Dividend Aristocrats are a group of stocks that have paid and increased their dividend every single year for more than 25 consecutive years. For a business to be able to have such a track record, it most do something good.
As a dividend growth investor, such businesses are what we seek for because they provide reliable growing income and capital growth and capital protection as well since every time they rise the dividend, the share price eventually follows.
Warren Buffett as coined the term “wide moat stock” to talk about wonderful businesses who have a large and sustainable competitive advantage over their competitors. Such businesses tend to make more money than their peers, achieve a better return on equity and a better return on invested capital then their peers and over the long term, will usually gain more market shares then they will. For a long term investor this usually means better return overall and with less risk and volatility. But, the ride might be slow and boring. These stocks are not IT grow stocks that skyrocket 20% in one day only to fall back the day after. Like a turtle, they walk slowly but steadily and their carapace protects them from outsiders!
In order to reach early retirement, I invest in income generating assets. My main focus is turned toward dividend growth stocks. My goal is to get a 3,5% initial yield at the moment I buy stocks and a dividend growth averaging 6-8% per year to make sure that my income is not only protected from inflation, but that it will also grow over time.
In a perfect world, every stock I would buy would fit those strict criteria but the world isn’t perfect and I have to look at my portfolio as a whole. In the end, there’s always a tradeoff between initial yield and dividend growth. Usually, the higher the yield, the lower the growth and the higher the yield, the higher the risk.
I recently invested a lot of money in REITs with high yield and low growth. I thought it was now time to balance things out a little and explore lower yield stocks but with higher growth prospects.
Here is a list of stocks who :
1) have a wide moat (as per Morningstar)
2) have increased their dividend every year for more than 25 years (dividend Aristocrats from the S&P500)
3) have increased their dividend by at least 8% per year over the last year, 3 years, 5 years and 10 years on average. (based on 2013-2014 figures)
Automatic Data Processing (ADP)
As per Yahoo finance :
Automatic Data Processing, Inc., together with its subsidiaries, provides technology-based outsourcing solutions to employers worldwide. The company operates through Employer Services and Professional Employer Organization (PEO) Services segments. The Employer Services segment offers a range of business outsourcing and human capital management (HCM) solutions, including payroll services, benefits administration services, talent management solutions, human resources management solutions, time and attendance management solutions, insurance services, retirement services, and tax compliance and payment solutions. This segments integrated HCM solutions include RUN Powered by ADP, ADP Resource, ADP Workforce Now, ADP Vantage HCM, ADP GlobalView, and ADP Streamline, which assist employers of all sizes in all stages of the employment cycle from recruitment to retirement; and ADP Mobile Solutions, ADP SmartCompliance, and ADP Health Compliance. The PEO Services segment provides a human resources outsourcing solution through a co-employment model to small and mid-sized businesses. This segment offers ADP TotalSource that provides integrated human resources management services, as well as integrates key HR management and employee benefits functions, including HR administration, employee benefits, and employer liability management into a single-source solution. The company was founded in 1949 and is headquartered in Roseland, New Jersey.
While this description sounds complex, I’d say that ADP simply provides all sorts of HR solutions to all type of businesses around the world. It’s a well-known established company who has been there since 1949.
ADP has paid a growing dividend for 39 consecutive years which makes it one of the most impressive dividend Aristocrats. According to David Fish’s list, its dividend growth rate as been as impressive with a 1 year dividend growth of 10.1%, 3 years dividend growth of 8.6%, 5 years dividend growth of 8.4% and 10 years dividend growth of 13.7%!!!
Actually, since 1983, according to BuyUpside calculator (figure below), ADP has raised its dividend by 14,04% per year on average.
At current price (75,44$) ADP offers a 1,92$ yearly dividend paid quarterly which represents a 2,6% initial yield. Its current p/e stands pretty high at 24 but is in line with its industry which stands at 24.9. But compared to its 5 years p/e average of 20.7 the price seems expensive right now.
Its current price/sale, price/book, price/cashflow tend to be higher than its 5 years averages and the dividend yield stands lower than its 2,8% five years average which would support that this stock is overvalued.
