Wednesday, 20 August 2008

MDA Companies with the Longest Records of Dividend Growth, Summer 2008 Update

In the previous post, I started an overview of the most recent changes in Mergent's Dividend Achievers, a quarterly publication which tracks a list of North American companies which have regularly increased their annual dividends for at least ten consecutive years.

In this post, I update the list of MDA leaders in terms of the longest history of uninterrupted dividend growth, which I first published here based on the Winter 2008 edition of Mergent’s Dividend Achievers.

Why are we interested in learning what companies have the longest dividend payout and growth history? The reasoning is simple – if the company has paid and has increased dividends for a sufficiently long period, then it is very unlikely that it will discontinue this policy in the future. It all has to do with reputation and expectations. The management of such companies will try to do anything in order to keep the dividend payouts and annual dividend increases alive. No matter how bad the economic environment is and no matter how small these dividend increases are, we can anticipate with a very high degree of certainty that each year the members of the Mergent’s longest dividend growers list will increase their annual dividends again and again and again…

Here is the updated list based on the Summer 2008 edition of MDA:


A few brief comments on the reported results:

First, we can see that the same companies populate the top of this list. It looks like I accidentally forgot to include NWN in the previous edition. I also expanded the list a little bit to include all companies with the history of dividend growth over 40 years. Other than that – the same names, only one extra year of dividend growth is under their belts.

Second, the average numbers at the bottom of the table show that the companies with a long history of dividend growth are on average ranked marginally higher in terms of their shorter-term total returns, which means that they are performing marginally better amid tough economic times than companies with a shorter history of dividend growth. In other words, a better performance during 1 last year than over 3 and 5 years coincides with the continuing correction in the equity markets, which means that the best dividend growers are doing relatively better when other stocks go down. Note that the rank numbers represent ranking among all members of the MDA list.

Third, if we look at where these companies are currently standing within the 52-week price range and compare it with performance of large indexes (Dow and S&P500), we see that they are on average close to the middle of the range as opposed to the teen percentiles for Dow and SPX.

Fourth, the average P/E ratio of these companies is quite high, which can be explained by two factors: (1) lower earnings due to the recent economic downturn and (2) stock prices that are quite resilient to the continuing correction.

Fifth, the industrial sector representation is pretty good in this top 31 list, which means that everybody can pick a company or two for his/her long-term portfolio.

Finally, dividend yields on average are far from being breathtaking, but a few companies have very decent 5+% dividend yields.

Disclaimer: The information presented in this post does not constitute an investment advice. DYODD when making an investment/trading decision on any of these companies. As of August 20, 2008, I own some of the stocks directly discussed in this post.

Sunday, 17 August 2008

Mergent's Dividend Achievers, Summer 2008 - Departures, Arrivals, and Candidates

Mergent's Dividend Achievers (MDA) is a quarterly periodical publication which is highly respected among dividend-growth-strategy investors. The Summer 2008 edition, which reflects corporate first-quarter results for 2008, was released on July 17, 2008 by the publisher, John Wiley & Sons.

I am planning to do a series of posts highlighting several different lists on the latest edition of Mergent’s selected group of Dividend Achievers.

By Mergent’s definition, a Dividend Achiever is “a publicly-traded company that has increased its dividends for the last ten or more consecutive years.” Depending on the industry, companies must also meet certain capitalization requirements in order to be considered a Dividend Achiever. Dividend Achievers represent 13 industry sectors and more than 50 industries.

Mergent currently offers an Index that tracks the daily performance of Dividend Achiever constituents. The inception date of the index was January 17, 2003. The price appreciation values of this index, which is reconstituted annually, are published by AMEX under the DAA symbol. If an Index constituent is acquired and is no longer actively traded, the company will cease classification as a Dividend Achiever.

Ten percent of 3,300-plus North American-listed, dividend-paying common stocks are classified as Dividend Achievers, which is not a very small sample, so I guess each dividend investor who looks for appropriate investment targets on this list should do extra research and should apply extra screening criteria to identify the best of the best.

The first post deals with the lists of most recent additions and departures from the Dividend Achievers group, along with the list of those companies that qualify in terms of their dividend growth history but do not make it to the MDA club because of Mergent's volume/liquidity requirements.

