Portfolio Suggestions:
Companies with Direct Investment Plans (This portfolio is updated monthly)
Bucking the Trend
(The companies included in this portfolio were selected by The Moneypaper editors)
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Companies in this month's portfolio (Click for capsule reviews and enrollment information) |
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|---|---|---|
| Abbott Laboratories | Ecolab Inc. | Nucor Corp. |
| AFLAC Incorporated | Emerson Electric Co. | Parker-Hannifin Corporation |
| Baxter International Inc. | Hudson City Bancorp Inc. | South Jersey Industries, Inc. |
| Becton Dickinson & Co. | Illinois Tool Works, Inc. | Valspar Corp |
| Clorox Company (The) | Monsanto Company | Wisconsin Energy Corp. |
| CVS/Caremark Corp. | New Jersey Resources Corp. | |
| Dominion Resources | Nike, Inc. B | |
Once upon a time, dividends were considered a reliable way for shareholders to compound their investments or build a steady stream of income. But the financial meltdown that washed over Wall Street last year and the recession that continues to wipe out profits changed all that, with some predicting that the pace of dividend reductions or eliminations will be the worst in at least 50 years. So we set out to highlight companies that have managed to withstand the onslaught of bad news and continued to reward shareholders with increased payouts.
Surprisingly,
there are still
dozens of companies
that have boosted
their dividends
over the past year.
To narrow our focus,
we considered those
that have done so
since last summer,
when stock trading
volatility (and
dividend cuts) really
picked up, and then
we eliminated companies
that declared only “token” increases.
Our final cuts were
based on a judgment
of earnings and dividend
reliability, as well
as strong balance
sheets.
Hardest
hit by the dividend
reduction trend
(and
underlying earnings
collapse) has been
the financial sector,
but there are exceptions.
One such company
is Hudson City
Bancorp,
a Paramus, New
Jersey
thrift known for
its conservative
lending
practices. The
company
earned 90¢ per
share in 2008, up
from 58¢ a
year earlier, and
increased the dividend
in February for the
fifth straight quarter.
All told, shareholders
have enjoyed a 59%
compound annual growth
rate in the dividend
since the company
went public in 1999.
Another
growth story, both
literally and figuratively,
is that of Monsanto.
This agricultural
giant ($42 billion
market cap) operates
two segments: Seeds & Genomics;
and Agricultural Productivity,
which includes animal
farming and crop protection.
It earned $3.39 per
share in fiscal 2008
(ended in August)
and should net about
$4.50 in fiscal 2009.
Continuing a recent
pattern of raising
the dividend every
three quarters, the
April payout will
rise by 10.4%, to
an annual rate of
$1.06 per share, still
less than one-third
of earnings.
We
consider it a very
positive sign when
management owns
a
significant amount
of company stock.
Those in this month’s
portfolio with 5%
or more include Baxter,
5.0%; Becton Dickinson,
5.3%; Ecolab, 12.5%;
Emerson, 5.7%; Hudson
City, 10.4%; New Jersey
Resources, 7.4%; Nike,
7.3%; South Jersey
Industries, 8.8%;
and Valspar, 7.3%.
Other
companies that
qualified,
but were recently
featured, include
Colgate-Palmolive,
Dover Corp., ExxonMobil,
Honeywell, Johnson & Johnson,
PepsiCo, Kimberly-Clark,
Medtronic, McDonald’s,
Procter & Gamble,
and Walgreen.
Our
list was scrutinized
by resident staff
analysts Robert
Briechle,
Michael Burke,
Dave
Fish, and Pete
Cirocco,
who all agreed
on
the worthiness
of
these companies
for
long-term accumulation.
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