The revenues and earning per share are growing. The dividend is steadily growing too but what bugs me here is that the payout ratio is also growing … It went from 33% in 2005 to 60.3% right now. I would have to further review these numbers but one would need to make sure that revenues and earnings are growing fast enough to cover such a dividend growth and that the dividend growth remains sustainable.
Morningstar rates this stock 2 stars and thinks that its fair value lies around 65$. At 65$, the yield would be near 3%. Its 52 weeks low stands at 63.13$.
Overall, ADP appears to be a good company in good financial health. It has a wide moat mainly because of the cost of switching their customers would have to incur but at current price, it’s a no-no for me and I suspect the impressive dividend growth could slow down over the coming years if revenues and earnings aren’t growing as fast as the dividend.
Based on Yahoo Finance :
Clorox Company manufactures and markets consumer and professional products worldwide. The company operates in four segments: Cleaning, Household, Lifestyle, and International. It offers laundry products, including bleach products under the Clorox brand, and stain fighter and color booster products under the Clorox 2 brand; home-care products primarily under the Clorox, Formula 409, Liquid-Plumr, Pine-Sol, S.O.S, and Tilex brands; naturally derived home care products under the Green Works brand; and cleaning and disinfecting products under the Clorox, Dispatch, Aplicare, HealthLink, and Clorox Healthcare brands. The company also offers plastic bags, wraps, and containers under the Glad brand; cat litter products under the Fresh Step, Scoop Away, and Ever Clean brands; and charcoal products under the Kingsford and Match Light brands. In addition, the company provides dressings and sauces primarily under the Hidden Valley, KC Masterpiece, and Soy Vay brands; water-filtration systems and filters under the Brita brand; and natural personal care products under the Burts Bees brand. The company markets its products primarily under the Javex, Glad, PinoLuz, Ayudin, Limpido, Clorinda, Poett, Mistolin, Lestoil, Bon Bril, Nevex, Agua Jane, and Chux brands. The company sells its products primarily through mass retail outlets, e-commerce channels, distributors, and medical supply providers. The Clorox Company was founded in 1913 and is headquartered in Oakland, California.
Who doesn’t know Clorox? Open your bathroom cabinet’s door and you’ll most probably find products sold by Clorox.
According to David Fish’s list, Clorox has paid and increased its dividend every year for 37 consecutive years. Based on 2013 to 2014 data, its one year dividend growth stands at 8,9%, its 3 years average dividend growth stands a 8,7%, while its five years and ten years dividend growth averages stand at 9,4% and 10,7% respectively. An impressive track record again for sure! But recently, in 2014, its last dividend increase was a disappointing 4,2% raise.
Since 1983, according to BuyUpside (figure below), CLX offered a 12,37% dividend raise per year on average to its investors :
But, I don’t find the last 4,2% raise very surprising. In fact, its revenues and earnings per share growth were pretty flat for the last couple of years while its payout ratio went from 38% in 2005 to more than 66% in 2014. Clorox had to face a lot of headwinds in recent years but will exit Venezuala and its inflation mess pretty soon which should help and they also are highly focused on their 2020 plan to bring value to investors. At first sight, I’d say that its massive recent dividend growth mainly came from two things : share buybacks and payout ratio increase. Further analysis would be required here though but that’s what it looks like.
Warren Buffett once said in his 1979 letter to shareholders that even a stopped clock could look like a growth stock if the dividend payout ratio was low. While Clorox is not a stopped clock, I don’t expect them to increase the dividend at high single digits in the near term. A 4-7% dividend raise sounds more probable and should still be supported by share buybacks and cost-cutting. But, there is a limit to how much you can increase the payout ratio, cut costs and buy back shares. One day, sales and revenues will have to pick up. The big problems with such products as bleach, garbage bags and so on is that they almost became commodities… The brand is good but do I really need to throw my garbage in a super resistant garbage bag? And what about bleach? Bleach is bleach in the end…
I’m also a bit concerned about the balance sheet. Its current debt/equity ratio has skyrocket at 30 over the last quarter and its quick ratio and current ratio are at 0,5 and 0,83 respectively according to Morningstar data. But, it is not unusual to see that with Clorox. The balance sheet is definitively leveraged and this is a risk indeed. But it is partly explained because Clorox doesn’t have a lot of equity to speak of. The company value is more related to its brands (goodwill) than to its hard assets.
