7 Dividend Growth Candidates for July, 2013

Last month I started a new series of posts in which I'm identifying candidates for DivGro. I score stocks in my watch list of dividend growth stocks based on my selection criteria, assigning a star rating to each candidate out of a maximum of 7 stars.  I then compile a dashboard of candidates, sorted by star rating.

Due to my 2-week vacation this month, I'm rather late with this post. I analyze data in Dave Fish's list of US Dividend Champions, which he publishes at the beginning of every month. Rather than using data that are 3 weeks old, I've spent some time to update the data before doing my analysis.

Dividend Increases, Jun/Jul 2013

Once every month I update my watch list of dividend growth stocks to reflect current yields. Current yields rise when dividends increase or when prices decrease. Conversely, current yields fall when dividends fall or prices increase. 

When stocks in my watch list decrease their dividend payments, I generally remove them from my watch list. I'm not really interested in tracking stocks that decrease their dividends. This blog is about dividend growth stocks, not dividend shrink stocks!

I've removed the following stocks from my watch list due to recent dividend decreases: DCM, LINE, and MTGE. 

Quarterly Review, Q2-2013

I've been away for two weeks on a high adventure hike in New Mexico with my youngest son. We had a great time, hiking 65 miles with our backpacks and many more miles on several side hikes. After this break, its time to look at DivGro's performance for the 2^nd quarter of 2013.

The past quarter, I contributed capital funds in the amount of $23,000 to DivGro – two bonus deposits of $10,000 each and three monthly deposits of $1,000 each. I received dividend income in Q2 of $235.34, up from the $138.88 received in Q1.

I purchased shares in five new dividend growth stocks, adding expected dividend income for 2013 of $272.10. Total expected dividend income for 2013 is now $1,000.67. Forward 12-month projected dividend income is $1,146.17.

Monthly Review, June 2013

The second quarter of DivGro has ended and I'll be posting another quarterly review soon. Before doing so, I want to report on happenings in the month of June.

In June, I purchased my 10th dividend growth stock, completing one of my 2013 goals. As for my other 2013 goals, I'm on track to earn at least $750 in dividend income and to average one blog post per week. However, it is too early to tell if DivGro will exceed the performance of the S&P 500 index in total returns.

Bonus Deposit, June 2013

On Friday, June 28, I deposited $10,000 cash into my DivGro portfolio. This bonus deposit is in addition to my regularly scheduled deposits of $1,000 per month. I decided to transfer this money from one of my other portfolios, where I've had some cash available for a while. In this post, I'll try to explain my thinking.

In addition to DivGro, my dividend growth portfolio, I manage three other portfolios in which I use different strategies: an income portfolio, an aggressive growth portfolio, and an options trading portfolio.

Dividend Increases, May/Jun 2013

Since May 15, the market has cooled down a bit with the S&P 500 decreasing 1.93% and the Dow Jones Industrial Average decreasing 1.35%. While updating my watch list of dividend growth stocks to reflect current yields, I noticed that several stocks moved into higher yield ranges. Current yield rises when a stock's dividend increases or when the stock's price decreases (or both).

In this month's update, I've removed several stocks from my watch list. Some stocks are not dividend growth stocks (although they are dividend payers), while a others have recently decreased their dividend payments. And one company, H.J. Heinz Company (HNZ), has been acquired by Berkshire Hathaway and 3G Capital and so is no longer traded on the stock exchange. 

Stock Analysis: CHL

China Mobile Limited (CHL) is an investment holding company. The company and its subsidiaries provide mobile telecommunications services to more than 700 million customers in Mainland China and Hong Kong. These services include voice, data, applications, and information services.

CHL has a streak of 7 consecutive years of dividend increases. It pays dividends semi-annually in the months of May and September. CHL's annual dividend is listed at $2.18, which represents a dividend yield of 4.25% with CHL priced at $51.28 per share.

Over the past 10 years, CHL has outperformed the S&P 500 handily, returning about 469% compared to about 63% for the S&P 500 and 65% for the Dow Jones. Performance for the past 5 years is not so impressive. CHL actually lost about 17% over this period, though EPS growth topped 8% and dividend growth topped 14%.

