2017 Dividend Kings List: 50+ Years of Dividend Growth Sure Dividend

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2017 Dividend Kings List: Dividend Stocks with 50+ Years of Rising Dividends


Updated October 1st, 2017

The Dividend Kings are the best-of-the-best in dividend longevity.

What is a Dividend King? Stocks with 50 or more consecutive years of dividend increases.

The downloadable Dividend Kings Spreadsheet List below contains the following for each stock in the index:

Along with other important investing metrics.

Click here to download my Dividend Kings Excel Spreadsheet now. Keep reading this article to learn more.

How To Use The Dividend Kings List to Find Dividend Stock Ideas

The Dividend Kings list is a great place to find dividend stock ideas.

However, not all the stocks in the Dividend Kings list make a great investment at any given time.

Some stocks might be overvalued. Conversely, some might be undervalued – making great long-term holdings for dividend growth investors.

For those unfamiliar with Microsoft Excel, the following walk through shows how to filter the Dividend Kings list for the stocks with the most attractive valuation based on the price-to-earnings ratio.

Step 1: Download the Dividend Kings Excel Spreadsheet above.

Step 2: Click on the filter icon in the price-to-earnings ratio column, as indicated below.

Dividend Kings Excel Tutorial Number One

Step 3: Fill in the fields according to what stock valuations are appealing to you. In the example below, I have filtered for Dividend Kings with a price-to-earnings ratio less than 22 and listed them in ascending order.

Dividend Kings Excel Tutorial Number Two

Looking for businesses that have a long history of dividend increases isn’t a perfect way to identify stocks that will increase their dividends every year in the future, but there is considerable consistency in the Dividend Kings (and Dividend Aristocrats).

This article will take a look at each of the current Dividend Kings to determine which ones are suitable investments likely to have decades more dividend growth – and which ones aren’t as timely.

There are currently 22 Dividend Kings. Each Dividend King satisfies the primary requirement to be a Dividend Aristocrat (25 years of consecutive dividend increases) twice over.

The current dividend yield, adjusted price-to-earnings ratio, and long-term total return of each stock are shown, as well as how many consecutive years of dividend increases each stock has. Stocks are analyzed in alphabetical order.

The table of contents below lists out all 2122 Dividend Kings so you can jump to analysis of each specific company quickly:

American States Water (AWR)

Dividend Yield: 2.0%

Adjusted Price-to-Earnings Ratio: 29.2

10 Year Total Return CAGR: 13.1%

Consecutive Dividend Increases: 62 years

As its name suggests, American States Water is a water utility company. Founded in 1929, the company has a market capitalization of $1.7 billion.

Details about American States Water’s business model can be seen below.

AWR American States Water Corporate Profile

Source: American States Water 2017 Shareholder Presentation, slide 3

Thanks to its stable business model, American States Water has been able to deliver 62 years of consecutive dividend increases.

One might think that after six decades of dividend growth that the pace of dividend increases might slow.

This is not the case for American States Water.

The company has delivered a five-year dividend growth CAGR of greater than 10%. At this pace, the dividend payments of this company are set to double in less than seven years.

AWR American States Water Dividend Growth

Source: American States Water 2017 Shareholder Presentation, slide 15

American States Water has a binary business model thanks to its two unique (but complimentary) operating subsidiaries.

The first (and larger) subsidiary is Golden State Water Company (GSWC). This is a regulated water and electric utility that provides water services to 261,000 customers in California and energy services to 24,000 customers in California.

The company’s other operating subsidiary is American States Utility Services (ASUS). This subsidiary provides contracted services for water and wastewater systems for 10 military bases under long 50-year contracts.

Unlike the company’s regulated subsidiary, American States Utility Services is unregulated. This provides additional upside (and risk) for the company and its investors.

AWR American States WAter Company Organizational Structure

Source: American States Water 2017 Shareholder Presentation, slide 4

As mentioned, GSWC is by far the larger of American States Water’s two operating subsidiaries. In 2016, this segment generated 78% of total revenues, with 70% of that 78% coming from its water utility business and the other 8% coming from the electric utility business.

The remainder (22%) of American States Water’s revenues was generated by the military contracts held by ASUS.

AWR American States Water 2016 Revenues By Segment

Source: American States Water 2017 Shareholder Presentation, slide 8

From a geographic perspective, the two subsidiaries of American States Water are very different.

As its name implies, the Golden State Water Company serves communities in California. Specifically, the company operates 39 water systems in 75 cities across 10 counties in California.

This segment’s geographic diversification can beseen below.

AWR American States Water GSWC Service Area Map

Source: American States Water 2017 Shareholder Presentation, slide 6

Thus, the Golden State Water company is geographically focused in California.

However, once the two segments of American States Water are combined, the company has a presence in multiple states across the continental United States.

The company’s geographic diversification can be seen below.

AWR American States Water AWR Service Area Map

Source: American States Water 2017 Shareholder Presentation, slide 5

American States Water will be dependent on the state of California for the foreseeable future thanks to the location of GSWC.

This begs the question – how does American States Water perform during times of drought in California? Fortunately, American States Water is relatively insulated from this risk.

The Golden State Water Company has a tiered system in place that decouples revenues from sales. Further, surcharges are in place to recover under-collections of water due to lower consumption.

The company will also benefit from a more normalized climate moving forward.

Late 2016 and early 2017 saw a more humid and precipitous climate in California, which helped to restore the state’s water situation to closer to its pre-drought levels.

More details about the performance of American States Water during droughts can be seen below.

AWR American States Water California Drought

Source: American States Water 2017 Shareholder Presentation, slide 12

American States Water currently pays a quarterly dividend of $0.242. The company’s current stock price of $47.41 is trading at a dividend yield of 2.0%, in-line with the average dividend yield of the S&P 500 index.

American States Water reported adjusted earnings-per-share of $1.62 in fiscal 2016. The company’s current stock price of $47.41 is trading at a price-to-earnings ratio of 29.2 using 2016’s adjusted earnings.

Based on the price-to-earnings ratio, American States Water appears overvalued and there are other stocks on this list with more appealing valuations.

You can read more Sure Dividend analysis on American States Water at the following links:

 

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California Water Services Group (CWT)

Dividend Yield: 2.0%

Adjusted Price-to-Earnings Ratio: 35.5

10 Year Total Return CAGR: 10.2%

Consecutive Dividend Increases: 50 years

California Water Services Group is one of the newest additions to the Dividend Kings. The company’s board of directors announced their 50th consecutive dividend increase on January 25, 2017.

Like American States Water, California Water Services Group is a publicly-traded water utility company – the third largest in the United States.

The company serves 509,000 customers connections, generates $400 million in annual revenues, and operates $1.5 billion in gross utility plant assets.

The California Water Services Group operates through six subsidiaries in California, Washington, New Mexico, and Hawaii. Of these six operating companies, four are regulated and two are unregulated.

The California Water Services Group has recently seen improved financial performance after reporting an operating loss in the first quarter of 2016. While the company reported earnings-per-share of just $0.02, this is welcome progress after a loss of $0.02 in the same period a year ago.

CWT California Water Services Group Financial Results First Quarter

Source: California Water Services Group First Quarter Earnings Presentation, slide 5

The company’s improved performance was driven by rate increases and a decrease of $1.8 million in drought-related expenses over the same period a year ago.

As mentioned earlier in the analysis for American States Water, a major risk for water utilities operating in the state of California is the effects of droughts.

This impacted the company in 2016 but was no longer felt in the first quarter of 2017.

More details about the company’s recent financial performance can be seen below.

CWT California Water Services Group Financial Highlights Q1

Source: California Water Services Group First Quarter Earnings Presentation, slide 6

California has moved from a prolonged five-year drought to the wettest water year in California history.

This helped to compensate for previous difficulties experienced by the California Water Services Group, and allowed the company to suspend drought surcharges in the summer of 2016.

CWT California Water Services Group Drought and Winter Storm Update

Source: California Water Services Group First Quarter Earnings Presentation, slide 12

The California Water Services Group has not yet fully recovered from the difficulties encountered in the last California drought. In the meanwhile, the company’s capital investments continue to be robust.

In the meanwhile, the company’s capital investments continue to be robust.

California Water Services Group has grown its capital investments at a CAGR of ~13% over the past decade. These investments will continue to pay off in the years to come.

CWT California Water Services Group Capital Investment History and Projection

Source: California Water Services Group First Quarter Earnings Presentation, slide 16

The California Water Services Group currently pays a quarterly dividend of $0.18 per share. The company’s current stock price of $35.90 is trading at a dividend yield of 2.0%, in-line with the average dividend yield in the S&P 500 index.