At a current price of 98,43$ its dividend yield is at 3% with a 2,96$ yearly dividend paid quarterly. Its current p/e is pretty high at 23,27 and is above its industry peers and its 19,7 five years average.
Overall, with its price/book, price/sale and price/free cashflow above their five years averages, CLX appears expensive. But, its five years average dividend yield stands at 3,2, not so far from what it currently yields.
Morningstar rates it 4 stars and assigns it a fair value of 96$ as of september 2014.
I feel CLX is a great company but I’m not as enthusiast about their future and dividend growth prospects as Morningstar sounded in their analysis of the stock I read. Nearly 40% of their income comes from products that have become commodified like bleach, garbage bags and so on. In their 2020 plan they are committed to focus on expanding their brands abroad and cut costs by reducing their wastes and improving their supply chain. They also want to find new segments to exploits. We’ll see where it will get them.
For now, it is not a stock I plan to buy at such a price but if there’s a sale, I might consider it!
Do I really have to say anything about what that company does? Nope!
But still… Founded in 1886 and headquartered in Atlanta (Georgia) the Coca-Cola Company sells its products primarily under the Coca-Cola, Diet Coke, Coca-Cola Light, Coca-Cola Zero, Sprite, Fanta, Minute Maid, Powerade, Aquarius, Dasani, Glacéau Vitaminwater, Georgia, Simply, Minute Maid Pulpy, Del Valle, Ayataka, Bonaqua/Bonaqa, and Schweppes brand names. They also recently took a stake in Keurig Mountain (GMCR) and Monster Beverages (MNST). With 17 one billion dollars brands, it’s a really impressive company.
Nice thing to mention here, Coca-Cola is one of the biggest of Warren Buffett’s holding. If I’m not mistaken, he owns through his Berkshire Hathaway holding, roughly 9% of Coca-Cola’s outstanding shares. I’m sure one of Warren’s dream would be to own all of them but that’s a big elephant… Or even mammoth that we have here!
According to David Fish’s list, KO has paid and raised its dividend for 52 years in a row!!! Wow! Its 1 year dividend growth rate stands at 9,8%, while its 3 years, 5 years and 10 years averages stand respectively at 8,4%, 8,1% and 9,8%.
Since 1962, according to BuyUpside (see figure below), KO has rewarded its shareholders with a 12,01% per year raise on average.
Last quarter earnings didn’t please investors and the share price fell from 44$ to 41$ recently. At current price, KO offers a 1,22$ dividend (3,00%). Its current p/e is still pretty high at 22,81 and is still above its 18,3 five years average and above industry peers. Its price/book, price/sales, price/cashflow and current dividend remains pretty in line with its 5 years averages.
KO revenues are growing, earnings per share are growing, the number of shares outstanding is declining due to share buybacks, the dividend is growing, the payout ratio has been stable over the last 10 years and the quick ratio, current ratio and debt/equity ratios look great. Overall, KO is still a great business and still has a lot of growth ahead in my own opinion. If you would have bought 1 KO share 10 years ago at 19,45$, you would currently own 2 shares worth ±41$ per share, 4 times what you paid for!! Not a bad return here!
Morningstar currently rates KO 3 stars and think that is has a fair value of 42$ as of october 2014. KO shares are rarely on sale. If I would have available cash, I would consider opening a position in Coke at present price and would cost-average over time.