Recent Buy: BBL

Jun 3, 2013: Bought 43 shares of BBL at $58.39 per share.

BHP Billiton is a diversified natural resources company and one of the world's largest producers of major commodities, including aluminium, coal, copper, iron ore, manganese, nickel, silver and uranium. BHP Billiton is a dual listed company comprising of BHP Billiton Limited (BHP) and BHP Billiton Plc (BBL). I've acquired shares in BBL, an American Depository Receipt (ADR) listing of BHP Billiton Plc available on the NYSE.

Yesterday I shared the seven DivGro candidates that are at the top of my June dashboard. BBL is one of my favorites: it trades at a deep discount and has been growing its dividends aggressively. I also like BBL because it increases my sector diversification. So, today I decided to buy BBL, the 10^th stock to be added to DivGro!

7 Dividend Growth Candidates for June, 2013

One of the most useful resources for dividend growth investors is Dave Fish's list of US Dividend Champions, which provides financial data of companies with 25 or more straight years of dividend increases in spreadsheet form. Also provided are data of companies that have increased their dividends for 10-24 straight years (Contenders) and companies that have increased their dividends for 5-9 straight years (Challengers).

I use Dave Fish's spreadsheet and my watch list of dividend growth stocks to identify candidates for DivGro. I use my selection criteria to score each candidate and to assign an overall star rating for each candidate, out of a maximum of 7 stars. I then compile a dashboard of all the candidates, sorted by star rating.

Monthly Review, May 2013

In May, I purchased shares in three new dividend growth stocks. These purchases bring the total number of stocks in DivGro to nine, just one short from my goal of ten different dividend growth stocks by year's end. I purchased shares in PartnerRe Ltd (PRE), The Travelers Companies, Inc (TRV), and ConocoPhillips (COP), adding $227.44 in annual dividend income or $170.58 for the 2013 calendar year.

At the end of May, DivGro had a market value of $29,683.39, for an overall gain of $1,683.39 or 6.01% since January.

Recent Buy: COP

May 21, 2013: Bought 38 shares of COP at $64.74 per share.

ConocoPhillips (COP) is an American multinational energy corporation with headquarters in Houston. Created in 2002 through a merger of Conoco Inc and Phillips Petrolium Company, COP became the 5^th largest integrated oil company in the world. In 2012, COP spun off its downstream assets to Phillips 66 (PSX), with the intent of maximizing shareholder value.

Last month I completed a stock analysis of COP when it was trading below $58 a share. I hesitated to buy COP at that time because it was not discounted by at least 5% to my fair value estimate. A reader of my post pointed out that COP has not increased its dividend in the two years he's owned it (although the spin-off to PSX could be considered a type of dividend payment). So, the question is, why would I buy COP today when it is trading at a premium to my fair value estimate and without evidence that it would be increasing its dividend?

Recent Buy: TRV

May 20, 2013: Bought 29 shares of TRV at $86.31 per share.

The Travelers Companies, Inc. (TRV) was founded in 1853 and is based in New York, New York. Through its subsidiaries, TRV provides various commercial and personal property and casualty insurance products and services to businesses, government units, associations, and individuals primarily in the United States.  

TRV is a Dividend Challenger with an 9-year streak of dividend increases. It pays dividends in March, June, September and December. At $86.31 per share, TRV has a dividend yield of 2.32%.

Dividend Increases, Apr/May 2013

It is mid-month and time again to update my watch list of dividend growth stocks to reflect current yields. With the market steaming higher, current yields are compressing. Since April 15, the market increased 4.40% (as measured by the S&P 500) and by 2.76% (as measured by the Dow Jones Industrial Average).

Dividend increases tend to counterbalance the influence of a rising market on current yields. When a company increases its dividend payment, its current yield increases. How much the yield changes depends on the size of the dividend increase and on the market's reaction to the increase. If the market response is positive, the stock's price would increase and so limit the increase in current yield. 

Recent Buy: PRE

May 13, 2013: Bought 27 shares of PRE at $91.80 per share.