The California Water Services Group reported adjusted earnings-per-share of $1.01 for fiscal 2016. The company’s current stock price of $35.90 is trading at an adjusted price-to-earnings ratio of 35.5 using 2016’s adjusted earnings.

Although the company has an adequate dividend yield, the California Water Services Group appears significantly overvalued at current prices. A price-to-earnings ratio of 35.5 is very high even for a company experiencing tremendous business growth.

Investors would be better off finding more attractively valued Dividend Kings elsewhere on this list.

You can read more Sure Dividend analysis on the California Water Services Group at the following link:

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Cincinnati Financial (CINF)

Dividend Yield: 2.9%

Adjusted Price-to-Earnings Ratio: 19.6

10 Year Total Return CAGR: 9.2%

Consecutive Dividend Increases: 57 years

Cincinnati Financial is a property and casualty insurance company that underwrites insurance via three operating subsidiaries:

Founded in 1950, Cincinnati Financial has a market capitalization of $11.5 billion.

Cincinnati Financial differentiates itself from many other P&C insurance companies by the way it invests its insurance float.

While many insurers invest their retained premiums in low-risk securities like long-term government bonds, Cincinnati Financial invests ~34% of their float in common stocks to help grow the company’s book value over the long-term.

CINF Cincinnati Financial Strategies For Long-Term Success

Source: Cincinnati May 2017 Investor Handout

Cincinnati Financial’s insurance is sold through a diverse group of insurance agencies with operations in 41 states.

For both commercial and personal insurance, the company has a ‘top five’ group of states that command most of their premiums. These are:

Cincinnati Financial has very strong relationships with more than 1,600 insurance agencies operating 2,100+ locations.

More details about Cincinnati Financial’s relationship with its insurance agencies can be seen below.

CINF Cincinnati Financial Select Group of Agencies In 41 States

Source: Cincinnati May 2017 Investor Handout

Cincinnati Financial has performed well in recent years.

One of Cincinnati Financial’s largest performance metrics is the ‘value creation ratio’, which is defined as “the growth rate of book value per share and the ratio of dividends declared per share to beginning book value per share.”

The company targets a 10%-13% annual average value creation ratio and has been able to achieve this target on a 3-year rolling basis in most recent years.

CINF Cincinnati Financial Measuring Our Performance

Source: Cincinnati Financial 2017 Annual Meeting Presentation, slide 18

Another important metric for the performance evaluation of insurance companies is the combined ratio, which measures what proportion of written premiums are being paid out as insurance claims in a given operating period.

A combined ratio below 100% indicates that the insurance company is making an underwriting profit while a combined ratio above 100% means that the insurance company is operating at an underwriting loss.

Importantly, an insurance company can still report a company-wide profit if the combined ratio is above 100% because the combined ratio does not account for investment income.

Cincinnati Financial’s combined ratio is compared to its weighted peer average and the industry average below.

CINF Cincinnati Financial Combined Ratio

Source: Cincinnati Financial 2017 Annual Meeting Presentation, slide 21

Cincinnati Financial has reported a combined ratio below 100% in each year since 2012. The company’s disciplined insurance underwriting gives it a competitive advantage over its peers with less compelling combined ratios.

Cincinnati Financial is also quite shareholder friendly. The company has increased its annual dividend payment for 57 consecutive years and paid a sizeable special dividend in 2015.

 

CINF Cincinnati Financial Returning Capital to Shareholders Through Dividends

Source: Cincinnati Financial 2017 Annual Meeting Presentation, slide 15

Cincinnati Financial will have a significant tailwind from rising interest rates as it will be able to invest the fixed income component of its portfolio at a higher rate of return. Thus, investors looking to benefit from rising interest rates ought to consider this stock.

Related: The Effect of Rising Interest Rates on Dividend Stocks

Cincinnati Financial currently pays a quarterly dividend of $0.50 per share which yields 2.9% on the company’s current stock price of $69.56.

The company’s dividend yield is considerably higher than the S&P 500’s average dividend yield of 2%. This insurance company might be an attractive option for investors seeking to generate current portfolio income.

Cincinnati Financial reported adjusted earnings-per-share of $3.55 in fiscal 2016. At the current price of $69.56, Cincinnati Financial is trading at a price-to-earnings ratio of 19.6.

While Cincinnati Financial’s current valuation is below the valuation of the average stock in the S&P 500, the company is still trading above its normal valuation levels.

Investors should wait for a more opportune time to add to or initiate a stake in this insurance company.

You can read more Sure Dividend analysis about Cincinnati Financial at the following links:

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Colgate-Palmolive (CL)

Dividend Yield: 2.1%

10 Year Total Return CAGR: 28.3

10 Year Dividend Growth Rate: 11.3%

Consecutive Dividend Increases: 55 years

Colgate-Palmolive is one of the most well-known consumer staples companies in the world thanks to the iconic brands shown below.

CL Colgate-Palmolive Among The World's Most Recognizable Brands

Source: Colgate-Palmolive Presentation at the Bernstein 33rd Annual Strategic Decisions Conference

Although the company’s most well-known product is its namesake Colgate toothpaste, Colgate-Palmolive operates a very diversified business model.

The company is divided into four segments for reporting purposes:

Colgate-Palmolive is also highly diversified by geography.

Only 20% of the company’s sales in the most recent quarter were generated in North America. In fact, Colgate-Palmolive generates more of its net sales from Latin America than from North America.

CL Colgate-Palmolive Net Sales By Division in the Most recent Quarter

Source: Colgate-Palmolive Presentation at the Bernstein 33rd Annual Strategic Decisions Conference

From an investor’s perspective, Colgate’s business is appealing because of its compelling market leadership in many of the markets that it serves.

This can be seen most distrinctly in the worldwide toothpast market. Colgate is the undisputed leader in this industry and has been for some time. Currently, Colgate-Palmolive has a ~43.5% share of the worldwide toothpaste market.

CL Colgate-Palmolive Worldwide Toothpaste Shares

Source: Colgate-Palmolive Presentation at the Bernstein 33rd Annual Strategic Decisions Conference

Colgate-Palmolive is also expanding into complimentary product categories.

While the company was not historically a leader in the toothbrush industry, it has expanded its presence over time and now has a market share nearly double its closest competitor.

CL Colgate-Palmolive Worldwide Manual Toothbrush Shares

Source: Colgate-Palmolive Presentation at the Bernstein 33rd Annual Strategic Decisions Conference

Colgate-Palmolive is well-positioned to deliver future business growth.

The company has a long-term secular tailwind of population growth, most notably in emerging market.

More people means more toothpaste and more toothbrushes – and more profits for Colgate-Palmolive and its shareholders.

CL Colgate-Palmolive Significant Population Growth

Source: Colgate-Palmolive Presentation at the Bernstein 33rd Annual Strategic Decisions Conference

Further, the company’s globalized business model means that it can capture much of the growth in emerging markets.

Take China, for example. With a population north of 1 billion people and a rapidly-growing middle class, China will be a strong driver of the company’s future growth.

Some other emerging markets that will be key to the future growth of Colgate-Palmolive can be seen below.

CL Colgate-Palmolive Emerging Middle Class

Source: Colgate-Palmolive Presentation at the Bernstein 33rd Annual Strategic Decisions Conference

Another compelling growth prospect for Colgate-Palmolive is continued margin expansion.

Because of cost-cutting initiatives and efficiency improvements, Colgate-Palmolive has witnessed amazing margin expansion over time and is currently reported a gross margin north of 60%.

CL Colgate-Palmolive Gross Margin

Source: Colgate-Palmolive Presentation at the Bernstein 33rd Annual Strategic Decisions Conference

Colgate-Palmolive also generates large amounts of free cash flow.

Notably, the company’s free cash flow has been above $2 billion per year each year since 2009.

The company’s strong free cash flow generation is a key component to its ability to raise its annual dividends for 55 consecutive years.

CL Colgate-Palmolive Free Cash Flow Before Dividends

Source: Colgate-Palmolive Presentation at the Bernstein 33rd Annual Strategic Decisions Conference

Colgate-Palmolive currently pays a quarterly dividend of $0.40 per share which yields 2.1% on the company’s current stock price of $77.02. Colgate-Palmolive’s dividend yield is only slightly higher than the 2% average dividend yield in the S&P 500 Index.

Colgate-Palmolive reported adjusted earnings-per-share of $2.72 in fiscal 2016. The company’s current stock price of $77.02 is trading at an adjusted price-to-earnings ratio of 28.3.

