Dividend champions vs stable dividend schedules

Following on from my earlier post wondering if all dividend growth was equal, I thought I’d take a quick look at the Dividend Champions from David Fish’s list to see what percentage of the champions have a stable dividend schedule.

As it turned out, this meant looking at some companies that I haven’t seen mentioned very often, so I listed them out in case they pique your interest.

The Dividend Champions are companies that have continually increased dividend payments for the last 25 years or more. They are mature companies; some of which have increased dividends for over 50 years. No doubt their management have a laser-like focus on making that yearly dividend increase to avoid dropping off the list. After all, any cut puts them out of the list for the next 5 years. However there are several tricks allowing companies to stay on the list and companies can go for up to two years without an increase before being removed.

There are currently 107 Dividend Champions in the August list. I’ve removed a couple of annual payers from my list and reduced it to 104 companies.

I like to have a quick look at their dividend schedule when reviewing stocks to see if they are changing how they pay dividends, such as avoiding an increase in one quarter. The dividend growth as a single percentage or number of years of increases doesn’t supply that information.

Number of Dividend Champions against number of years they've maintained a stable dividend schedule - August 2014
Number of Dividend Champions against number of years they’ve maintained a stable dividend schedule – August 2014

So around 80% of Dividend Champions have a stable pattern, e.g. they’ve always increased their dividend in the same quarter over the last 5 years.

I’m not going to list all 82 companies that have a 5 year stable dividend schedule; they’re the usual quality suspects such as PG, XOM, JNJ etc. But I will list the others since some of them are not commonly mentioned in the dividend community. Not having a 5 year stable schedule does not imply that they’re bad, just that you might want to look closer to see why they varied their payments. There are many reasons for changing dividend schedules, some are perfectly valid such as new management or accounting practices and some that are more of a concern such as being unable to afford an increase.

4 Year Dividend Pattern

Three companies have had consistent increases for 4 years. This timeframe includes 2009, catching the start of the recovery period after the great financial crisis of 2008, during which many companies froze dividend increases.

AFLAC (AFL) [Financials sector]

Aflac is a well known US insurance company that has increased dividends for 31 years. Lanny wrote about them in a recent purchase.

AFL made this list because it didn’t increase its dividend on Feb 11 2010. Instead it delayed its increase to November that year, but has been increasing dividends in November ever since.

Altria Group (MO) [Consumer Defensive]

Altria is a US tobacco company which also produces table wines. It’s increased dividends for 44 years in a row.

MO’s on the list because it paid slightly higher dividends in March and June 2010 than and then adopted a yearly dividend increase in September 2011. We’ll take a dividend increase, but it remains inconsistent so 4 points.

PPG Industries (PPG) [Basic Materials]

PPG is a chemical company that manufactures and distributes various coatings, optical and glass products. It has increased dividends for 43 years.

Since 2011 PPG has increased its dividend in May, prior to 2009 it increased them in November and in 2010 it was August. 4 points.

3 Year Dividend Pattern

Five companies fall into this category.

American States Water (AWR) [Utilities sector]

AWR is a Californian water utility and I also own some shares. It’s increased dividends for the last 60 years.

AWR has recently been increasing its dividend in August; a change from in 2011 when it was increasing them in May. So 3 points.

RLI Corp (RLI) [Financials sector]

RLI is an insurance underwriter. It’s increased dividends for 39 years.

Since 2011 its increase has been in May, however it changed its dividend schedule in 2010 when it went from payouts in June, September & December to May, August and November earning it 3 points.

Stanley Black & Decker (SWK) [Industrials sector]

SWK produces power and hand tools in the Industrials sector. It has increased dividend payments for 47 years.

SWK increased its dividend in February 2011 and then adopted increases every September. 3 points.

Tompkins Financial Corporation (TMP) [Financials sector]

Tompkins is another financial company, operating banks in New York and Pennsylvania. It has increased dividends for 27 years.

TMP earns 3 points as its current pattern of increasing payouts at the end of Oct / early November started in 2012, previously it had two streaks of 5 quarters without increases.

