Email of the day
Comment of the Day

June 24 2013

Commentary by Eoin Treacy

Email of the day

on companies with reliable dividend policies
“Thank you for the update on S&P Dividend Aristocrats. These are blue chip aristocrats limited to major indices. Readers might be interested to know that there are other Aristocrats and even junior ones with potentially higher growth rates. The Dividend Champions (25 years or more of dividend growth) is a list that is not limited to the S&P 500. A current monthly view of the Dividend Champion (with relevant fundamental data) is maintained by David Fish at DRiP Resource Centre ( http://dripinvesting.org/Tools/Tools.asp ) .

“The Dividend Achievers are liquid US stocks that have raised their dividends 10 years or more. There are a few Dividend Achievers indices maintained by Nasdaq ( http://ir.nasdaqomx.com/releasedetail.cfm?releaseid=737248 ). These include an International Dividend Achievers list , a UK Dividend Achievers and a Canada list. There are also some ETF's: (eg Vanguard's VIG for the US and Powershares PID for International). I could not find the full list and do not have all the related ETFs, but the Collective may know. It may be useful to table these lists on Fullermoney, and the ETFs in the Chart Library. If time is at all available it may be useful if Fullermoney could host all the lists including Autonomies in the Chart Library. I for one would really appreciate that. Thank you for continued super service, especially the big picture outlook...”

And

"Oops, in the message I just sent you I should have also said that the DRiP Resource also maintains (in Excel spreadsheet) the Dividend Contenders and Dividend Challengers. Dividend Contenders include US companies that have had annual dividends raised 10-24 years in a row, and Dividend Challengers for US companies doing the same for 5-9 years. There are no liquidity requirements for these Achievers."

Eoin Treacy's view Thank you for your kind words and especially these informative emails contributed in the spirit of Empowerment Through Knowledge which I'm sure will be welcomed by the Collective. As you point out, the S&P dividend aristocrat indices are somewhat restrictive which has both positive and negative aspects.

On the one hand it is useful to have a list of large liquid shares from which to choose potential investments. However, at the margin, these indices also omit companies that may not have been in existence long enough to qualify and yet have solid records of dividend increases. They also omit companies that do not have sufficient average daily volume but are nonetheless liquid. In the normal business cycle, a company may maintain its dividend without increasing it on consecutive years. It would still be attractive from the perspective of a yield investor but would not qualify as a dividend aristocrat.

All of the indices mentioned above have now been added to the Chart Library where possible.

The lists you highlighted are extensive and will take time to add to my Favourites list. I will endeavour to do this over the next week or two. There are some clear standouts from the spreadsheet posted on Drip investing:

UK listed Astra Zeneca has been increasing dividends for at least 9 years and hit a new all time high in May. It has since pulled back below its 200-day MA and a clear upward dynamic will be required to check momentum. It currently has a P/E of 8.7 and dividend yield of 5.96%.

US listed Visa is also worthy of mention. It has also been increasing its dividend of 6 years but with an estimated P/E of 25 is not cheap and a pullback towards the MA is more likely than not.

Although the technology sector is not normally associated with reliable dividends, an increasing number of companies have instituted payouts and generally have solid records of sustaining them. These companies are conspicuous for the length of time they have sustained dividends: Microchip Technology (12 years), Maxim Integrated, Xilinx & Qualcomm (11 years), Microsoft (10 year) and Intel (9 years).

In the food sector, Lancaster Colony Corp (51 years), Flowers Foods (12 years), General Mills (10 years) and Conagra Foods (6 years) are all reverting towards their respective means following impressive breakouts earlier this year. They are approaching the first area of potential support in the region of the upper side of their bases and/or thier MAs and clear upward dynamics would indicate returns to demand dominance near areas of previous psychological resistance.

During the current process of deleveraging, the attractive attributes of shares with reliable dividends are likely to be less appreciated than might otherwise be the case. However, as overextensions relative to the trend mean are unwound, yields increase and valuations improve, the sector's appeal will become more compelling.

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