Based on Yahoo Finance :
Colgate-Palmolive Company, together with its subsidiaries, manufactures and markets consumer products worldwide. The company operates in two segments: Oral, Personal and Home Care; and Pet Nutrition. It offers oral care products, including toothpastes, toothbrushes, and mouthwashes, as well as dental floss and pharmaceutical products for dentists and other oral health professionals; personal care products comprising liquid hand soaps, shower gels, bar soaps, deodorants, antiperspirants, shampoos, and conditioners; and home care products, such as dishwashing liquids, laundry and dishwashing detergents, household cleaners, oil soaps, bleaches, and fabric conditioners. The company also offers pet nutrition products for everyday nutritional needs; a range of therapeutic products to manage disease conditions; and various products with natural ingredients. Its principal trademarks include Colgate, Palmolive, Speed Stick, Lady Speed Stick, Softsoap, Irish Spring, Protex, Sorriso, Kolynos, elmex, Toms of Maine, Sanex, Ajax, Axion, Fabuloso, Soupline, and Suavitel, as well as Hills Science Diet, Hills Prescription Diet, and Hills Ideal Balance. The company markets its pet nutrition products for dogs and cats through pet supply retailers and veterinarians. Colgate-Palmolive Company was founded in 1806 and is headquartered in New York, New York.
According to David Fish’s list, Colgate-Palmolive has paid a growing dividend for 51 straight years. Its past 1 year dividend growth stands at 9%, while its 3 years, 5 years and 10 years dividend growth respectively stand at 9,4%, 11,3% and 11,4%.
Since 1977, according to BuyUpside, CL has rewarded its investors with a 9,03% dividend raise per year on average :
At current price (65,35$), CL offers a 1,44$ dividend representing a poor 2,2% initial yield. Its current p/e is at 27,32 and lies far above its 20,7 five years average. Its price/book, price/sale, price cashflow also are a lot above their 5 years averages, which let us believe that this stock is probably overvalued right now. But, its current dividend yield is in line with its 5 years average yield.
Over the last 10 years, the revenues and earning per share have grown, the outstanding number of shares have decreased but the payout ratio also increased from 41% to 56%.
Morningstar currently rates it 3 stars and assigns it a fair value of 63$. I would support and say that this stock trades above fair value right now. For now, I’m on the sideline with this stock but would consider buying it on a dip.
According to Yahoo Finance :
Exxon Mobil Corporation explores and produces for crude oil and natural gas. As of December 31, 2013, the company had approximately 37,661 gross and 31,823 net operated wells. It also manufactures and markets commodity petrochemicals, including olefins, aromatics, polyethylene, polypropylene plastics, and specialty products; and transports and sells crude oil, natural gas, and petroleum products. In addition, the company has interests in electric power generation facilities. It operates in the United States, Canada/South America, Europe, Africa, Asia, and Australia/Oceania. Exxon Mobil Corporation was founded in 1870 and is headquartered in Irving, Texas.
Exxon is a great dividend growth stock and the world’s largest oil and gas company. According to David Fish’s list, XOM has raised its dividend every year for 32 consecutive years. Its one year dividend growth rate between 2013-2014 was 12,8% while its 3 years, five years and ten years averages stand respectively at 12,2%, 9,7% and 9,6%. The last increase occurred recently in 2014 and was a 9,5% raise!
Since 1970, Exxon has rewarded its shareholders with a 7,49% dividend raise per year on average (BuyUpside).
Such a record is definitely impressive. But some argue that oil price is putting a lot of pressure on future earnings. I believe that while in the short term it might affect earnings, over the long term the demand for energy is growing as the population is also growing and as such Exxon makes a great stock to hold for my portfolio. With Warren Buffett as a fellow shareholder here, I feel pretty safe.
At current price, the initial yield is at 2,9% a lot above its 2,4% five years average. Its price/book, price/sales, price/cash flow and price/earnings ratios are all under their five years averages suggesting that the stock is undervalued. I recently added to my position under 91$ per share and I’m more than happy with my buy.
The debt/equity ratio is strong here at 0,07 and the payout ratio pretty low at 32%.
