatic Data Processing (NASDAQ: ADP). This stock offers a bit more cyclicality than the others, but as the data in the table suggests the dividend is well covered. In addition, I like the prospects for margin and cash flow expansion given the assumption of an ongoing economic recovery. Its evaluation is attractive, but EPS forecasts look a bit weak. No matter, this stock offers a nice mix of current value proposition plus some upside kicker from a stronger-than-expected economy going forward.

I always like to look at a new stock when I write this type of article, and I’m intrigued by RPM International (NYSE: RPM). Superficially it is another boring materials company; but what is wrong with that? It recently raised full year sales and EPS guidance and gave commentary alluding to ‘gradual improvement in North American commercial construction.’ The company has around 24% of its market cap in debt (Yahoo! Finance), but its strong cash flow generation makes servicing and repaying it hardly a difficult task. While North America is doing fine, European sales were negative year-on-yea--but then again Europe has been weak for a while, and any upturn there will see many companies beat low earnings estimates.

There was a bit of confusion regarding RPM's roofing division at the time of the last results. When pressed by analysts it became clear that the weakness was in its international operations, which is why RPM is now exiting overseas roofing contracting. This should create some operational improvements going forward.