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Dividend Aristocrats: Top Dividend Growers

by: David Powell March 28, 2008 | about stocks: ADP / BAC / BDX / JNJ / LOW / MTB / NUE / PFE / STT / USB / WMT / WWY    

David Powell

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Standard and Poor's publishes a list of companies called the "Dividend Aristocrats." This list is updated every year: some companies are added, and some fall off the list. The criteria for inclusion is paying a dividend which has been increased every year, for the last 25 years.

There are currently 58 companies on this list, which I have copied below. However, the Dividend Aristocrats are not created equal. Some increase their dividends at significantly faster rates than others and the differences can be staggering.

If you are an income investor, you want to buy companies that are increasing their dividends. You might think that utilities pay the best dividends, however Consolidated Edison (ED) has increased its dividend only 11% since 1997. Questar Corp (STR) has increased its dividend only 50%. So what are the biggest dividend growers on the Dividend Aristocrats list? Here's a list of the 12 companies with the biggest increases over the last 10 years, adjusted for splits:

Ticker

Company

Dividend Growth ’97-‘08

Current Dividend

NUE

Nucor Corp.

900%

1.8%

MTB

M & T Bank

775%

3.2%

LOW

Lowe’s Companies

700%

1.4%

WMT

Wal-Mart Stores

633%

1.8%

USB

U.S. Bancorp

574%

4.9%

PFE

Pfizer, Inc.

433%

6.2%

ADP

Automatic Data Processing

383%

2.8%

STT

State Street Corp.

360%

1.1%

JNJ

Johnson and Johnson

320%

2.6%

BDX

Becton, Dickinson

300%

1.3%

BAC

Bank of America

276%

6.0%

WWY

Wrigley

263%

2.2%

CHANGES TO 2007 DIVIDEND ARISTOCRATS

[TICKER COMPANY SECTOR 12/31/2007]

ADDITIONS:
ADF AFLAC Inc Financials
APD Avery Dennison Corp Industrials
XOM Exxon Mobil Energy
TEG Integrys Energy Group Utilities
PBI Pitney Bowes Industrials

DELETIONS:
MO Altria Group Consumer Staples
FHN First Horizon Natl Financials
SLM SLM Corp Financials

Disclosure: Author is long BDX and BAC

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This article has 30 comments:

  •  
    Mar 28 12:00 PM
    Very informative. Thanks for it.
    Reply
  •  
    Mar 28 12:25 PM
    THANKS. MOST ALWAYS FIND UNEXPECTED GOODIES ON ALPHA.
    HELPS ME FEEL 'INFORMED'.
    Reply
  •  
    Mar 28 12:28 PM
    I work for a Nucor subsidiary and I can't say enough good things about upper management and how well this company is run. The treatment of employees is extremely fair and done with a great deal of integrity. I personally can see why Nucor is the top player in many of its downstream operations. We strive to "Take Care of Our Customers". I do own company stock and recommend the stock to everyone I know.
    Reply
  •  
    Mar 28 04:32 PM
    3 of these companies are Buffett picks.
    Reply
  •  
    Mar 29 08:44 AM
    .


    Can anyone give me a link to and ETF/ETFs, that have all the 12 companies above listed in their portfolio.

    If you can't, give me a link to a site that I can find out this information.

    Thank You

    Cajun


    .
    Reply
  •  
    Mar 29 09:03 AM
    Take a look at www.dividendachievers..../. In particular, take a look at the list of "licensed products". Compare the Powershares PFM with Vanguard's VIG. Note also the comparison of the index performance with that of the S&P 500 over 10 years. S&P wins.
    Reply
  •  
    Mar 29 09:04 AM
    By 'index performance' I mean the Dividend Investors Index
    Reply
  •  
    Mar 29 09:16 AM
    Well, PFE with it's rather (non) robust pipeline is in trouble and I don't see it in the Aristocrat field.
    Reply
  •  
    Mar 29 09:18 AM
    I feel that SGP is a better drug company than PFE because it has patent protection out several years.
    Reply
  •  
    Mar 29 09:18 AM
    i cant c the future but FRO has been great for dividends. seems well run &nobody has figured out a way to pave over the ocean.i am not connected to wall st or this co.
    Reply
  •  
    Mar 29 10:54 AM
    I wouldn't own Bank of America stock if you paid me to accept it as a gift, and it paid a 100% dividend. They are the most arrogant, hateful, self-serving bunch of louts I have ever done business with. They could not care less if you deposit money with them. They charge fees no other bank would even consider charging. It would not surprise me if they installed pay water fountains and pay toilets for their customers to use!