Morningstar currently rates it 4 stars with a fair value of 109$ per share. If I had more cash available, I would take the opportunity to buy even more shares at current price level. (90-94$)
W.W. Grainger inc (GWW)
As per Yahoo Finance :
W.W. Grainger, Inc. operates as a distributor of maintenance, repair, and operating (MRO) supplies; and other related products and services that are used by businesses and institutions in the United States and Canada. The company provides material handling equipment, safety and security supplies, lighting and electrical products, power and hand tools, pumps and plumbing supplies, cleaning and maintenance supplies, building and home inspection supplies, and vehicle and fleet components. It also offers inventory management and energy efficiency solutions; various industrial and safety supplies; tools, fasteners, instruments, welding, and shop equipment; and safety footwear, supplies, and services, as well as distributes metalworking products, production supplies, and MRO materials. The company sells private label brands under its registered trademarks, such as DAYTON, SPEEDAIRE, AIR HANDLER, TOUGH GUY, WESTWARD, CONDOR, and LUMAPRO; and offers its products through various branches, sales and service representatives, catalogs, and distribution centers, as well as through online Websites. It serves small and medium-sized businesses, large corporations, government entities, and other institutions. The company also operates in the Europe, Asia, Latin America, and internationally. W.W. Grainger, Inc. was founded in 1927 and is based in Lake Forest, Illinois
While a dividend Aristocrat, I have to admit it’s a company I never heard of and really knew anything about. But, when compiling data for that post and other posts, I saw it was a name that was often coming up.
Let’s take a deeper look at this company. First, they have a huge and great website where they sell well over 1,200,000 products focused toward businesses. With 9 billions in sales last year and more than 2 millions active customers GWW is the North America’s leading broadline supplier of repair, maintenance and operating products. They also operate abroad and are active in 23 countries.
On the shareholder’s return standpoint, based on their fact sheet, they offered a 29,7% return per year to shareholders between 2009 and 2014. (Don’t forget that we had one of the greatest bull market since the 2008 crash) and they also have increased their dividend every year for 42 consecutive years.
In fact, based on David Fish’s list, its one year dividend raise was 17,3%, its three years dividend growth average stands at 20%, while its five years and ten years dividend growth rates stand respectively at 18,3% and 17,2%. If this is not impressive well I don’t know what is!!!
Since 1985, according to BuyUpside, GWW rewarded its shareholders with a 11,93% dividend raise per year on average :
Now on a valuation standpoint, is GWW a fair valued stock? At first sight I would say probably not because such impressive records rarely stay unnoticed and unfortunately there are too many people in this world who are willing to pay too much for future potential growth. But who knows?!
With a current p/e at 20,74, GWW trades pretty in line with its five years average p/e of 20. Its price/book, price/sales and price/cashflow ratios are also pretty in line with their 5 years averages. While its dividend yield (which is pretty low) stands at 1,7%, a little above its five years dividend yield average of 1,5%.
Revenues are growing, earnings per share are growing, dividends are growing while the payout ratio remains pretty flat around 30%. The book value per share is also growing and went from 22,93$ in 2004 to 49,19$ in 2014.
The current ratio and quick ratio show that the debt is greatly covered with a nice margin of safety while the debt/equity ratio is strong at 0,13.
Overall, we have a great company here at first sight and I think it would be worth a more in-depth analysis.
One of my concerns that I would like to explore here is that they are sort of a retailer for businesses, kind off like a Wal Mart but for businesses. They have more than 4800 suppliers but with internet it is now easier than ever for a supplier to cut the middle-man. I understood that they offer more than that with their inventory management solutions but even though…
Morningstar currently rates it a 4 stars stock and assigns it a fair value of 264$. GWW currently trades at 238$. At 264, the p/e would be near 23. I’d say that given its five years averages, GWW probably trades at fair value but that’s only my amateur opinion.
With a current yield of 1,8%, one must be pretty sure that the dividend will continue to grow at high single digits at most. I’m not sure yet I want to add that stock to my portfolio. The dividend is pretty low and the share price pretty high but it’s definitely a stock at which I’d be willing to take a more in-depth look at.
Okay, I’m gonna skip the company description here.
According to David Fish’s list, MCD has raised its dividend every year over the last 39 years. Its 2013-2014 dividend growth rate was 8,7%. While its three years, five years and ten years dividend growth rate averages were respectively 11,3%, 13,9% and 22,8%. A nice record indeed. But its 2014-2015 dividend hike was a deceptive 5%. Is the high single digit dividend growth over?
