Saturday, December 8, 2012

High Yield Stocks That Have Increased Dividends for 40 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 twenty years in an article linked here, and those that have raised them over thirty years in this article.  Now it’s time to do the same for those companies that have increased dividends for forty 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.




Even though I’m not the biggest fan of dividend investing per se I can appreciate that if you want a long term income then analyzing the reasons why these stocks have increased dividends for so long is very important to you. With that in mind let’s look in more detail at some of these companies.

Go for the KO

No prizes for guessing I am talking about the Coca-Cola Company (NYSE: KO) here. Warren Buffett’s favorite stock holds the quintessential moat of one of the most powerful brands ever. While it is essentially just flavored water it also represents a piece of Americana that is globally recognized and aspired too. These points are critical in a long term yield seeking investment in Coca-Cola. I would look at this stock as a global ‘GDP plus’ type growth play. In other words expect it to increase earnings in line with GDP growth but throw in some extra for increasing penetration rates in underdeveloped markets. There is the issue of increasing health concerns reducing demand for sugar laden beverage, but the brand retains its power and the company is highly innovative in introducing sugar free drinks. Considering how low US long bond yields are I think Coca-Cola is a relatively good purchase.

Here Kid Take Some Mouthwash

I’m still not giving prizes out. Colgate-Palmolive (NYSE: CL) is another iconic American company and I think in a few years time MBA students will be nestling to read case studies of how this company has successfully leveraged the power of its brands in recent years. I’ve discussed the company at length in an article linked here.  It has led the marketplace in innovation in personal care and cleaning fluids by launching new fragrances that create instant rapport and curiosity with customers. Similarly in oral care innovations like optic white toothpaste and whitening mouthwash have long to strong customer acceptance. Just like Coca-Cola, I think its long term growth prospects can be defined as being ‘global GDP plus’. Unlike Coca-Cola it has a lot more competition in its various end markets so perhaps its current valuation is a little high.

A Lowe Blow

No, this isn’t anything to do with Andrew Golota. Lowe’s Companies (NYSE: LOW) is an interesting stock right now. Along with Home Depot it dominates the home improvement market in the US, but unlike its rival it has not been managing its operations to its full potential. Gary Player once said that the harder he practiced the luckier he got, but I think with companies sometimes the luckier they get the easier will be their practicing. In plain English, when end markets are favorable it is a lot easier to adjust operations. More than a few companies have been saying positive things about the housing market recently and it’s time for Lowe’s to take full advantage.

Pack a Powerful Punch

Just as with Lowe’s, an improving housing market means that things should be looking up for power tool manufacturer Stanley Black & Decker (NYSE: SWK). With that said it’s actually been a choppy year for the company. It has a large share of the market for hand and power tools in the US, but it also has significant European exposure and it may face increasing competitive pressure from home improvement stores developing their own tools and crimping margins. Of all the featured stocks I see this as being the one with the hardest visibility. Will it increase its dividend for the next 40 years?

An Explosive Finish

Nope, nothing to do with Finns brandishing Molotov cocktails. Mine Safety Appliance (NYSE: MSA) is -as the name suggests- a world leader in manufacturing and supplying safety products to the hazardous workplace. Theoretically this makes it a correlated play on growth in industrial and commodity output with a kicker from increasing safety regulation requirements. However it is not that simple.

The company had previously built up some non-core businesses of which it has now divested (ballistic vest and North American ballistic helmets) in order to drive growth in its core product range. Moreover, slowing industrial demand and the fall in hard commodity prices this year is challenging growth assumptions here. It is a tricky outlook near term and longer term the shift of industrial production to the Far East could cause issues.