Like many high-quality dividend stocks, Colgate-Palmolive is trading at a valuation well above its normal levels. This consumer staples stock is valued too richly to merit a recommendation right now, although it would be a great candidate for accumulation during the next market correction.

You can read more Sure Dividend analysis about Colgate-Palmolive at the following links:

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Dover Corporation (DOV)

Dividend Yield: 2.1%

Adjusted Price-to-Earnings Ratio: 25.8

10 Year Total Return CAGR: 7.6%

Consecutive Dividend Increases: 61 years

Dover is a diversified industrial manufacturer with annual revenues exceeding $7 billion. Headquartered in Downers Grove, Illinois, Dover was founded in 1955 and has a market capitalization of $13 billion.

The company operates in four segments:

More details about each operating segment of the Dover Corporation can be seen below.

DOV Dover Corporation Segments, Key Platforms, and Unique Capabilities

Source: Dover Corporation Presentation at the 2017 EPG Conference, slide 4

Dover’s first quarter earnings release delivered strong financial performance and was well-received by the company’s investors.

The company saw revenues increase by 12% from the same period a year ago and bookings increased by 21%.

This strong top-line performance has led Dover to increased its guidance for full-year revenue, margin and earnings-per-share.

DOV Dover Corporation Strong Start To The Year - Momentum Building

Source: Dover Corporation Presentation at the 2017 EPG Conference, slide 10

The company is currently partway through its second quarter and performance continues to be solid.

Every major financial metric is either in-line with expectations or above expectations, which suggests that Dover’s second quarter earnings release will be similarly strong.

DOV Dover Corporation Second Quarter Update

Source: Dover Corporation Presentation at the 2017 EPG Conference, slide 11

The Dover Corporation currently pays a quarterly dividend of $0.44 per share which yields 2.1% on the company’s current stock price of $83.77. The company’s dividend yield is slightly higher than the average yield in today’s stock market, but does not stand out for investors seeking to generate current portfolio income.

Dover Corporation reported adjusted earnings-per-share of $3.25 in fiscal 2016. The company’s current stock price of $83.77 is trading at a price-to-earnings ratio of 25.8 using 2016’s adjusted earnings.

This is a rather rich valuation, but the company’s price becomes much more attractive when we evaluate it based on 2017’s expected earnings.

As mentioned, Dover recently increased its full-year earnings-per-share guidance. The company is now expecting adjusted earnings-per-share of $4.05-$4.20 for the full-year of 2017. Taking the midpoint of this guidance band ($4.125) along with the current stock price of $83.77 gives a forward price-to-earnings ratio of 20.3.

Dover’s forward price-to-earnings ratio and strong current growth make it the most interesting stock on this list so far. However, value-focused investors can find better opportunities elsewhere in the Dividend Kings list.

You can read more Sure Dividend analysis on the Dover Corporation at the following links:

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Emerson Electric (EMR)

Dividend Yield: 3.3%

Adjusted Price-to-Earnings Ratio: 19.7

10 Year Total Return CAGR: 5.2%

Consecutive Dividend Increases: 60 years

Emerson Electric is a multinational industrial service firm with a market capitalization of ~$38 billion. Founded in 1890, Emerson Electric has more than 110,000 employees and 205 manufacturing locations across the globe.

The company operates in two core segments:

Emerson Electric has struggled in recent years because many of its customers have been experiencing difficulties due to low oil prices.

However, the company is expected to experience a significant rebound in fiscal 2017. In particular, the company’s Automation Solutions segment has recovered more quickly than the company had anticipated, which is setting the company up for a strong close to fiscal 2017 and a solid start to fiscal 2018.

The company’s order trends (the metric that is driving this recovery) can be seen below.

EMR Emerson Electric Underlying Order Trends Trailing 3-Month Average vs. Prior Year

Source: Emerson Electric Presentation at the 2017 Electrical Products Group Conference, slide 2

As a highly diversified industrial company, Emerson Electric’s performance is strongly correlated to the performance of the broader economy.

Fortunately, the global economy is showing signs of strength, particularly the G7 developed nations. And, between October of 2016 and May of 2017, GDP growth expectations have been revised upwards by IHS, indicating that even stronger growth is ahead.

EMR Emerson Electric G7 Gross Fixed Investment Emerson Fiscal Year on Year Change

Source: Emerson Electric Presentation at the 2017 Electrical Products Group Conference, slide 3

For Emerson Electric shareholders, the most important current event is the recent acquisition of Pentair’s Valves & Controls business. The transaction closed in late April and was valued at $3.15 billion.

Below, you can see the anticipated effects of this acquisition on Emerson Electric’s expected 2017 financial performance. The transaction is expected to be slightly dilutive to 2017’s earnings-per-share and has additional effects in 2018 and beyond.

EMR Emerson Electric Valves and Controls Preliminary 2017 Financial Impact

Source: Emerson Electric Presentation at the 2017 Electrical Products Group Conference, slide 9

With that said, the acquisition is still a win for Emerson’s shareholders. The company has a long-term sales target of $2 billion for this segment, and sees $200 million of synergy opportunities.

It also significantly expands Emerson’s footprint in the industrial valves & controls industry. On a per-site basis, the acquisition is expected to double or triple Emerson’s valves & controls revenue, boosting the segment’s value proposition for its customers.

EMR Emerson Electric Valves & Controls Expands Emerson's Operational Certainty Capabilities

Source: Emerson Electric Presentation at the 2017 Electrical Products Group Conference, slide 12

It also makes Emerson the undisputed leader in the valve solutions industry.

Now, it has the capability to become the one global manufacturer supplying and servicing all valve systems worldwide. This is a global market of about $25 billion. For context, Emerson Electric has a market capitalization of ~$38 billion.

EMR Emerson Electric Combined Entity Creates The Premier Global Valve Solutions Provider

Source: Emerson Electric Presentation at the 2017 Electrical Products Group Conference, slide 11

Emerson Electric is a highly appealing dividend stock.

The company currently pays a quarterly dividend of $0.48 per share which yields 3.3% on the company’s current stock price of $58.72. Emerson Electric’s dividend yield is more than 50% higher than the average dividend yield in the S&P 500.

Emerson Electric reported adjusted earnings-per-share of $2.98 in fiscal 2016. The company’s current stock price of $58.72 is trading at a price-to-earnings ratio of 19.7 using 2016’s adjusted earnings.

A price-to-earnings ratio of 20 is likely fair for a high quality business like Emerson Electric. This Dividend King merits further research based on its impressive business diversification, reasonable valuation, and shareholder-friendly capital allocation policies.

You can read more Sure Dividend analysis on Emerson Electric at the following links:

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Farmers & Merchants Bancorp (FMCB)

Dividend Yield: 1.1%

Adjusted Price-to-Earnings Ratio: 16.3

10 Year Total Return CAGR: 3.3%

Consecutive Dividend Increases: 52 years

Farmers & Merchants Bancorp is a community bank chain located only in California. The company has a total of 25 locations and was founded in 1916. The company has conservative business practices which have led to sustained growth over the last 101 years.

Farmers & Merchants Bancorp is one of the ‘younger’ Dividend Kings. 2015 marked the company’s 50th consecutive dividend increase and induction to this list, and Farmers & Merchants Bancorp announced its 52nd consecutive increase in 2017.

The company’s stock is very thinly traded. Most days, no shares trade hands. Farmers & Merchants Bancorp is by far the smallest Dividend King. The company currently has a market cap of just $493 million. The stock almost forces its holders to be long-term investors as there are simply so few shares traded.

In recent times, Farmers & Merchants Bancorp has compounded earnings at a rate just shy of 5%. The company should continue growing a few percentage points faster than GDP growth in the area it serves.

Farmers & Merchants Bancorp currently pays a semiannual dividend of $6.75 per share. The company’s current stock price of $610.00 is trading at a dividend yield of 1.1%. This is well below the average dividend yield in the S&P 500 of approximately 2%.

Farmers & Merchants Bancorp reported earnings-per-share of $37.44 in fiscal 2016. The company’s current stock price of $610.00 is trading at a price-to-earnings ratio of 16.3. While this is certainly lower than the average price-to-earnings ratio in the S&P 500 index, it is higher than many of FMCB’s peers in the financial sector. For instance, Wells Fargo (WFC) trades at a much more attractive valuation.

What stands out about Farmers & Merchants Bancorp is how inactive its shares are. The company does not have any substantial growth catalysts, though an eventual take over by a larger bank is possible given the bank’s relatively small size.

