David Van
Knapp
submits:
There are two lists that serve as basic source material for
investors interested in long-term dividend-raisers. One is the
well-known
Dividend Aristocrats
list published by S&P. (To get the list, click the link here,
then Market Attributes, then Dividend Aristocrats. Free
registration is required.) The other is the lesser-known
Dividend Champions
list maintained by The DRiP Investing Resource Center, a non-profit
organization.
In my book, the latter list is far more useful than the former.
What follows is a comparison between the two lists.
Goals:
Both lists, at first glance, appear to have the same goal: To
identify companies that have raised their dividends for 25
consecutive years. That would lead one to believe that the lists
should be identical. But they are not. The Dividends Aristocrats
[DA] list identifies
43
such companies as of February 17, 2010. The Dividend Champions [DC]
list names
98
. How can that be? The answer lies in the methods used to compile
the lists.
The two organizations use slightly different wording to describe
what their lists show. S&P states that the DA list shows
companies with "25 consecutive years of increased cash payments."
DriP puts it this way: "[C]ompanies that have increased their
dividend in at least 25 consecutive years[,…]broadened to include
additional companies that [have] paid higher dividends (without
necessarily having increased the quarterly rate in every calendar
year."
Source Universe:
DA uses the S&P 500. If a company is removed from the S&P
500, it is immediately removed from the DA list. If a company is
added to the S&P 500, it is not eligible to be included on the
DA list until the list is recompiled in mid-December each year. DC
does not specify its universe, but it appears simply to be all
US-based companies. Note that neither list includes foreign-based
companies.
Update Schedule:
S&P's DA list is updated once per year, in mid-December. It
remains unchanged during the year unless a company is dropped from
the S&P 500 as just described. Each month during the year, DA
is updated to show whether or not a dividend increase or decrease
has been declared by each company on the list. So even if a company
declares a decreased dividend early in the year, the company will
remain on the DA list for the rest of the year. For example, when
GE announced in Feb. 2009 that it intended to cut its dividend, GE
remained on the DA list for the rest of 2009, with a notation that
its dividend had "decreased in February."
DC is updated every month. GE was deleted from its list at the
end of Feb, 2009, as it should have been. DC maintains a running
chronology of changes to its list. That chronology notes, "2/27/09:
Deleted General Electric (div. reduced)." GE has not appeared on
the DC list since that date.
What Qualifies as a Dividend Increase:
S&P focuses on "dividend actions." These are positive
declarations by a company that it is increasing its dividend.
DriP focuses on the actual dividend paid annually. This
introduces another difference between the two lists. A company can
increase its dividend distribution year-over-year without declaring
a dividend increase. For example, "alternators" are companies that
declare a dividend increase every other year, then hold the payment
steady between increases. Say that a company pays out four times
per year, as is typical of US companies. Then the actual annual
dividend distribution will rise each year even if there is a
declared increase only every other year. DC picks up such
companies, DA does not. (If it is not intuitive to you why
every-other-year increases result in annually increasing payouts,
see the example in the DC document.)
Another apparent difference is that DC accounts for "special
dividends." When a company declares a special dividend, it can
appear the following year that it cut its dividend, even though its
"regular dividend" has actually increased. DC factors out special
dividends for its listing, and therefore it does not drop a company
on the basis that it issued a special dividend the preceding
year.
Information Provided by Both Lists:
Each list gives the company name, ticker symbol, and
sector/industry for each company on its list. Each list is
available in Excel spreadsheet form. DriP also provides a pdf
version of DC. The DA list is alphabetical, while the DC list is in
descending order of the dividend streak.
Additional Information Provided:
DA provides a year-by-year tabulation (going back 8 years) of
dividend actions by the companies on its list. It tells what month
the dividend was increased in that year. For the current year, it
tells whether a company has decreased its dividend, without
removing the stock from the list. If the company has neither
increased nor decreased its dividend in the current or preceding
year, that cell is left blank in the spreadsheet. Even if a company
has declared a decreased dividend, S&P keeps the company on the
DA list until the next December update. So, for example, in the
list dated 11/11/2009, DA showed 52 companies, even though 8 of
them had decreased their dividends (as noted in the document). Two
other companies remained on the list even though no increase was
noted in either 2008 or 2009. All 10 of those companies have been
removed from the 2010 list.