Since 1976, according to BuyUpside, McDonald’s has rewarded its shareholders by an impressive 20,59% dividend raise per year :
Let’s take a deeper look at McDonald’s numbers. First, I’d like to say that MCD had to handle a lot of bad press and bad news this year. This probably more than anything affected the share price by a lot and MCD share price fell from 104$ to 90$ during the year.
Currently trading near 92$ at a 16,77 p/e ratio, MCD offers a juicy 3,7% yield compared to a 3% yield on average over the last five years. On a dividend yield standpoint, the stock appears cheap but when we compare its p/e, price/books, price/cashflow MCD is trading quite in line with its five years averages and no bargain seems to be made here. I’d say that at first sight, the stock looks fairly valued.
Over the last decade, revenue growth as been scarce at MCD. But earnings per share and dividend grew a lot faster than revenues. Even though revenue growth was not high, MCD is a cash machine and through share buybacks and steady increases in the payout ratio, MCD was able to grow earning per shares and dividend at high rates.
But, now that the payout ratio went from 30% to near 60% during that 10 years time frame, McDonald’s will have to find ways to grow real revenues at a faster rate.
McDonald’s board has approved a 20 billion plan to reward shareholders through share buybacks and dividends. If I’m not mistaken, they have already spent close to 4,5 billions over the last two years and I suspect there will be a lot more of share buybacks over the coming years.
With a market at such highs buying back shares might not be the best way to reward shareholders… Like Warren Buffett once said, one dollar kept by management should at least produce one dollar in shareholder’s wealth because if it fails to do that then that’s money lost that should have been given back to shareholders in the form of dividends. I’m not a big fan of share buybacks, but they at least give the shareholders some protection of capital.
The balance sheet is strong overall, the financial health is good with a current ratio and quick ratio at 1,74 and 1,46 and a debt/equity ratio at 0,92.
Morningstar currently rates it 3 stars and assigns it a faire value of 95$.
McDonald’s is a mature business facing a lot of problems and competition, revenue growth is getting harder and millennial seem to be more concerned with their health and the way huge corporations deal with salarial conditions of their employees. MCD employees have a lot of claims, the main is to being paid at least 15$/hour. If MCD eventually accept that, this means that it will have to pass these costs to customers or reduce the number of employees and automate the processes a little more. Because, will customers want to buy a 20$ Big Mac Meal?
I trust in McDonald’s to figure out all those problems. Their cashflow is strong, McDonald’s is such a strong brand and as such, McDonald’s currently is my biggest holding. At current price, I would consider adding more if I didn’t already have a full position for now.
Wal Mart (WMT)
Wal Mart is another company that doesn’t need any introduction.
According to David Fish’s list, WMT has paid and raised its dividend every single year over the past 41 years and its dividend growth rate is more than impressive. Between 2013 and 2014, WMT raised its dividend by 16,1%. Over the last three years WMT raised its dividend by 15,3% on average. While over the last five and ten years, the dividend has been raised by 14,2% and 18% on average. Remember that this ten years time frame includes the 2008 market crash!
Since 1974, according to BuyUpside, WMT has rewarded its shareholders with a 23,33% dividend raise per year on average!
At current price (76$), WMT trades at a p/e ratio of 15,67, a little above its five years 14,3 average. While its price/sales, price/book and price/cashflow five years averages are pretty in line with their current figures. The dividend is 2,5% while the five years average dividend yield stands at 2,3%. This suggest that WMT is probably fairly valued.
Over the last ten years I’d say that the revenue almost doubled, the earnings per share doubled, the dividend per share almost quadrupled and the payout ratio doubled to 40% which is still low and lets a lot of room for dividend growth.
WMT as also been aggressive at buying back its shares and reduced the outstanding amount of share by 1 billion roughly over the last ten years! All of these efforts have permitted to Wal Mart to reward its shareholders by such great dividend raises.
At 0,59, the debt/equity ratio suggest that debts are under control too.
I’d say that overall, WMT offers a very strong balance sheet and a pretty safe dividend and dividend growth.
Morningstar currently rates WMT a 4 stars stock and assigns it a fair value of 80$.