You can read more Sure Dividend analysis on Farmers & Merchants Bancorp at the following link:

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Genuine Parts Company (GPC)

Dividend Yield: 2.9%

Adjusted Price-to-Earnings Ratio: 20.1

10 Year Total Return CAGR: 9.8%

Consecutive Dividend Increases: 61

Genuine Parts Company is an industrial distribution company that specializes in the distribution of automotive replacement parts. Founded in 1928, Genuine Parts Company is headquartered in Atlanta, Georgia and has a market capitalization of ~$13.5 billion.

Genuine Parts Company operates in four segments:

More information about the business model of the Genuine Parts Company as well as the contribution of each segment to 2016’s sales can be seen below.

GPC Genuine Parts Company Company Overview

Source: Genuine Parts Company Investor Presentation, slide 4

Genuine Parts Company distributes components that are in demand through all economic environments.

As a result, the company has had a very stable track record of business growth.

Genuine Parts Company has grown its sales in 84 years of its 89-year operating history and 73 of those years have also seen profit increases. The company has increased its annual dividend payments for 61 consecutive years, qualifying it to be a member of the Dividend Kings.

GPC Genuine Parts Company Track Record of Success

Source: Genuine Parts Company Investor Presentation, slide 6

Genuine Parts Company’s strong shareholder returns have been driven by its strong free cash flow generation.

The company consistently generates close to $1 billion of cash flow each year, with ~$400 million going to dividend payments and ~$400 million left as free cash flow.

GPC Genuine Parts Company Steady and Strong Cash Flows

Source: Genuine Parts Company Investor Presentation, slide 46

The company’s cash generation has led to a strong balance sheet.

Genuine Parts’ most recent financial report noted $178 million of cash and equivalents on its balance sheet.

The company is also highly profitable.

Genuine Parts Company reported a 16% return on invested capital for the twelve-month period ending on December 31, 2016.

GPC Genuine Parts Company Financial Focus

Source: Genuine Parts Company Investor Presentation, slide 40

Genuine Parts Company is also remarkably shareholder-friendly.

Aside from its 61 years of consecutive dividend increases, the company consistently devotes a considerable amount of capital to share repurchases.

In 2015 and 2016, for example, Genuine Parts Company repurchases $292 million and $181 million of company stock.

These share repurchases boost each shareholder’s fractional ownership of the company and correspondingly increase the company’s earnings-per-share.

GPC Genuine Parts Company Commitment to Shareholders Share Repurchases History

Source: Genuine Parts Company Investor Presentation, slide 50

Over full economic cycles, Genuine Parts Company is highly likely to deliver strong total returns.

The company is aiming for 6%-8% annual sales growth combined with 7%-10% annual earnings-per-share growth. These two targets combined with the stock’s high dividend yield mean that investors are highly likely to experience double-digit percent total returns.

GPC Genuine Parts Company GPC Outlook & Objectives

Source: Genuine Parts Company Investor Presentation, slide 52

Genuine Parts Company currently pays an annual dividend of $2.70. The company’s current stock price of $92.13 is trading at a dividend yield of 2.9%. Genuine Parts’ high dividend yield makes it a good stock to own for retirees and other income-oriented investors.

Genuine Parts Company reported adjusted earnings-per-share of $4.59. The company’s current stock price of $92.13 is trading at a price-to-earnings ratio of 20.1.

Like Emerson Electric, Genuine Parts Company is an exceptionally high-quality business and a price-to-earnings ratio of around 20 is likely fair value.

Thus, this stock merits further research based on its realistic valuation, strong historical growth, and shareholder-friendliness.

You can read more Sure Dividend analysis on the Genuine Parts Company at the following links:

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Federal Realty Investment Trust (FRT)

Dividend Yield: 3.0%

Adjusted Price-to-Earnings Ratio: 22.6 (using 2017’s expected funds from operations)

10 Year Total Return CAGR: 9.2%

Consecutive Dividend Increases: 50 years

Federal Realty Investment Trust is the newest member of the Dividend Kings. The REIT announced its 50th consecutive annual dividend increase on July 31, 2017.

This REIT specializes in the ownership and operation of large-scale commercial shopping locations. As a result, its properties are big and expensive, which means it owns a much smaller number of properties than many of its peers.

Make no mistake, though – this is a large REIT. Despite owning less than 100 properties, Federal Realty has more than 23 million square feet of shopping mall assets and the trust has a market capitalization of nearly $10 billion.

Other details about Federal Realty can be seen in the following diagram.

FRT Federal Realty Investment Trust Who Are We?

Source: Federal Realty First Quarter Investor Presentation, slide 2

Federal Realty Investment Trust is the only real estate investment trust to be a Dividend King.

So what makes this REIT different?

Federal Realty actively pursues two characteristics when shopping for new properties: population density and affluence. Both of these traits benefit Federal Realty’s tenants and, by extension, the REIT itself.

An emphasis on these characteristics can be seen when looking at Federal Realty’s existing tenant base, which is compared to its peers in a scatterplot below.

FRT Federal Realty Investment Trust Location, Location, Location

Source: Federal Realty First Quarter Investor Presentation, slide 3

Federal Realty also stands out for being exceptionally recession-resistant. The trust’s funds from operations (the REIT equivalent of earnings-per-share) during the 2007-2009 financial crisis can be seen below.

Remarkably, Federal Realty did not experience a single year of negative FFO growth during the last recession.

Altogether, Federal Realty continues to be a conservative, recession-resistant option for investors looking to add some real estate exposure to their investment portfolio.

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Hormel Foods (HRL)

Dividend Yield: 2.0%

Adjusted Price-to-Earnings Ratio: 20.9

10 Year Total Return CAGR: 9.8%

Consecutive Dividend Increases: 51 years

Hormel is one of the newer members of the Dividend Kings. The company became a member in January of 2016, and recently increased their dividend for the 51st consecutive year.

Hormel Foods is a diversified foods company that was founded in 1891 by George A. Hormel. Since then, the company has grown into a consumer staples giant with $9.5 billion in annual sales and a market capitalization of $18.2 billion.

HRL Hormel Foods We Are Hormel Foods

Source: Hormel Foods 2017 CAGE Presentation, slide 4

Hormel operates in five core segments:

The company often purchases small, up-and-coming food brands and then scales their product through their robust global distribution network.

HRL Hormel Foods Operating Segments

Source: Hormel Foods 2017 CAGE Presentation, slide 5

Hormel has been experiencing trouble lately in its turkey segment, the Jennie-O Turkey Store. The price of raw turkey is at seven-year lows, which has flooded the market with processed turkey products and derivatives. This oversupply has lowered prices of end products and impaired the profitability of Hormel’s turkey unit.

The company’s stock price has been hammered as a result.

Related: Is Hormel Foods A Better Bargain Than Ever?

We believe this presents a buying opportunity for long-term investors. Hormel is an amazingly profitable business, and along with increasing its annual dividend for 51 years, has increased its earnings for 28 out of the past 31 years.

This is a record of profitability growth matched by only 4 companies in the S&P 500 (Johnson & Johnson is one of the others).

HRL Hormel Foods We Have Grown Earnings 28 Out Of 31 Years

Source: Hormel Foods 2017 CAGE Presentation, slide 11

Hormel’s strong business performance is driven by its impressive brand portfolio.

Hormel owns iconic brands like Hormel, SPAM, Muscle Milk, Skippy and Justin’s peanut butter, among many others.

Amazingly, Hormel brands have a #1 or #2 market share in over 35 product categories.

HRL Hormel Foods Our Brands Have a #1 or #2 Share in Over 35 Categories

Source: Hormel Foods 2017 CAGE Presentation, slide 17

Hormel investors benefit from the company’s unique ownership structure.

48.5% of the company’s stock is owned by the Hormel Foundation, which is a source of permanent investor capital. This encourages long-term thinking and helps to provide some stability for Hormel’s stock price.

Related: Top 15 Low Volatility Dividend Aristocrats (Hormel is one of them)

HRL Hormel Foods Unique Ownership Fosters A Long-Term Outlook

Source: Hormel Foods 2017 CAGE Presentation, slide 23

Despite Hormel’s recent turkey troubles, the company is highly likely to deliver double-digit total returns over full economic cycles.

The company is has long-term targets of 5% annual growth in net sales and 10% annual growth in diluted earnings-per-share.

Over the past decade, the company has reported 5% and 12% growth in these two metrics, respectively, showing that Hormel is capable of meeting (and even exceeding) their long-term growth goals.

HRL Hormel Foods Achieving Our Long-Term Growth Goals

Source: Hormel Foods 2017 CAGE Presentation, slide 12

Hormel Foods currently pays a quarterly dividend of $0.17 per share which yields 2.0% on the company’s current stock price of $34.45. Hormel Foods is traditionally a low yield dividend stock but its turkey troubles have pushed Hormel’s stock price down and its yield up, making Hormel more attractive for income investors.

