matisse capital management

The Highest Dividend Payers of the 2010 Aristocrats

Ranked by dividend yield.  Standard & Poor's compiles the Dividend Aristocrats list, defining the constituents as "large cap, blue chip companies within the S&P 500 that have followed a policy of increasing dividends every year for at least 25 consecutive years."  As of 2010, there are only 42 Dividend Aristocrats.  Here are the top 20 companies on the list by yield:

    1.   CTL, CenturyTel Inc., 8.3%

    2.   PBI, Pitney Bowes, 6.1%

    3.   TEG, Integrys Energy Group, 5.9%

    4.   CINF, Cincinnati Financial, 5.6%

    5.   ED, Consolidated Edison, 5.5%

    6.   LLY, Eli Lilly, 5.4%

    7.   LEG, Leggett & Platt, 4.8%

    8.   KMB, Kimberly-Clark, 4.2%

    9.   MCD, McDonald's Corp., 3.3%

    10. PPG, PPG Industries, 3.3%

The Dividend Achievers Index Funds (PKW, PFM, PEY, PID)

Diversified dividend yield. I am a dividend investor, tending toward shares that have consistent dividend growth.  When looking for these stocks, a good research starting point is the Dividend Achievers list created by Indixs.  To qualify for this list, a company must i) trade on the NYSE or NASDAQ, ii) have increased its annual dividend payments for the last ten or more consecutive years, and iii) have a daily cash volume over $500,000 in the Nov. and Dec. before the yearly list revision.  There is a US list (213 companies), a Canadian list and an international list.   In contrast, the Dividend Aristocrats list, created by S&P, requires companies to have annual dividend increases over 25 consecutive years.  Dividend Achiever stocks are available in several index funds at Powershares here, under "equity income funds;" the fees are relatively low.  These funds include:

Buyback Achievers Portfolio (PKW), the Dividend Achievers Portfolio (PFM), the High Yield Equity Achievers (PEY), and the International Dividend Achievers Portfolio (PID).  For me the most interesting of these if the Buyback Achievers, which has the added requirement that the company repurchased 5% or more of its outstanding shares for the last 12 months, so appreciation and yield.  Below are the top holdings of PKW:

Aetna Inc.   5.28%   Philip Morris International Inc.   5.23%   Sears Holdings Corp.   5.19%   DIRECTV   5.10%   Travelers Cos. Inc.   4.97%

Raytheon Co.   4.97%   WellPoint Inc.   4.76%   Exxon Mobil Corp.   4.75%   Quest Diagnostics Inc.   4.65%   Zimmer Holdings Inc.   4.39%

Highlights from Toronto Dominion Bank's 2009 Report

I recently reviewed Toronto Dominion Bank's (TD) annual report, year-end 2009.  I am a shareowner, so I receive a copy each year.  The president writes that while "there are some positive signs we are in a recovery...we expect the underlying economic conditions will remain lackluster for the foreseeable future." Here are some of the report's highlights:

-Tier 1 Ratio = 11.3%, up from 9.8% at year-end 2008.  The bank issued 35 million shares in 2009 at C$39.50 per share to boost this.

-Total shareholder return was 14% for the year. 

-Dividends were unchanged from 2008 at C$2.44 per share, annually; the payout ratio was 46%.

-Net income was C$3.8 billion, down 15.4% from C$4.5 billion.

-Earnings per share  were $C3.47, down from C$4.87 in 2008, due to a decrease in the fair value of derivatives, restructuring charges, and a decrease in the value of credit default swaps.

-Total impaired loans = C$1.75 billion, of which more than half was in the US, however less than 25% of this was real estate related.

-Total assets were C$557 billion at year-end 2009, down from $563 billion in 2008.

-TD is one of only a few global banks to retain an Aaa-rating from Moody's

Disclosure:  The author is long Toronto Dominion Bank (TD).

Companies Raising Dividends - 3/6

    CNQ, Canadian Natural, from C$.105 to C$0.15, quarterly; yield = 0.7%; +42.8%

    GD, General Dynamics, from $0.38 to $0.42, quarterly; yield = 2.3%; +10.5%

    MYE, Myers Industries, Inc., from $0.06 to $0.065, quarterly; yield = 2.6%; +8.3%

    PPL, PPL Corporation, from $0.345 to $0.35, quarterly; yield = 4.8%; +1.4%

    QCOM, QUALCOMM, Inc., $0.17 to $0.19, quarterly; yield = 2.0%; +11.8%

    WGL, WGL Holdings, from $0.3675 to $0.3775, quarterly; yield = 4.4%; +2.7%

    WMT, Wal-Mart Stores, from $0.273 to $0.303, quarterly; yield = 2.2%; +11.0%

Top dividend growers of this group?  QUALCOMM (QCOM) riased its dividend at an annual compound rate of 25.9% over the last eight years (it has only paid a dividend for that time).  Over the last 10 years, Canadian Natural Resources (CNQ) raised its dividend at annnual compound rate of 21.9%.  Next was Wal-Mart (WMT), which after this increase, boosted its payout over the last decade from 16.2 to 17.5% yearly.