    I took $300,000 out of their bank to open an account with a competitor and it didn't bother them one bit. What's a peanut account to them? Of course, there just might have been a lot more money to deposit later on, but that doesn't matter to their elitist mind set.
    Reply
  •  
    Mar 29 11:21 AM
    Due to exposure to sub-prime CDO's, SIV's etc, and thier pending take-over bid for Country Wide, Bank of America would be the last stock I would own.
    Reply
  •  
    Mar 29 11:58 AM
    Here's a 2-yr chart showing how much money you LOST while chasing "dividend aristocrats", finance.yahoo.com/q/bc...
    All the financials should be MANDATED to cut or eliminate dividends using taxpayer Fed bailout money, don't be surprised to see those cuts.
    Reply
  •  
    Mar 29 12:37 PM
    The CFC deal will be a huge winner in a few years. BAC has a tremendous amount of cash on it's balance sheet so I'm not concerned about any dividend cut. I can't say the same for WB,WM or C(again).

    Either way the general fear is my gain - AXP, WFC are all great bargains.
    Reply
  •  
    Mar 29 01:28 PM
    Good piece David.

    America is the place to invest.

    America has no equal.
    Reply
  •  
    Mar 29 02:53 PM
    USB has no subprime exposure. I think Buffett bought $2 billion of it in 2007.

    PFE has a lousy pipeline, but it also has $22 billion in cash and there are tons of depressed biotech stocks out there.
    Reply
  •  
    Mar 29 05:20 PM
    Some very good information, from author and readers. Thanks.
    Reply
  •  
    Mar 29 06:53 PM
    Mixter. Boy have u got it straight on Bank of America. Now if the other 98% of Americans would get smart.
    Reply
  •  
    Mar 30 01:29 AM
    Can someone(s) help me here?

    I just don't understand why we should care about dividends, when the stock normally declines by the same amount each time the dividends are paid.

    Am I missing something?
    Reply
  •  
    Mar 30 06:43 AM
    I am a big believer in Dividend investing. Currently we have Mergents Dividend AChievers and we have S& P Dividend Aristocrats. It would be great if some one wrote a detailed piece comparing them.

    I have seen studies done historically which proves dividend paying companies far outperform non-dividend paying companies.

    The problem is investors do not have patience and do not look it from a 10 to 20 years perspective. They always seeing a stock price growth for 5 years and decide the stock is dead beat. For example look at WMT chart for 5 years and then again for 15 years. You will see the difference.

    My logical explanation as to why I like dividend paying companies is, it provides discipline to the management. IF a company is 'committed' to pay dividends and to grow them as the companies listed above, it provides them with a good guide line and they do not go on a shopping spree and waste money on big costly acquisitions. It provides a dependable inflation adjusted income stream for the patient investor.
    I am still torn between share repurchases and dividends. I normally reinvest dividends through a DRIP program so I wonder whether stock repurchase is better for me tax wise. However a dividend is a public commitment to either retain or increase the distribution (I love companies that are committed to increase dividends like WMT, JNJ) but stock buy back is not a commitment. A company may choose NOT to buy back shares when the prices get too high.

    I have some questions on NUCOR though. As I understand they are a commodity company without any 'brand' or moat. How do they manage to perform so well over time?

    In the past I have resisted temptations to own NUCOR as it is a commodity company. Can some one provide more info as to why NUCOR will be around for next 30 years?