Hormel Foods is expecting adjusted earnings-per-share at the ‘lower end’ of its previously-announced guidance range of $1.65 to $1.71 for fiscal 2017. Using $1.65 as a proxy for Hormel’s adjusted earnings-per-share, the stock is trading at price-to-earnings ratio of 20.9.

A price-to-earnings ratio of 20 is fair for a recession-resistant stock experiencing double-digit earnings growth. Thus, this stock is likely trading at or just above fair value and Hormel Foods merits further research as a result.

You can read more Sure Dividend Analysis about Hormel Foods at the following links:

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Johnson & Johnson (JNJ)

Dividend Yield: 2.6%

Adjusted Price-to-Earnings Ratio: 19.5

10 Year Total Return CAGR: 10.9%

Consecutive Dividend Increases: 55 years

Johnson & Johnson is the largest healthcare conglomerate in the world with a market capitalization of $355 billion. The company operates in three segments:

Johnson & Johnson’s Pharmaceutical segment is its largest by net sales and operates under the name Janssen.

Although a large business in its own right (Janssen has more $1 billion products than any other pharmaceutical company worldwide), Janssen is growing rapidly, delivering sales growth roughly twice as strong as the rest of the global branded market.

JNJ Johnson & Johnson Janssen 6 Years of Growth - 2x The Branded Market

Source: Johnson & Johnson 2017 Pharmaceutical Business Review Day

The company’s Medical Devices segment is its second largest by net sales and manufactures electrophysiology equipment, contact lenses, and surgical equipment for both consumers and hospitals. The segments hospital sales far outweigh its sales made directly to consumers.

JNJ Johnson & Johnson Our Medical Device Business

Source: Johnson & Johnson Consumer & Medical Device Business Review Day, slide 18

Lastly, Johnson & Johnson’s Consumer segment is its smallest by net sales (despite being arguably its most well-known). This segment owns iconic brand like Johnson’s, Aveeno, and Tylenol, among others.

JNJ Johnson & Johnson Iconic Brands

Source: Johnson & Johnson 2017 CAGNY Presentation, slide 5

Notably, Johnson & Johnson’s Consumer segment has three brands – Johnson’s, Neutrogena, and Listerine – that generate more than $1 billion in annual sales.

Johnson & Johnson’s diversified business model, strong management, and presence in the recession-resistant healthcare industry help to make it one of the most stable businesses that I have ever analyzed.

Along with its impressive 54 years of consecutive dividend increases, Johnson & Johnson has increased its adjusted operational earnings for 33 consecutive years.

Johnson & Johnson is also one of only two companies to hold the coveted AAA credit rating from S&P, with the other being Microsoft (MSFT).

Related: AAA Credit Rating Stocks In Focus: Johnson & Johnson

More details about Johnson & Johnson’s remarkably stable business model can be seen below.

JNJ Johnson & Johnson A Strong, Consistent, Sustainable Business

Source: Johnson & Johnson 2017 CAGNY Presentation, slide 53

Johnson & Johnson’s largest segment is a research-based pharmaceutical company.

Accordingly, the company’s future is highly dependent on its ability to deploy capital into meaningful research and development initiatives.

Importantly, Johnson & Johnson deploys a large sum of capital into R&D each year. The company’s long-term research and development trend can be seen below.

JNJ Johnson & Johnson Enterprise Investment in R&D

Source: Johnson & Johnson Consumer & Medical Device Business Review Day, slide 18

Johnson & Johnson currently pays a quarterly dividend of $0.84 per share. The company’s current stock price of $130.96 is trading at a dividend yield of 2.6%. Investors generate about 30% more income from an investment in Johnson & Johnson than from an investment in an S&P 500 index fund (which yields about 2% right now).

In addition to Johnson & Johnson’s above-average dividend yield, this stock is also trading at a reasonable valuation multiple.

Johnson & Johnson reported adjusted earnings-per-share of $6.73 in fiscal 2016. The company’s current stock price of $130.96 is trading at a price-to-earnings ratio of 19.5.

Johnson & Johnson is one of the most high-quality businesses around, and a price-to-earnings ratio of 20 or above is certainly reasonable for this stock. Thus, Johnson & Johnson is a strong hold or even a buy at current prices.

You can read more Sure Dividend analysis about Johnson & Johnson at the following links:

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Coca-Cola (KO)

Dividend Yield: 3.2%

Adjusted Price-to-Earnings Ratio: 24.0

10 Year Total Return CAGR: 9.0%

Consecutive Dividend Increases: 55 years

Coca-Cola is the gold standard in the beverage industry thanks to its popular drinks like Coca-Cola, Powerade, Minute Maid, vitaminwater, Sprite, Schweppes, and Dasani.

After the first Coca-Cola beverage was concocted in 1886, Coca-Cola has enjoyed rapid business growth. The company currently has a market capitalization of $197 billion and has 21 brands with $1 billion or more in annual sales.

More details about Coca-Cola’s current business model can be seen below.

KO Coca-Cola Product Information

Source: Coca-Cola Investor Infographic

Despite Coca-Cola’s remarkable business diversity, many investors are convinced that the best days of the beverage industry have passed. Concerns about the health effects of sugary drinks have led some to believe that Coca-Cola will slowly decline into irrelevancy.

We believe they are wrong, for two major reasons.

First, Coca-Cola offers a healthy alternative for the vast majority of its product lineup. More specifically, 19 of Coca-Cola’s billion dollar brands have a low- or no-calorie alternative. Think of the Coca-Cola and Diet Coke pairing as the flagship example.

Secondly, the size of the beverage industry is actually expected to grow over the coming years at a rate of approximately 4% per year. This means that Coca-Cola still has plenty of room to increase its sales by just maintaining its leading market share.

Related: Coca-Cola’s Growth Potential & Market Share

KO Coca-Cola Industry Growth Remains Solid

Source: Coca-Cola 2017 CAGNY Presentation, slide 9

With that said, Coca-Cola is not content to just passively grow its sales.

The company is currently executing an extensive corporate restructuring where it is divesting of its capital-intensive bottling operations to focus on its core competency of producing syrups and concentrates.

The ‘new’ Coca-Cola will have lower revenues, but significantly higher margins and ultimately higher earnings-per-share.

Details about the progress of Coca-Cola’s restructuring can be seen below.

KO Coca-Cola Refranchising Will Drive Local Market Performance

Source: Coca-Cola 2017 CAGNY Presentation, slide 26

The company’s progress on this front can be observed when analyzing its financial statements.

Although the transformation is still underway, fiscal 2016 saw Coca-Cola have lower revenues but slightly higher operating margins.

I expect that operating margins will improve more as the restructuring efforts make more progress and long-term cost synergies can be identified.

KO Coca-Cola We Have Made Progress Returning To Our Core

Source: Coca-Cola 2017 CAGNY Presentation, slide 33

While Coca-Cola’s transformation continues to make progress, investors will continue to benefit from the company’s exceptionally shareholder-friendly capital allocation policies.

Coca-Cola is one of the most popular dividend growth stocks out there, and it’s not hard to see why – the company has increased its dividend for 55 consecutive years and currently has an above-average dividend yield.

KO Coca-Cola Strong Record of Returning Cash To Shareowners

Source: Coca-Cola 2017 CAGNY Presentation, slide 38

More specifically, Coca-Cola currently pays a quarterly dividend of $0.37 per share which yields 3.2% on the company’s current stock price of $45.87. For context, the S&P 500 has an average dividend yield of 2.0%, making Coca-Cola a very attractive stock from a dividend perspective alone.

Coca-Cola reported adjusted earnings-per-share of $1.91 in fiscal 2016. The company’s current stock price of $45.87 is trading at a price-to-earnings ratio of 24.0.

Like many other high-quality consumer staples stocks, Coca-Cola’s valuation is a bit rich right now. There are likely better bargains in today’s stock market, although Coca-Cola would be a fantastic stock to accumulate during the next market correction.

You can read more Sure Dividend analysis on the Coca-Cola Company at the following links:

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Lancaster Colony (LANC)

Dividend Yield: 1.7%

Adjusted Price-to-Earnings Ratio: 28.3

10 Year Total Return CAGR: 15.1%

Consecutive Dividend Increases: 54 years

Similar to Farmers & Merchants Bancorp, Lancaster Colony is much smaller than many of the other Dividend Kings.

Lancaster Colony sells regional specialty food products under the Marzetti, Flatout Bread, New York, and Sister Shubert’s brands. The company was founded in 1961 and has a current market capitalization of $3.6 billion.