Dividend Achievers Recent Departures

The following former Dividend Achievers have not increased their regular cash dividends in 2008 and therefore were removed from the list:

  • Alabama National BanCorporation (DE)
  • Applebee's International, Inc
  • Briggs & Stratton Corp.
  • Chittenden Corp. (Burlington, Vt.)
  • Colonial Properties Trust (AL)
  • First Commonwealth Financial Corp. (Indiana, PA)
  • First Indiana Corp
  • Freddie Mac
  • Haverty Furniture Cos., Inc.
  • Healthcare Realty Trust, Inc.
  • Omega Financial Corp
  • Pacific Capital Bancorp
  • People's United Financial Inc
  • Progressive Corp. (OH)
  • SLM Corp.
  • Sterling Bancorp (N.Y.)
  • Sterling Financial Corp. (PA)
  • Sun Communities, Inc.
  • Superior Industries International, Inc.
As we can see, most of the departing companies are banks and financial services firms, including the most famous name, Freddie Mac. The financial crisis has hit them hard, and they were not able to maintain their historical dividend growth pattern.

Dividend Achievers New Arrivals

The following companies are classified as new Dividend Achievers because they have recorded at least ten consecutive years of dividend increases and satisfied the liquidity requirement for the period from January 1, 2008 to May 30, 2008:
  • Alexandria Real Estate Equities, Inc.
  • American Capital Strategies Ltd.
  • Bank of the Ozarks, Inc.
  • Block (H & R), Inc.
  • Cato Corp.
  • Corporate Office Properties Trust
  • Developers Diversified Realty Corp.
  • Energy East Corp.
  • Horton (D.R.) Inc.
  • Nationwide Financial Services Inc.
  • Northwest Natural Gas Co.
  • Owens & Minor, Inc.
  • Robinson (C.H.) Worldwide, Inc.
  • Royal Bancshares of Pennsylvania, Inc
  • Security Bank Corp
  • Shenandoah Telecommunications Co.
  • Stepan Co.
  • Suffolk Bancorp
  • Tompkins Financial Corp
  • Total System Services, Inc.
  • Univest Corp. of Penn.(Souderton)
Dividend Achievers Candidates

The following companies qualify in terms of their history of 10+ consecutive years of dividend growth but did not meet volume/liquidity requirements of the MDA list:

  • American River Bankshares
  • Arrow Financial Corp.
  • Artesian Resources Corp.
  • Bank of Granite Corp.
  • BOE Financial Services of Virginia Inc
  • Bowl America Inc.
  • C & F Financial Corp.
  • Center Bancorp, Inc.
  • Central Virginia Bankshares, Inc.
  • Centrue Financial Corp (New)
  • Citizens & Northern Corp
  • CNB Financial Corp. (Clearfield, PA)
  • Codorus Valley Bancorp, Inc.
  • Comm Bancorp, Inc. (PA)
  • Connecticut Water Service, Inc.
  • Elmira Savings Bank (NY)
  • Farmer Bros. Co.
  • FFD Financial Corp
  • Fidelity Bancorp, Inc. (PA)
  • First Defiance Financial Corp.
  • First Federal Bancshares of Arkansas, Inc.
  • First National Lincoln Corp. (Damariscotta, ME)
  • First of Long Island Corp.
  • First South Bancorp Inc (VA)
  • First United Corporation (MD)
  • Firstbank Corp. (MI)
  • Florida Public Utilities Co.
  • Greater Community Bancorp.
  • Harleysville Savings Financial Corp
  • HF Financial Corp.
  • Jeffersonville Bancorp
  • LSB Financial Corp.
  • MASSBANK Corp.
  • MBT Financial Corp.
  • MFB Corp
  • Middlesex Water Co.
  • National Bankshares Inc. (VA)
  • National Security Group, Inc
  • NB & T Financial Group Inc
  • North Central Bancshares, Inc.
  • Northrim BanCorp Inc
  • Ohio Valley Banc Corp.
  • Penns Woods Bancorp, Inc. ( PA)
  • Peoples Financial Corp. (Biloxi, MS)
  • Princeton National Bancorp, Inc.
  • Quixote Corp.
  • River Valley Bancorp
  • Savannah Bancorp, Inc.
  • Smithtown Bancorp, Inc.
  • Summit Financial Group Inc
  • UMH Properties Inc
  • Union Bankshares, Inc. (Morrisville, VT)
  • United Bancorp, Inc. (Martins Ferry, OH)
  • United Security Bancshares (CA)
  • Weyco Group, Inc
  • WGNB Corp.
  • York Water Co
I think this last list of potential MDAs can provide you with some very attractive candidates for your long-term dividend portfolio. However, there is a pretty high risk in there too, but who knows, maybe some of these companies will grow big over time and will remain stable dividend growers?

-----------

In the next post discussing the latest Summer 2008 edition of Mergent’s Dividend Achievers, I will summarize some of the top lists of MDA's selected dividend performers.

Disclaimer: As of August 14 2008, I do not own any of the stocks directly discussed in this post. The information presented in this post does not constitute the investment advice. DYODD when making an investment/trading decision on any of these companies.