    Reply
  •  
    Mar 30 07:52 AM
    B of A is a superb example of why one needs to own dividend stocks. Had you purchased B of A back in 1987 your cost basis would be about $3.00. The annual dividend is about 80 cents. This equates to a yield of 26.66% on your initial money.
    Reply
  •  
    Mar 30 07:54 AM
    Mixter: Many banks will try to rape you with fees. Not just B of A.
    Reply
  •  
    Mar 30 11:28 AM
    Notsosmart - your website link does not point correctly (I assume). You may want to check it.
    Reply
  •  
    Mar 30 12:59 PM
    BofA's annual dividend is running 2.56. If you have shares from 87 you are getting over 50% yield on initial investment.
    Reply
  •  
    Mar 30 01:49 PM
    Each quarter you receive a dividend, and you automatically convert that amount to the companies' stock, you receive the compounding effect. Over time, it really works well for you.
    Reply
  •  
    Mar 30 03:11 PM
    I am long on Pfizer - here is my thesis:

    I beleive Pfizer will be making multiple acquisitions (or a big ones) to replenish its near term pipleline before Lipitor patents expire over the 3 - 4 years. They are sitting on over 30 billion cash + short term assets and are continuing to add to the cash pile at the rate of 5 B a year (after paying out 8 B for dividends. They have a AAA credit rating (only a handful of companies have that - and none of banks).

    They also continue to spend over 8 B in R&D and their mid term to long term pipeline looks quite good. I don't think there is any great danger of divdend impairment.
    Reply
  •  
    Mar 30 09:03 PM
    To Marol - There are many ways to make money from dividend stocks besides buying and holding. Which most of the above cimments emphasize. First, check dividends in the newspaper every nite. When you find one which pays quarterly, buy as much as you can if the price has not started to go up. Then, sell the day before it goes ex-dividend. You will usually have more profit than you would have if you had held the stock on its (sometimes) downward trajectory. Or you can do what I did last week - Buy the stock when it has just started to move up. A couple of days before the x-div. date, write about 30 out of the money calls (per 1000 shares) and the day before it goes x-div, put in a sell order at the market. You will get (usually) the first price of the day, which I did. The stock has already moved down where all my calls are profitable if I wanted to buy them back, but they are very safe. I love dividends. By the way, there are times when the stock does NOT go down after ex-div day. You can spend some time each week finding div. situations and making a list. Then you can jump from one issue to the other. Right now I own some HTE (a Canadian Royalty Trust) which I have been holding for awhile, but I write way-out of-the money calls close-in right before it goes ex. Pays a generous div. The market, these days, is not a place where I feel comfortable holding anything(with a few exceptions) for very long. My opinion - When you have a profit, take it. We're not going to the moon just yet.
    Reply
  •  
    Mar 30 09:11 PM
    Very important - When you put in the Sell order the day before the stock goes x-div, PUT THE ORDER IN AFTER THE MARKET IS CLOSED. That way, you will get the div. Also, please excuse typos. Of course, if you don't want the div., you sell BEFORE the market closes. Whichever seems like a better deal.
    Reply
  •  
    Mar 31 04:23 AM
    Mixter, you speak the truth about the arrogance of this bank. I too stopped using the bank to do everyday banking based on their business model. However, as an investment, they seem to be doing just fine. From the customer service stand point, they are terrible and have caused me to move to more friendly and response banks.

    As for the subprime mess that we are in, I suspect that many banks including B of A will be soon chopping their dividends. Right now they have an ideal set up with the Feds giving them cheap money and keeping loan rates high. That is one way or them to cover the pending losses resulting from the sub prime loans made by them.

    I do not see where they will gain much from the Country wide take over- at least in the short run. Maybe in the long run if the current banking crisis doesn't blow up into a full blown collapse this will turn out to be a good strategy for them to increase their exposure to the home mortgage market. We will come out of the housing down turn I believe, but in the immediate future, there will be some blood in the streets.
    Reply
  •  
    Apr 13 08:22 PM
    Did I miss something? Didn't NUE cut its dividend this year? I'm a big fan of dividend stocks, but this company's numbers in terms of dividend growth are misleading: there was a HUGE divy increase followed by a year in which the divy remained virtually unchanged, followed by a significant cut to its current level.

    If you want to talk overall (i.e. cumulative) returns, that's a different story, but this stock does not belong on this list.
    Reply
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