Lancaster’s business model used to be slightly different than it is today. Lancaster Colony spun-off its candle division in 2014 to focus its operations strictly on its food business. Many of the company’s most notable brands are displayed in the following diagram.

LANC Lancaster Colony Brand Examples

Source: Lancaster Colony Corporation Website

Lancaster Colony will appeal to very conservative investors. The company has no debt outstanding and reported approximately $125 million of cash and equivalents at the end of the most recent quarter. Further, its presence in the recession-resistant food industry will help to insulate it from the effect of the next economic downturn.

Lancaster is growing at a solid clip right now. The company fiscal 2016 (which ended on June 30, 2016) saw adjusted earnings-per-share increase by 19.6% over the same period a year ago.

With that said, fiscal 2017 is not off to as strong a start. The company’s fiscal-year-to-date adjusted earnings-per-share of $3.16 have decreased noticeably from last year’s figure of $3.32.

Lancaster Colony currently pays a quarterly dividend of $0.55 per share. The company’s current stock price of $126.08 is trading at a dividend yield of 1.7%.

Unlike most dividend kings, Lancaster Colony is trading at a lower dividend yield than the overall stock market (as measured by the S&P 500). Thus, there are likely better options elsewhere on this list for investors looking to generate current income.

Lancaster Colony reported adjusted earnings-per-share of $4.45 in fiscal 2016. The current stock price of $126.08 is trading at a price-to-earnings ratio of 28.3 – above the average price-to-earnings ratio in the S&P 500.

Low interest rates have driven up the valuations of many high-quality stocks, including Lancaster Colony. Investors are better off waiting for a more reasonable valuation to accumulate shares of this company.

You can read more Sure Dividend analysis on Lancaster Colony at the following links:

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Lowe’s Companies (LOW)

Dividend Yield: 2.1%

Adjusted Price-to-Earnings Ratio: 19.7

10 Year Total Return CAGR: 11.3%

Consecutive Dividend Increases: 54 years

Lowe’s is the second-largest home improvement retailer in the United States behind The Home Depot. The company serves more than 17 million customers per week in the United States and has a market capitalization of $68 billion.

As a home improvement retailer, Lowe’s business performance is highly correlated to the performance of the broader economy. People tend to slow home renovations when disposable income becomes constrained.

However, the economy is relatively strong right now and Lowe’s is posting commendable financial performance as a result. The company’s first quarter earnings release saw adjusted earnings-per-share increase by 18.4% from the same period a year ago, assisted by 1.9% growth in comparable store sales.

LOW Lowe's Companies First Quarter Highlights

Source: Lowe’s First Quarter Earnings Presentation, slide 1

While comparable store sales ticked upwards by a modest 1.9%, the company’s total sales story is markedly better.

On a company-wide basis, Lowe’s saw sales of $16.9 billion in the first quarter – up 10.7% from the same period a year ago.

This strong growth from Lowe’s is unsurprising given the current strength of the U.S. economy.

LOW Lowe's Companies Total Sales Summary

Source: Lowe’s First Quarter Earnings Presentation, slide 2

Lowe’s is highly profitable and allocates its owner earnings in a very shareholder-friendly fashion.

In the most recent quarter, Lowe’s generated $3.3 billion of operating cash flow and spent a very small $0.2 billion on capital expenditures.

The difference between these two numbers gives free cash flow of $3.1 billion – plenty of ammunition to drive the company’s shareholder capital return program.

In the current fiscal year, Lowe’s has spent $1.2 billion on share repurchases and has $3.8 billion in remaining buyback authorization.

LOW Lowe's Companies Statement of Cash Flows Summary

Source: Lowe’s First Quarter Earnings Presentation, slide 7

Lowe’s currently pays a quarterly dividend of $0.41 per share which yields 2.1% on the company’s current stock price of $78.72. Lowe’s dividend yield is slightly higher than the average dividend yield in the S&P 500 index.

Lowe’s reported adjusted diluted earnings-per-share of $3.99 in fiscal 2016. The company’s current stock price of $78.72 is trading at a price-to-earnings ratio of 19.7.

While Lowe’s is not grossly overvalued right now, the best time to accumulate this stock is during recessions. Lowe’s is not recessions resistant but tends to perform exceptionally well during times of economic prosperity. Recessions present buying opportunities for potential Lowe’s shareholders.

You can read more Sure Dividend analysis about Lowe’s at the following links:

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3M (MMM)

Dividend Yield: 2.3%

Adjusted Price-to-Earnings Ratio: 25.2

10 Year Total Return CAGR: 11.8%

Consecutive Dividend Increases: 59 years

3M is the gold standard in the diversified manufacturing industry. The company makes a wide array of products including electrical components, medical products, car-care products, dental and orthodontic products, adhesives, abrasives, laminates, and many others.

Originally known as Minnesota Mining & Manufacturing, 3M was founded in 1902 and has a current market capitalization of $125 billion.

The company is dividend into five segments for reporting purposes:

Each segment’s contribution to 2016 revenue along with its reported operating margin can be seen below.

MMM 3M Company Executing Our Playbook Has Created A Successful Portfolio

Source: 3M Presentation at Bernstein’s 33rd Annual Strategic Decisions Conference, slide 5

As a highly diversified company with many unrelated (but complimentary) operating divisions, 3M has a meaningful potential to improve its business through portfolio management.

Recent years have seen the company restructure its organization with the intent to increase scale and relevance while simultaneously divesting non-core brands.

The company recently added the Scott Safety business to its portfolio, purchasing the business from Johnson Controls (JCI) in a transaction worth approximately $2 billion.

Other instances of 3M creating value through portfolio management can be seen below.

MMM 3M Company Portfolio Actions Have Positioned Us To Deliver Efficient Growth in 2017

Source: 3M Presentation at Bernstein’s 33rd Annual Strategic Decisions Conference, slide 10

Portfolio management is just one example of how 3M has created shareholder value through disciplined capital allocation decisions.

The company is also very shareholder-friendly, and this manifests itself through both its dividend policy (59 years of consecutive dividend increases) and its consistent share repurchase program.

MMM 3M Company Capital Allocation Success

Source: 3M Presentation at Bernstein’s 33rd Annual Strategic Decisions Conference, slide 18

Aside from being a rewarding dividend stock, 3M is also appealing from a total return perspective.

The company is targetting earnings-per-share growth of 8%-11% per year through 2020, driven by a robust 20% return on invested capital and 100% free cash flow conversion (meaning that for every dollar of earnings, there is an equivalent dollar of free cash flow).

MMM 3M Company Long-Term Financial Objectives

Source: 3M Presentation at Bernstein’s 33rd Annual Strategic Decisions Conference, slide 19

3M currently pays a quarterly dividend of $1.175 which yields 2.3% on the company’s current stock price of $205.68. 3M’s dividend yield is slightly higher than the market’s average, making it appealing for dividend investors.

Unfortunately, the company’s valuation is not quite as attractive.

3M reported 2016 earnings-per-share of $8.16 for fiscal 2016. The company’s current stock price of $205.68 is trading at a price-to-earnings ratio of 25.2 using 2016’s adjusted earnings-per-share.

3M is trading in-line with the overall stock market’s valuation, but low interest rates are propping up valuations right now. The company would have much better total return prospects if it were trading at a price-to-earnings ratio of 20.

With that said, 3M’s forward valuation is slightly more favorable.

3M is expecting 2017 adjusted earnings-per-share to be in the range of $8.45-$8.80. Taking the midpoint of this guidance band ($8.625) and the current stock price of $205.68 gives a forward price-to-earnings ratio of 23.8.

Still, 3M appears moderately overvalued. Investors would do well to accumulate shares of this company if/when they fall to a more reasonable level.

You can read more Sure Dividend analysis about 3M at the following links:


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Nordson (NDSN)

Dividend Yield: 0.9%

Adjusted Price-to-Earnings Ratio: 24.8

10 Year Total Return CAGR: 9.6%

Consecutive Dividend Increases: 53 years

Nordson is an industrial manufacturing company that produces a diverse array of products including adhesives, coatings, sealants, and biomaterials, among others.

Founded in 1954, Nordson is headquartered in Westlake, Ohio and has a market capitalization of $6.7 billion. The company has impressive size and scope, with 7,200 employees, a direct presence in more than 35 countries, and fiscal 2016 sales of $1.8 billion.

NDSN Nordson At A Glance

Source: Nordson Second Quarter Investor Presentation, slide 3

Nordson benefits from an impressive level of business diversification. The company operates in three core segments:

Nordson also has a very globalized business model, with 71% of its fiscal 2016 revenue being generated from outside the United States.