Wal Mart sure faces a lot of headwinds like most brick-and-mortar retailers do. But their moat is wide wide wide and their cash-flow strong. They have plans to compete against dollar-stores and get back the market shares they took over the last years. They also want to fight against super-giant online retailers like Amazon. While they have a lot of cash, fighting everywhere on all fronts may prove to give unsatisfying results over the coming years. War is not free and e-commerce is outside the company’s core competency.
I own 18 shares of Wal Mart and plan to buy more over the coming months or years. But to get a decent return, I think that shares must be bought on dips. Since april 2013, WMT share price remained pretty flat… In fact, if you would have bought 1 share last year at the same exact date, you would have lost 1%.
McKormick & Cie (MKC)
As per Yahoo :
McCormick & Company, Incorporated manufactures, markets, and distributes spices, seasoning mixes, condiments, and other flavorful products to retail outlets, food manufacturers, and foodservice businesses. It operates in two segments, Consumer and Industrial. The Consumer segment offers spices, herbs, seasonings, and dessert items directly, as well as through distributors or wholesalers to various retail outlets, including grocery stores, mass merchandise stores, warehouse clubs, and discount and drug stores, as well as supplies private label items. This segment markets its products under the McCormick, Lawrys, Club House, Zatarains, Thai Kitchen, Simply Asia, Ducros, Schwartz, Kamis, Vahiné, DaQiao, and Kohinoor brand names. The Industrial segment provides seasoning blends, spices and herbs, condiments, coating systems, and compound flavors directly, as well as through distributors to food manufacturers and foodservice customers. McCormick & Company, Incorporated was founded in 1889 and is headquartered in Sparks, Maryland.
Miam! Club House Montreal Steak spice is great! Let’s see how’s the dividend growth!
According to David Fish’s list, MKC has raised its dividend for 28 consecutive years. Over the 2013-2014 period, it has raised it by 9,7% while it has raised its dividend by 9,4% on average over the last three years, 9,1% on average over the last five years and 11,4% per year on average over the last ten years. Impressive records again here!
Since 1990, according to BuyUpside, MKC has rewarded its shareholders with an 11,17% dividend raise per year on average :
At current price, MKC offers a small 2,1% dividend yield and trades at a p/e ratio a bit high at 21,78. All these figures are pretty in line with their five years averages which suggest that even though the p/e is a bit rich here, MKC doesn’t fall often on sale.
Over the last ten years, the revenues almost doubled, the earnings per share almost doubled, the net income doubled, the dividend tripled, the number of shares outstanding slighly decreased and the payout ratio slightly increased from 37 to 49%. Plus, MKC doesn’t carry a lot of debt. The debt/equity ratio looks good at 0,52 and has remained steady over the last 10 years. All these figures suggest that the dividend growth is pretty safe here and that the dividend growth didn’t came from aggressive share buyback programs or aggressive increases in the payout ratio. Further analysis would be needed here but this company seems pretty interesting at first sight for a dividend growth investor like me.
Morningstar currently rates this stock 4 stars and assigns it a fair value of 76$. Its current price is 69.32$… It might find a place on my watch list!
The stocks listed here are part of the S&P500 dividend Aristocrats list and carry a wide moat as per Morningstar. They are mature companies with lasting competitive advantage. All of them, in my own opinion are relatively safe stocks to buy with low betas (low volatility) that will deliver slow but constant dividend growth and capital appreciation. But, one need to make sure to verify punctually that their moat is intact because no competitive advantage will last forever… think of Kodak, Sears and countless huge companies who disappeared over the last 30 years! Some of them are a bit pricey right now while others offer attractive prices right now.
Remember that price is what you pay, while value is what you get!
I will add them all to my watch list and might perform more in-depth analysis on some of them in the weeks or months to come. One that particularly grabbed my attention is MKC. While I knew a little about this company, its one of the company on this list who appears to have one of the healthiest dividend growth at first sight.
Do you own any stocks on this list? What are your thoughts?
Please remember that I’m only an amateur investor and that this discussion is not a recommendation to buy any stocks.
Full disclosure : long WMT, MCD, XOM
Image courtesy of chrisroll/ FreeDigitalPhotos.net