Weyco Group (WEYS) [Consumer Cyclical]

Weyco is a footwear company with some apparently well-known brands that I’ve never heard of: Florsheim, Nunn Bush, Stacy Adams, BOGS, Rafters and Umi. It has increased dividends for 33 years.

Yearly increases for WEYS only started again in May 2012 ending an 8 quarter stretch without increases. Trois points.

2 Year Dividend Pattern

Three companies fall into this category.

Archer Daniels Midland (ADM) [Consumer Defensive]

Archer Daniels Midland company processes grain and oilseeds into products used for food, beverage, industrial and animal feed products. It’s been named the world’s most admired production company by Fortune magazine from 2009-2011, a turn-around from its 1992 price-fixing scandal. ADM has increased its dividends for 39 years.

ADM has been increasing dividends in February for the last 2 years, enduing a 5 quarter stretch without increases in 2012. Two points.

Helmerich & Payne (HP) [Energy]

HP is a contract oil drilling company organized into three segments: US Land, Offshore and International Land with major customers being Occidental Oil & Gas, Devon Energy and BHP Billiton. It has increased dividends for 42 years.

HP has been ramping up its dividend payments starting in 2012 with twice yearly increases in February and August. The raise in February 2013 ended a 6 quarter stretch without a dividend increase.

Questar Corp (STR) [Utilities]

Questar Corporation is an integrated natural gas holding company with three lines of business operated via wholly owned subsidiaries: Wexpro Company, Questar Pipeline and Questar Gas. It has increased dividends for 35 years.

STR has been increasing dividends each end of May / early June since 2013. In 2012 and earlier it tended to increase them in November for the most part. Deux points.

1 Year Dividend Pattern

Last but not least, the one year category. Companies earn 1 point just for paying dividends since this is the starting point for comparing to previous years.

This list is still actually a great place to be – remember that all of the companies have had to increase dividends over 25 years to get here and that includes several recessions and financial implosions.

There are 11 companies in this category.

1st Source Corp (SRCE) [Financials]

1st Source Corp is a holding company for 1st Source Bank which operates banks in Indiana and Michigan. It has increased dividends for 27 years.

SRCE ended a 7 quarter stretch without an increase when it increased dividends in May this year. It had another 7 quarter stretch before that.

Bowl America (BWL.A) [Consumer Cyclical]

Bowl America operates 18 bowling centers in the US (Consumer Cyclical sector). It’s a $79M company that has increased dividends for 43 years.

BWL.A ended a 6 quarter stretch after increasing dividends in July this year, although it also paid a special dividend in 2012. It had a 7 quarter stretch prior to that starting in 2011.

Donaldson Company (DCI) [Industrials]

Donaldson Company is a manufacturer of air and liquid filtration systems as well as exhaust and emission control products. It manufactures internationally across 39 facilities. It has increased dividends for 28 years.

DCI typically increases dividends twice a year, but in December 2012 it skipped a beat earning it one point.

Dover Corp (DOV) [Industrials]

Dover Corporation owns and operates a diverse range of manufacturing companies producing industrial equipment. Its product range includes the telecommunication, consumer goods, life sciences, aerospace and energy industries. It has increased dividends for 59 years.

DOV has increased dividends twice in the last year; in March 2014 and August 2013. Previously it was on a strict yearly increase in August.

Gorman-Rupp Company (GRC) [Industrials]

Gorman-Rupp Company designs and manufactures pumps for use in water, wastewater, construction, heating, air-conditioning and other applications. It has increased dividends for 41 years.

A dividend increase in November last year ended a 6 quarter flat payment trend. So one point.

Lancaster Colony Corp (LANC) [Consumer Defensive]

LANC is a manufacturer of food products (salad dressings, sauces and dips; bread, noodles and pasta among others) as well as candles and glassware. It has increased dividends for 51 years.

LANC changed a two year trend of twice yearly increases when it decided not to increase dividends in June this year.