More details about Nordson’s business diversification can be seen below.

NDSN Diversified Sources of Revenue

Source: Nordson Second Quarter Investor Presentation, slide 4

There are a number of reasons why Nordon is appealing from an investment perspective.

Given that this is an article about the Dividend Kings, the most obvious characteristics its its impressive dividend history – 53 years of consecutive dividend increases.

Notably, Nordson’s business growth has certainly justified this dividend growth. Nordson’s dividend is well-supported by earnings.

The company paid out only 21% of its earnings as dividend payments in 2016, meaning that there is still plenty of room for Nordson to continue growing dividend even if earnings remain flat for a temporary period of time.

Nordson is also highly profitable. The company reported an average gross margin of 57% between 2011 and 2016 and an average operating margin of 22% during the same time period.

NDSN Nordson Investment Highlights

Source: Nordson Second Quarter Investor Presentation, slide 5

Looking ahead, Nordson appears well-positioned to continue delivering strong growth.

The company has a well-defined 2017-2022 strategic plan that includes a focus on business optimization, tuck-in acquisitions, and organic growth.

Details about Nordson’s strategic plan can be seen below.

NDSN Common Themes Of Our 2017-2022 Strategic Plan

Source: Nordson Second Quarter Investor Presentation

As noted above, Nordon is (partially) relying on organic growth to fuel its future shareholder returns.

An important part of the company’s organic growth will be its presence in emerging markets. While Nordson has compounded its company-wide sales at an impressive 12.6% CAGR over the past decade, the majority of this growth has come from emerging or international markets – which means that the company’s international presence is currently much larger than its domestic business.

NDSN Emerging Markets Drive Organic Growth

Source: Nordson Second Quarter Investor Presentation, slide 30

Nordson is very shareholder-friendly.

The following diagram visually depicts Nordon’s capital deployment between 2011 and 2016. 40% – or $1.1 billion – of the company’s spending during this time has been shareholder-focused, including share repurchases and dividend payments.

NDSN Disciplined Capital Deployment

Source: Nordson Second Quarter Investor Presentation, slide 14

Nordson currently pays a quarterly dividend of $0.27 per share which yields 0.9% on the company’s current stock price of $115.86. Despite Nordson’s illustrious dividend growth history, it is still the lowest yielding Dividend King and does not appeal to income-focused investors.

Nordson reported adjusted earnings-per-share of $4.68 in fiscal 2016. The company’s current stock price of $115.86 is trading at a price-to-earnings ratio of 24.8 using 2016’s adjusted earnings.

Nordson’s price-to-earnings ratio appears slightly elevated right now, although the company would be a strong buy if prices fall to a price-to-earnings ratio of 20 or less.

You can read more Sure Dividend analysis on Nordson at the following link:

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Northwest Natural Gas (NWN)

Dividend Yield: 3.0%

Adjusted Price-to-Earnings Ratio: 29.1

10 Year Total Return CAGR: 6.0%

Consecutive Dividend Increases: 61 years

As its name implies, Northwest Natural Gas is a utility company focused on natural gas distribution in the northwest United States. Headquartered in Portland, Oregon, Northwest Natural Gas has a market capitalization of $1.8 billion – making it one of the smallest Dividend Kings by market capitalization.

Like most utilities, Northwest Natural Gas benefits from a significantly de-risked business model. The company generates 90%+ of its revenues from a pure-play local distribution company (LDC) subsidiary. Further, Northwest Natural Gas has investment grade credit ratings from both S&P and Moody’s, and is investing heavily in its future growth, with projected five-year capital expenditures of $850 to $950 million.

NWN Northwest Natural Gas Investment Highlights

Source: Northwest Natural Gas May 2017 Investor Presentation, slide 7

In addition, the vast majority of Northwest Natural Gas’ business operates in a regulated market.

This means that market forces are partially dictated by governments, helping to provide stable growth for the company and its shareholders.

NWN Northwest Natural Gas Highly Regulated Business

Source: Northwest Natural Gas May 2017 Investor Presentation, slide 8

Looking at the balance sheet of Northwest Natural Gas, the company is positioned quite conservatively and has shown the ability to be flexible in its financing.

In the fourth quarter of 2016, the company completed both equity and debt financing and used the proceeds for general corporate purposes, utility capital expenditures, and the reduction of short-term debt balances.

Also, Northwest Natural Gas possesses an AA- credit rating from S&P and an A1 credit rating from Moody’s, indicating that the rating agencies see little risk of this company defaulting on its debt.

NWN Northwest Natural Gas Delivering Shareholder Value

Source: Northwest Natural Gas May 2017 Investor Presentation, slide 31

Northwest Natural Gas currently pays a quarterly dividend of $0.47 per share which yields 3.0% on the company’s current stock price of $61.70. Northwest Natural Gas’ high dividend yield and stable, regulated business model make it ideal for risk-averse equity investors.

However, the company’s valuation is much less appealing.

Northwest Natural Gas reported adjusted earnings-per-share of $2.12 in fiscal 2016. The company’s current stock price of $61.70 is trading at a price-to-earnings ratio of 29.1.

Low bond yields have driven upwards the valuation of ‘bond substitutes’ like utilities. Right now is a historically poor time to purchase shares of Northwest Natural Gas.

You can read more Sure Dividend analysis on Northwest Natural Gas at the following link:

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Procter & Gamble (PG)

Dividend Yield: 3.1%

Adjusted Price-to-Earnings Ratio: 23.0

10 Year Total Return CAGR: 6.6%

Consecutive Dividend Increases: 61 years

Procter & Gamble is one of the largest consumer goods companies in the world with a market capitalization of approximately $227 billion.

The company owns many popular brands such as:

Among many others.

Founded in 1837, Procter & Gamble generated $65.3 billion in sales in 2016, produces products in more than 180 companies and has increased its dividend for 60 consecutive years.

PG Procter & Gamble Company Overview

Source: Procter & Gamble Investor Relations

Procter & Gamble’s long-term business success is undisputable.

However, the company has experienced troubles in recent years. By over-diversifying (or di-worse-ifying, in the words of Peter Lynch) its product portfolio, Procter & Gamble needlessly complicated its business model which increased expenses and reduced shareholder profits.

To rectify this, Procter & Gamble is in the midst of a dramatic business transformation.

The company is divesting non-core brands and using the proceeds to grow the sales of its most popular and core products.

PG Procter & Gamble Productivity Transformation

Source: Procter & Gamble 2017 CAGNY Presentation

Although the transformation is still relatively new, meaningful progress can be seen when looking at Procter & Gamble’s financial performance.

The company’s gross margin (net sales less the cost of goods sold) and operating margin (net sales less the cost of goods sold and operating expenses) have increased by 1.8% and 2.1%, respectively, since 2012/2013.

PG Procter & Gamble P&G Margin Improvement

Source: Procter & Gamble 2017 CAGNY Presentation

A significant component of Procter & Gamble’s reinvention is a refined and improved supply chain.

In the past, Procter & Gamble sourced products from multiple fulfillment centers depending on product availability and shipping circumstances.

Now, recognizing that there is only one shortest route between any two locations, Procter & Gamble is investing heavily in developing supply chain mastery and operational expertise.

A visual depiction of these efforts can be seen below.

PG Procter & Gamble Productivity Savings

Source: Procter & Gamble 2017 CAGNY Presentation

Procter & Gamble is also remarkably shareholder-friendly.

The company translates the vast majority of its earnings-per-share into free cash flow (which is measured using free cash flow productivity). The company then distributes much of this free cash flow to its shareholders via share repurchases and dividend payments.

PG Procter & Gamble Replacement Photo

Source: Procter & Gamble 2017 CAGNY Presentation

The company’s shareholders will also benefit from a meaningful reduction in share count thanks to the divestiture of 41 beauty brands to Coty in a transaction that closed earlier this year.

In April, Procter & Gamble increased its quarterly dividend payment by 3%. This marked 61 years of consecutive dividend increases for this consumer goods giant. The company’s new quarterly dividend of $0.6896 combined with the company’s current stock price of $88.70 means that the company is trading at a dividend yield of 3.1%

Procter & Gamble’s low risk business model and high dividend yield make it ideal for risk-averse, income-focused investors such as retirees.

Because of the way that Procter & Gamble’s financial calendar is scheduled, the company is already well into its fiscal 2017 fourth quarter. Thus, it is more meaningful to assess Procter & Gamble’s using 2017’s expected earnings (rather than 2016’s earnings).