Founded in 1993, PartnerRe Ltd. (PRE) provides reinsurance services to clients in 150 countries around the world. It provides these services through wholly owned subsidiaries, as well as through brokers and direct relationships with insurance companies. The risks PRE reinsures include agriculture, aviation, casualty, catastrophe, contamination, credit, disability, energy, engineering, health, longevity, marine, mortality, motor, pollution, property, space, and war. PRE's headquarters are in Pembroke, Bermuda.

PRE is a Dividend Contender with an 20-year streak of dividend increases. It pays dividends in March, June, September and December. At $91.80 per share, PRE has a dividend yield of 2.79%.

Monthly Review, April 2013

It has been a rather busy month for me. Early in April, I travelled to South Africa, spending precious time with family and friends. The least fun part of my short vacation was the return flight of 16 hours (non-stop!) from Johannesburg to Atlanta. I didn't realize that airplanes can fly so far, especially lifting off in Johannesburg at altitude! I don't sleep in airplanes, so that was a bit of an ordeal. Then there was tax day. Due to jet lag, I did just enough of my taxes to apply for an extension. So I'm still not done with my taxes… And, to top things off, back at work things have been crazy busy!

Given all of the above, I'm very happy with my DivGro activities in April. I wrote six posts, including my first quarterly review. Also, I transferred some funds into DivGro after one of my CD's reached maturity. This bonus deposit provided some welcome cash for more dividend growth stock buys. To that end, I evaluated Aflac Incorporated (AFL) and ConocoPhillips (COP), deciding to go with AFL because of its superior fair value discount.

COP remains interesting because it pays a dividend of $2.64 per share. This represents an attractive yield of about 4.4% (at the current price of $60). I think COP would be a good buy at $56, so for now I'll just wait.

Quarterly Review, Q1-2013

The first quarter of DivGro has come to an end and its time to look at the portfolio's performance.

As stated elsewhere on this blog, the goals of DivGro are to generate reliable and growing dividend income and to generate acceptable total returns exceeding the performance of the S&P 500 index. My strategy is to buy stocks of companies that consistently pay and increase their dividends. By reinvesting those dividends, I'll benefit from compounding and, over time, generate a return that handily beats inflation.

During this quarter, I contributed capital funds in the amount of $16,000 to DivGro (an opening deposit of $12,000 and 4 additional deposits of $1,000 each) and purchased a total of 5 dividend growth stocks. These stocks represent expected dividend income for 2013 of $721.09. At the end of March, DivGro had a market value of $16,736.95. Included in the overall gain of $736.95 is dividend income of $138.88.

Recent Buy: AFL

Apr 16, 2013: Bought 50 shares of AFL at $50.06 per share.

In my recent stock analysis of Aflac Incorporated (AFL), I identified AFL as a 7-star (strong buy) candidate. AFL is in the Financial sector and increases DivGro's diversification. With this purchase, I'm locking in an initial yield on cost of 2.80%.

Stock Analysis: COP

ConocoPhillips (COP) is an American multinational energy corporation with headquarters in Houston. Created in 2002 through a merger of Conoco Inc and Phillips Petrolium Company, COP became the 5^th largest integrated oil company in the world. In 2012, COP spun off its downstream assets to Phillips 66 (PSX), with the intent of maximizing shareholder value.

COP has a track record of 12 consecutive years of dividend increases. It pays quarterly dividends of $0.66 per share in the months of February, May, July, and October. At the current price of $57.44, COP's dividend yield is 4.6%.

Over the past 10 years, COP has outperformed the S&P500 handily, returning about 130% compared to about 90% for the S&P500. The EPS growth rate over this time period is 6%, while the 10-year dividend growth rate is 13.9%. 

Stock Analysis: AFL

Aflac Incorporated (AFL) is a supplemental health and life insurance company and a member of the Fortune 500. AFL mainly operates in Japan and the US. Sales in Japan target health and life insurance, as well as annuity products, and account for approximately 77% of Aflac’s total revenue. In the US, Aflac sells health and disability insurance, mainly as part of employer sponsored group insurance plans.

AFL is a Dividend Champion, with a track record of 30 consecutive years of dividend increases. It pays quarterly dividends of $0.35 per share in the months of February, May, August, and November. At the current price of $50.11, AFL's dividend yield is 2.79%.