Dividend Aristocrats 2010: The Top Dividend Growers

Ranked by their annual compound rate of increase.  Standard & Poor's compiles the Dividend Aristocrats list, defining the constituents as "large cap, blue chip companies within the S&P 500 that have followed a policy of increasing dividends every year for at least 25 consecutive years."  The current recession has caused a variety of companies to fall of the list as they cut their dividends.  There are presently only 42 Dividend Aristocrats.  When buying dividend stocks, it is important to consider not only the current yield, but also whether the company consistently increases its dividend at a rate that exceeds inflation.  If it does not, you are losing money.  I have analyzed the current Aristocrat's list and calculated the annual compound rate of dividend increase for each constituent over the last decade.  The top 10 dividend growers over this time period, with their annual increase, are as follows:

1. CTL, CenturyTel, Inc., 30.6%
2. MCD, McDonald's Corporation, 25.9%
3. LOW, Lowe's Companies, 24.6%
4. AFL, AFLAC Incorporated, 21.5%
5. WAG, Walgreen Company, 16.7%
6. WMT, Wal-Mart Stores, Inc., 16.2%
7. ADP, Automatic Data Processing, Inc., 15.6%
8. BDX, Becton, Dickinson and Company, 15.2%
9. SIAL, Sigma-Aldrich Corporation, 14.9%
10. PEP, Pepsico, Inc., 12.4%

Who was at the bottom of the list?  Consolidated Edison (ED) only increased its dividend over the last decade at a compound annual rate of 0.8%, followed by Integrys Energy (TEG) at 2.7%, and Pitney Bowes (PBI) at 2.8%.

Notes: Dividend increases which were announced, but not yet paid for the first quarter were included in the calculations.  This included CTL's recent quarterly increase to $0.725, plus announced increases by Air products (APD), Coca-Cola (KO), and Sherwin Williams (SHW).  Disclosure:  The author is long Pepsico and Becton Dickinson and Company.

Highlights from Royal Bank of Canada's 2009 Report

I recently reviewed Royal Bank of Canada's (RY) annual report, year-end 2009.  I am a shareowner, so I receive a copy each year.  The bank projects modest growth in income for this year, and forecasts Canada's economy to grow by 2.6% and the US economy by 2.5% in 2010.  Credit quality is expected to remain an issue, particularly in the US, although RY projects modest improvements in the US housing market for 2010.  Generally 2010, is expected to be a year of stabilization.  Here are some of the report highlights:

• Tier 1 Ratio = 13.0%, up from 9.0% at year-end 2008
• 2009 Return on Equity (ROE) was 11.9%
• Dividends were unchanged from 2008 at C$2.00 per share, annually; the payout ratio was 78%
• Net income was C$3.8 billion, down 15.4% from C$4.5 billion
• Total market capitalization was $C77.7 billion (it is currently $C79 billion).   The company issued both common and preferred shares in 2009 to boost its Tier 1 ratio.
• EPS = $C2.59, down from C$3.41 in 2008, due to increased provision for credit losses, increased expenses, and a one time goodwill impairment charge
• The C$1 billion impairment charge was taken against US operations for declines in the housing market and in the market value of US banks.

The Highest Dividend Payers in the S&P 500

Below is a chart from Thomson Reuters, ranking dividend stocks from the S&P 500 in descending order (click to enlarge).  Of course, an unusually high dividend can be a sign of trouble, elevated by a low share price.  Additional top dividend payers are listed after the jump.

The Berkshire-B Share Split

Berkshire Hathaway B shares (BRK-B) sold for $3,476 on January 20th.  They opened the next morning at $71.00 after a 50:1 split.  This makes Berkshire more accessible to small investors, but it really had to do with the acquisition of Burlington Northern (BNI).  Markel (MKL) which is similar to BRK-B in holdings trades at $330.50.  From WSJ:

"Berkshire's cash and stock offer will pay Burlington Northern shareholders $100 per share at 60% cash and 40% Berkshire Hathaway stock. Chairman Buffett proposed the split to accommodate holders of small amounts of Burlington Northern shares who would want to receive Berkshire Hathaway shares when the acquisition closed....'By splitting Berkshire "B" shares 50-for-1, we can accommodate even the smallest holdings of BNSF shares that elect a tax-free exchange,' Berkshire Hathaway said in the November announcement...It also said that the split was advisable regardless of the Burlington Northern transaction....Berkshire Hathaway shares aren't included in the Standard & Poor's 500-stock index, but the new, lower price could mean that the B shares would be eligible.

 

Warren Buffet's New Positions

According to its most recent filing, Berkshire Hathaway currently holds shares in 43 companies, as reported here.  New holdings from the third quarter are listed below:

    NSRGY.PK, Nestle, S.A., 3.4 million shares

    RSG, Republic Services Inc., 3.6 million shares

    TRV, Traveler's Insurance, 27,336 shares

    XOM, Exxon Mobil Corp., 1.3 million shares

Buffett also increased his holdings in WalMart (WMT) and eliminated his positions in Wabco Holdings (WBC) and Eaton Corporation (ETN).

Disclousre: the author is long XOM.

Canada's Stocks of the Decade

The best and the worst of the last 10 years, from the Globe and Mail.  Many of the top performers were energy, mining and technology companies.  Below are some of the best, with their appreciation over the last decade.  You can find the worst performers here.

    FNX.TO, FNX Mining Company, +4,182%

    HCG.TO, Home Capital Group, +1,942%

    SNC.TO, SNC Lavalin Group, +1,379%

    TRE.TO, Sino-Forest, +1,089%

    POT, Potash Corp. of Saskatchewan, +895%

    RIMM, Research in Motion Limited, +539%