NACCO Industries (NC) [Industrials]

Another diverse holding company, NACCO Industries operates mining (North American Coal Corporation), household and retail appliances (Hamilton Beach Brands) and kitchenware companies (The Kitchen Collection). It has increased dividends for 29 years.

An increase in May this year ended a flat 5 quarter dividend stretch (excluding special dividends). So NC earns un point.

Parker-Hannifin Corp (PH) [Industrials]

Parker Hannifin Corporation manufactures fluid power systems and electromechanical controls in three segments – Industrial, Aerospace and Climate & Industrial Controls. It has increased dividends for 58 years.

Update: See Henry’s analysis of Parker Hannifin for some more details about the company.

PH doesn’t have any real pattern to describe; it can increase dividends from quarter to quarter, but it rarely holds out for more than 3 quarters before an increase. It gets one point.

Raven Industries (RAVN) [Industrials]

Raven Industries is a holding company operating companies in the industrial, agricultural, energy, construction and aerospace markets. Its products range from agricultural systems to improve farm crop yield to GPS-guidance and steering systems to high performance plastic films. It has increased dividends for 27 years and you can read Henry’s more detailed analysis at Living At Home.

RAVN is currently in a six quarter stretch without a dividend increase, hopefully that trend will end soon.

Tennant Company (TNC) [Industrials]

Tennant Company manufactures cleaning products and coatings for commercial and industrial applications. It has increased dividends for 43 years.

TNC increases dividends slowly; its recent increase in May this year ended a 6 quarter payout which started in November 2012. Prior to November, it went 8 quarters without an increase.

Universal Health Realty Trust (UHT) [Financials]

UHT is a Real Estate Investment Trust and invests in hospitals, clinics, care centers and medical office buildings. It has increased dividends for 28 years.

UHT looks to be switching back to annual increases with its June dividend payment after a couple of years with twice yearly increases. It earns one point.

Summary

Clearly the majority of dividend champions keep their payment schedule fairly stable. Investors generally don’t like surprises and so a regular dividend increase pattern can help with that. I also came across some interesting stocks in this exercise; who knew there was a publically traded bowling company that has increased dividends for 43 years?

Disclosure: I am long AWR.

 

Quote of the Day

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0 thoughts on “Dividend champions vs stable dividend schedules”

    1. Hi Henry,
      I’m glad you found the article useful!

      Bowl America’s website is awesome, complete with music! It’s certainly not your traditional S&P corporation site! I looked at it yesterday because I couldn’t believe they only operated 18 bowling centers. I was expecting a much larger number like a couple of hundred but 18 it is.

      I’ll update the article to include your Parker Hannifin post, thanks for mentioning it.

      Best wishes!
      -DL

  1. Div Life,

    First – thank you for the mention! Secondly – I have never even thought about analyzing this before, it’s very interesting. I wonder if it’s because of earnings and like you said – new management. Also could do with the tax implications on the dividend tax cut that they were waiting for, possibly, so instead of increasing them as early as they used to – say it was always every April, maybe they waited until new information was brought on by the tax coders to see if it was going to change. Great article and research and worth using on a decision possibly. Have a great sunday!

    -Lanny

    1. HI Lanny,

      You’re welcome! There are definitely legitimate reasons for the schedule to change as you mention, but certainly the majority of the champions tend to be very stable. So if you see a change in schedule I think it’s worth asking why.

      Keep up the dividend diplomacy!
      Best wishes,
      -DL

  2. Ha, I do own Bowl America! It was one of those high yield stocks on the champs list so I bought it without much research (before I started learning). Well I guess I will keep it around unless they cut the div. It really hasn’t grown to much and the PE is crazy.

    1. Hi DFG,

      Bowl America has increased dividends for 43 years, so they’re definitely doing something right! Do keep an eye on them since their Payout Ratio is very high (> 200%) as is the P/E that you noted.

      I think they’re paying their dividend based from investment income they receive; not from operating income, so that’s how they can continue to pay a crazy payout ratio. At least that’s my 5 minute late at night assessment!

      Best wishes,
      -DL

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