DriP's DC list provides a host of additional information beyond
the bare list itself:
- Number of years of consecutive dividend increases (the leader
= Diebold [DBD] at 56 years)
- Whether the company offers a dividend re-investment plan
[DRIP]
- Price and yield as of the end of each month
- The old and new quarterly dividend rate
- The percentage of the most recent dividend increase
- The ex-dividend, record, and payment dates
- DriP's source of information for each stock
- Notes, such as whether a stock's information has been
adjusted because it issued a stock dividend, or if its payment
schedule is other than quarterly
- Totals and averages for all the stocks
- A chronology of all adds, deletes, and methodology
adjustments since the DC list was first published in 2007
The DC list uses colors to flag special situations: It uses
green to indicate that an increase announcement is expected in the
next 30 days. It uses red to indicate that the last dividend
increase was more than a year ago (i.e., that this stock is a
candidate to be dropped from the list.)
The DC list drops stocks that freeze their dividend across two
consecutive years. For example, Johnson Controls (
JCI
) is one of the companies noted earlier that S&P kept on its
list even though their spreadsheet showed blanks for both 2008 and
2009 (i.e., no dividend increases). DRiP, on the other hand, noted
in its chronology that Johnson Controls was dropped in 9/2009
because "4 divs. pd. 2009 = 2008."
Finally, the DC list includes an addendum of "contenders,"
companies that have recorded at least 15 but less than 25 years of
dividend growth. Thus, DC is really a source for companies that
have increased their dividends for 15 years or more I have seen it
said that business cycles typically last for 3-8 years. Therefore,
a company with a 15-year history of dividend growth has maintained
that record through at least two business cycles, while a company
with 25 straight years has done it through at least three cycles.
Each is an impressive achievement.
Notes on Use:
In my opinion, either list should be used only as a starting point
for doing your own due diligence. As many banks proved in 2008-09,
just because a company has raised its dividend many years in a row
does not mean that it has the financial wherewithal to keep doing
so. Some financial institutions raised their dividends (and
repurchased shares) just months before failing. Utilize a method
for determining the financial soundness of a company, and the
sustainability of its business model, before investing in it for
increasing dividends. I modestly suggest the method laid out in my
own
The Top 40 Dividend Stocks for 2010: How to Generate
Wealth or Income from Dividend Stocks
.
Also, just because a company has been raising its dividend for
many years does not mean that it has a good yield. If you have a
threshold minimum yield of 2.5% or 3%, some of these companies will
not meet it. For example, Parker-Hannifin (52-year streak) yields
1.8% at the moment. Tootsie Roll (44 years) yields 1.2%.
Company Comparison:
The following table compares the two lists. It shows vividly the
difference between them as sources for 25-year dividend raisers.
You will note that just one company-Supervalu-appears on the DA
list and not on the DC list. The company cut its dividend last
October; it is not clear why S&P kept it on the DA list for
2010.