Over the past decade, AFL's annual dividend payment has increased by about 20% per year, though the rate of increase has slowed over the last five years. The 20% growth in distributions translates into a dividend payment that doubles in about 3.5 years.

Dividend Increases, Mar/Apr 2013

Around the 15^th of each month,  I'll be updating my watch list of dividend growth stocks to reflect current yields. These change over time due to changes in the stock price and changes in dividend payments. 

Since March 15, the market increased by another 1.64% (as measured by the S&P 500) and by 2.24% (as measured by the Dow Jones Industrial Average). The current yield of dividend paying stocks will decrease when stock prices increase.

When a company increases its dividend payment, the current yield also should increase. The size of the  increase not only depends on the size of the dividend increase, but also on the market's reaction to the increase. Often, a dividend increase stimulates interest in the stock and results in a corresponding increase in the stock price, which in turn would limit the increase in current yield.

Bonus Deposit, April 2013

On April 2, I deposited an additional $10,000 cash into my DivGro portfolio. This bonus deposit is in addition to my regularly scheduled deposits and follows from having closed a certificate of deposit (CD) account after the CD had matured.

A CD is a promissary note issued by a bank for a deposit made for a specified term. The holder is restricted from withdrawing funds on demand, at least without incurring a penalty. In return, the bank offers an interest rate that is slightly better than those for savings and checking accounts. Deposits are FDIC insured, which makes these type of investments safer than investing in stocks. Unfortunately, interest rates offered on CDs are below the inflation rate (currently 2%), which means your investment actually is losing value (buying power) over time.

Monthly Review, March 2013

The first quarter of DivGro has come to an end!  I'd like to post a quarterly review, but I'll need some time to develop a reasonable format before doing so, as this would be my first quarterly review. It will most likely be several weeks before I post it, especially since we're in tax season and I have yet to complete my taxes!

Including this post, I've written only four posts in March. It was a rather busy month for me at work, and without cash on hand in DivGro I had little incentive to research new candidates. Besides, the market is at an all time high, so finding great value is much more challenging! I did start a new series in which I'll be tracking dividend increases for stocks in my watch list.

In March, I purchased General Dynamics Corporation (GD). The purchase increased my diversification into the Capital Goods sector and gives me dividend income in the months of January, April, July and October.

Dividend Increases, Feb/Mar 2013

I keep a watch list of dividend growth stocks, with tickers organized by yield, by sector, and by the calendar month of dividend payments. Of these, the organization by yield is expected to  change over time due to changes in the stock price and increases (or decreases) in dividend payments. Every month, I'll update my watch list to reflect these changes. 

Since February 15, the market has increased by 2.44% (as measured by the S&P 500) and by 3.78% (as measured by the Dow Jones Industrial Average). For a dividend paying stock, yield would trend lower when the stock price trends higher. This follows from the definition of yield.

Of course, when a company increases its dividend payment, the yield also should increase. How much the yield increases would depend on the size of the dividend increase and the market's reaction to the increase.

Monthly Review, February 2013

This month I received my first dividend income in DivGro! It is exciting to start the journey of generating a dividend income stream, and I can't wait to see how it grows over time.

I wrote five posts in February, including one about my selection criteria and one about the future of DivGro. I also reworked my watch list page, listing candidates for DivGro by yield, by payment month, and by sector. Hopefully this reorganization will help with portfolio diversification.

In February, I purchased Nippon Telegraph & Telephone Corp (NTT). It is a foreign telecommunications company that trades on the NYSE as an American Depositary Receipt (ADR). Generally, I like telecom stocks because of their reputation for dependable dividend payments. As an international stock, NTT is an added bonus because it diversifies my portfolio geographically as well as by industry.

Recent Buy: GD

Mar 1, 2013: Bought 35 shares of GD at $67.61 per share.

Yesterday I published a stock analysis of General Dynamics Corporation (GD) in which I indicated that I'm considering buying 35 shares. Today, GD opened about 1% down from yesterday's closing price. It gave me a good entry point and secured an initial dividend yield of 3.02%.