One of the characteristics that investors look for in dividend stocks is the growth of the dividends. A company that continually grows its dividend can be a sign of a company that has strong fundamentals as well as management that is committed to rewarding shareholders.
I went on a quest for extreme dividend growers. I looked for companies that have grown their dividend every year for the last 20 years, without exception. This time period includes several recession, including the most recent “great recession.” As you can imagine, there are very few stocks that passed muster. In fact, only 16 companies grew their dividend every single year since 1991.
The criteria used is that the dividend per share paid in a fiscal year must be at least a penny more than the previous fiscal year. A company may have reduced its dividend for a quarter or two, but if the total dividend paid in a year is larger than the previous year then the stock will pass the screen. For the most recent fiscal year I used the forward indicated annual dividend since we are not quite done with 2011. The forward indicated annual dividend is simply the last dividend paid multiplied by the number of dividend payments per year (usually 4). If a company has announced a dividend increase recently then the announced dividend is used and multiplied by the number of dividends paid per year.
Part 1 of this series will look at four consumer staples stocks that passed our stringent test for dividend growth since 1991: KO, PG, CL and LANC. Look for the rest of the dividend growth stocks in the coming days!
Coke is a consumate dividend growth stock. Back in 1990, the company paid $0.18 per share. It’s recent annual dividend is more than ten times that, or $1.88. With a current dividend yield of approximately 2.8%, stable earnings and strong cash flow, KO is a core holding in countless portfolios. You’ll notice in the chart below that KO’s dividend growth is very consistent, but since the mid-2000′s the rate of dividend growth (the slope of the line) has increased slightly. The dividends on the chart below and the rest of this article are the annual dividends paid.
Proctor and Gamble (PG)
PG is another classic dividend growth stock in the consumer staples sector. The company paid $0.22 per share in 1990 and today the company pays $2.10 per share per year. The consistent divined growth of PG over the past 20 years has increased since the mid-2000′s just as the dividend growth rate of KO. Currently, PG has a dividend yield of about 3.2%.
Colgate Palmolive (CL)
The third consistent dividend growth stock on our list is Colgate Palmolive (CL). While CL may seem like a boring soap company, it has consistently increased its dividends without fail. In the past 20 years CL has increased its dividend payment 10-fold, from $0.23 in 1990 to $2.32 per year today. Just like KO and PG, the dividend growth rate has accelerated in the past few years. In fact, the dividend growth rate of CL has accelerated much more dramatically than the previous two stocks.
Lancaster Colony (LANC)
The last stock on our list for Part 1 of this series is LANC, a maker of specialty foods. While it may not be a household name like the three previous stocks, LANC has also been able to grow its dividend every year since 1991. Back in 1990, the company paid $0.19 per share. Today, the company pays $1.44 per share per year. Like the other companies on this list, LANC has not had a year in the past 20 years without a dividend increase. The most interesting thing in the chart below is the huge recent increase in its dividend payment.
So that wraps up today’s look at consistent dividend growth stocks. Check back soon for more stocks that have increased their dividends every year for the last 20 years. There are many names on the list that you will expect, but there are a few surprises too!
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