Company
S&P
Dividend Aristocrat?
DRiP
Dividend Champion?
Abbott Laboratories (
ABT
)
Yes
Yes (37 years)
ABM Industries (
ABM
)
Yes (43)
Aflac (
AFL
)
Yes
Yes (27)
Air Products & Chemicals (
APD
)
Yes
Yes (27)
American States Water (
AWR
)
Yes (55)
Archer Daniels Midland (
ADM
)
Yes
Yes (34)
AT&T (
T
)
Yes (26)
Automatic Data Processing (
ADP
)
Yes
Yes (35)
Bancorp South (
BXS
)
Yes (25)
Bank of Hawaii (
BOH
)
Yes (30)
Becton Dickinson (
BDX
)
Yes
Yes (37)
Bemis (
BMS
)
Yes
Yes (26)
Black Hills (
BKH
)
Yes (40)
Bowl America (BWL-A)
Yes (38)
Brown-Forman (BF-B)
Yes
Yes (26)
California Water Service (
CWT
)
Yes (43)
Carlisle (
CSL
)
Yes (33)
CenturyLink (
CTL
)
Yes
Yes (35)
Chubb (
CB
)
Yes
Yes (44)
Cincinnati Financial (
CINF
)
Yes
Yes (49)
Cintas (
CTAS
)
Yes
Yes (27)
Clarcor (
CLC
)
Yes (26)
Clorox (
CLX
)
Yes
Yes (32)
Coca-Cola (
KO
)
Yes
Yes (47)
Colgate-Palmolive (
CL
)
Yes (46)
Commerce Bancshares (
CBSH
)
Yes (41)
Community Trust Banc. (
CTBI
)
Yes (28)
Connecticut Water Services (
CTWS
)
Yes (40)
Consolidated Edison (
ED
)
Yes
Yes (36)
C. R. Bard (
BCR
)
Yes
Yes (38)
Diebold (
DBD
)
Yes (56)
Dover (
DOV
)
Yes
Yes 54)
Eaton Vance (
EV
)
Yes (29)
Eli Lilly (
LLY
)
Yes
Yes (42)
Emerson Electric (
EMR
)
Yes
Yes (53)
Energen (
EGN
)
Yes (28)
ExxonMobil (
XOM
)
Yes
Yes (27)
Family Dollar Stores (
FDO
)
Yes
Yes (34)
Federal Realty (
FRT
)
Yes (42)
Franklin Resources (
BEN
)
Yes (29)
Genuine Parts (
GPC
)
Yes (53)
Gorman-Rupp (
GRC
)
Yes (35)
H. B. Fuller (
FUL
)
Yes (40)
Helmerich & Payne (
HP
)
Yes (37)
Hormel Foods (
HRL
)
Yes (44)
Illinois Tool Works (
ITW
)
Yes (45)
Integrys Energy (
TEG
)
Yes
Yes (51)
Johnson & Johnson (
JNJ
)
Yes
Yes (47)
Kimberly-Clark (
KMB
)
Yes
Yes (37)
Lancaster Colony (
LANC
)
Yes (47)
Leggett & Platt (
LEG
)
Yes
Yes (38)
Lowe's (
LOW
)
Yes
Yes (47)
McDonald's (
MCD
)
Yes
Yes (33)
McGraw-Hill (
MHP
)
Yes
Yes (37)
Medtronic (
MDT
)
Yes (32)
MGE Energy (
MGEE
)
Yes (34)
Middlesex Water (
MSEX
)
Yes (37)
Mine Safety Appliances (
MSA
)
Yes (37)
National Fuel Gas (
NFG
)
Yes (39)
Nordson (
NDSN
)
Yes (46)
Northwest Natural Gas (
NWN
)
Yes (54)
Nucor (
NUE
)
Yes (37)
Old Republic International (
ORI
)
Yes (27)
Parker-Hannifin (
PH
)
Yes (52)
Pentair (
PNR
)
Yes (34)
Pepsico (
PEP
)
Yes
Yes (37)
Piedmont Natural Gas (
PNY
)
Yes (31)
Pitney Bowes (
PBI
)
Yes
Yes (27)
PPG Industries (
PPG
)
Yes
Yes 38)
Procter & Gamble (
PG
)
Yes
Yes (53)
Questar (
STR
)
Yes
Yes (30)
RLI (
RLI
)
Yes (35)
RPM International (
RPM
)
Yes (36)
Sherwin-Williams (
SHW
)
Yes
Yes (31)
Sigma-Aldrich (
SIAL
)
Yes
Yes (33)
SJW (
SJW
)
Yes (43)
Sonoco Products (
SON
)
Yes (26)
Stanley Works (
SWK
)
Yes
Yes (42)
Stepan (
SCL
)
Yes (42)
SuperValu (
SVU
)
Yes
Sysco (
SYY
)
Yes (40)
Target (
TGT
)
Yes
Yes (42)
Teleflex (
TFX
)
Yes (31)
Telephone & Data Systems (
TDS
)
Yes (34)
Tennant (
TNC
)
Yes (38)
Three M (
MMM
)
Yes
Yes (51)
Tootsie Roll (
TR
)
Yes (44)
United Bancshares (
UBSI
)
Yes (36)
Universal (
UVV
)
Yes (39)
Valspar (
VAL
)
Yes (29)
Vectren (
VVC
)
Yes (50)
V. F. (
VFC
)
Yes
Yes (37)
Walgreen (
WAG
)
Yes
Yes (34)
Wal-Mart (
WMT
)
Yes
Yes (35)
Washington REIT (
WRE
)
Yes (38)
Wesco Financial (
WSC
)
Yes (38)
Weyco (
WEYS
)
Yes (28)
WGL Holdings (
WGL
)
Yes (33)
W. W. Grainger (
GWW
)
Yes
Yes (38)
Author's Disclosure
:
Long PG, EMR, MMM, JNJ, CB, ABT, PEP, CTL, MCD, T, SHW
See also
Productivity: Cyclical or Structural?
on seekingalpha.com