In Procter & Gamble’s third quarter earnings release, the company reiterated its guidance for “core earnings per share growth of mid-single digits versus fiscal 2016 Core EPS of $3.67”. 5% growth over last year’s earnings-per-share of $3.67 gives an estimate of $3.85.

Procter & Gamble’s current stock price of $88.70 combined with this estimate for 2017’s earnings-per-share gives a price-to-earnings ratio of 23.0. While this valuation is below the average valuation within the S&P 500, it is still quite rich and investors are likely able to find more attractive valuations in today’s stock market.

You can read more Sure Dividend analysis on Procter & Gamble at the following links:

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SJW Group (SJW)

Dividend Yield: 1.7%

Adjusted Price-to-Earnings Ratio: 19.9

10 Year Total Return CAGR: 7.2%

Consecutive Dividend Increases: 50 years

The SJW Group is a water utility company with a market capitalization of $1.1 billion. The company’s wholly-owned subsidiary the San Jose Water Company was founded in 1866, giving this company a remarkably long corporate history.

SJW is the newest addition to the Dividend Kings. The company’s dividend increase in January was its 50th consecutive, qualifying it to be a member of this elite group of stocks.

SJW has many of the other characteristics of a strong, stable stock. It has an S&P credit rating of A and operates in a constructive regulatory environment. Further, it is growing its profits at a fantastic rate, with a 14.6% earnings-per-share CAGR between 2011 and 2016.

SJW Group Investment Highlights

Source: SJW Group Investor Presentation, slide 3

Like many other publicly-traded utilities, SJW acts as a holding company for several operating companies which report consolidated financial statements under the parent’s corporate umbrella.

Specifically, SJW has four operating subsidiaries:

The first two subsidiaries in the above list provide water to more than 1 million people. The SJW Land Company owns and operates commercial real estate investments. The Texas Water Alliance is an entity dedicating to pursuing the developemnt of a regional water supply project in central Texas.

The companies two largest subsidiaries (San Jose Water and SJWTX) are both regulated entities.

SJW Group Structure and Platforms

Source: SJW Group Investor Presentation, slide 5

Based on the corporate structure of SJW, it should be of no surprise that an investment in this company is an investment in the future of the water sector.

Fortunately, there are many secular tailwinds in this industry.

Aging water infrastructure across the United States requires extensive investment to provide safe and reliable water services. However, water utilities have typically been privately-held by governmental agencies in the past, and governemntal balance sheets are already highly leveraged, preventing them from making the necessary investments to keep their water infrastructure operational and safe.

That’s where water utilities like SJW come in.

By having access to the public capital markets, SJW provies individual investor the opportunity to invest in publicly-used water infrastructure, filling a need that is estimated to be $384 billion between 2011 and 2030.

More details about the water sector investment thesis can be seen below.

SJW Group Water Sector Investment Thesis

Source: SJW Group Investor Presentation, slide 4

SJW is aggressively investing in the improvement of water infrastructure, and its level of investment has been growing rapidly over time.

In fact, the company’s infrastructure investments have grown at a CAGR of 16.9% over the past five years – more than doubling during this time period.

SJW Group CAPEX Growth

Source: SJW Group Investor Presentation, slide 19

SJW currently pays a quarterly dividend of $0.2175 after their 50th consecutive annual dividend increase in January. The company’s current stock price of $51.14 is trading at a dividend yield of 1.7%. SJW’s dividend is below the average dividend yield in the S&P 500 index and investors should look elsewhere to generate current portfolio income.

SJW reported adjusted earnings-per-share of $2.57 in fiscal 2016.The company’s current stock price of $51.14 is trading at a price-to-earnings ratio of 19.9 – a reasonable valuation in today’s richly valued stock market.

Tootsie Roll Industries (TR)

Dividend Yield: 1.0%

Price-to-Earnings Ratio: 33.3

10 Year Total Return CAGR: 4.8%

Consecutive Dividend Increases: 51 years

Tootsie Roll Industries owns, manufactures, and distributes many iconic candy brands, including:

The image below shows many of the company’s iconic brands.

TR Brands

Source: 2016 Annual Report, page 1

Tootsie Roll Industries was founded in 1896 and has paid increasing dividends for 51 consecutive years.

Unlike most established confectioners, Tootsie Roll has not significantly expanded internationally.  The company still generates under 10% of its sales internationally.

Not only has the company been slow to grow internationally, but sales growth in general has been sluggish:

Adjusting for inflation, sales have actually declined by 1.1% a year from 2007 through 2016.  For comparison, competitor Hershey’s (HSY) sales have grown at 3.7% a year after adjusting for inflation over the same time period.

While sales have declined (in real terms) for Tootsie Roll, earnings-per-share have held constant (in real terms).  Fiscal 2007 saw a dip in earnings-per-share, so 2006 is used as the starting period for comparison instead of 2007 which is used for sales.

This comes to growth of 1.8% a year before inflation, or virtually flat growth after inflation.

In Tootsie Roll’s defense, the company regularly issues a 3% a year stock dividend and currently yields 1% a year.  Dividends paid in stock increase the total number of shares outstanding, and the total number of shares shareholders own.

Fortunately, Tootsie Roll also engages in significant share repurchases.  The company has reduced its share count by ~1.5% a year over the last 7 years after accounting for its stock dividends.

I don’t project much growth for Tootsie Roll going forward.  The company’s CEO recently passed away. The former CEO’s wife is now at the helm and controls more than half of company shares.

Even if Tootsie Roll manages to only grow earnings-per-share at the rate of inflation, investors will still generate real returns of 4% a year from the company’s cash dividend and stock dividend.

Unfortunately, Tootsie Roll shares look especially overvalued.  The company is currently trading for a price-to-earnings ratio over 30.  I believe a price-to-earnings ratio of 20 is a very generous (probably still too high) price-to-earnings ratio for a slow-growing, safe, stock like Tootsie Roll.

Valuation compression will likely significantly reduce already meager real total returns going forward.

You can read more Sure Dividend analysis on Tootse Roll at the following link:

Vectren (VVC)

Dividend Yield: 2.7%

Adjusted Price-to-Earnings Ratio: 24.2

10 Year Total Return CAGR: 12.9%

Consecutive Dividend Increases: 57 years

Vectren is an energy holding company with a market capitalization of approximately $5.2 billion. Founded in 1999 and headquartered in Evansville, Indiana, Vectren currently delivers energy to more than 1 million customers in Indiana and Ohio.

Vectren acts as a holding company for the following operating units:

The names listed above are not the actual legal names of the operating subsidiaries – rather, they are the names used by Vectren in investor documents & SEC filings to refer to these businesses in a manner that reflects their underlying operations.

The geographic distribution of each operating utility can be seen below.

VVC Vectren Geographic Map

Source: Vectren Presentation at the May 2017 AGA Financial Forum

In addition to its primary utility businesses, Vectren also has two smaller operating divisions: Vectren Infrastructure Services (VISCO) and Vectren Energy Services (VESCO).

Vectren’s investors have enjoyed very strong total returns in recent years, particularly considering this is a regulated utility company. Vectren’s 5-year total shareholder return CAGR is ~16%, which exceeds its 9%-11% target by a wide margin.

This has been driven by the company’s robust earnings growth. Vectren has compounded its earnings-per-share by approximately 8% over the past 5 years while steadily improving its return on equity.

VVC Vectren Delivering Strong Results By Executing on Our Strategies

Source: Vectren Presentation at the May 2017 AGA Financial Forum, slide 8

Vectren’s growth has been primarily driven by its intelligent capital expenditure policy. Vectren’s capitalized investments into its utilities business have grown to more than $500 million per year over the past five years, with a large proportion of this capital directed towards gas infrastructure investments.

The company’s internal investments have improved its profitability over time. Return on equity has been steadily increasing in recent years, and the company has a strong cost management culture. Vectren’s Operations & Management (O&M) expenses have grown at a CAGR of less than 1% over the past five years.

VVC Vectren Disciplined Utility Growth Key to Vectren's Success

Source: Vectren Presentation at the May 2017 AGA Financial Forum, slide 9

These investments are starting to provide meaningful contributions to Vectren’s business. The company recently increased its long-term targets for consolidated earnings-per-share and dividend growth, with both now standing at 6%-8%.

Further, Vectren’s targetted dividend payout ratio is 60%-65%, giving this company a healthy mix of growht and dividend safety for its investors.

VVC Vectren's Long-Term Outlook Improves

Source: Vectren Presentation at the May 2017 AGA Financial Forum, slide 10

Earnings-per-share growth of 6%-8% might seem quite high for a utility. After all, this industry is known for holding low-risk, slow-growth companies.

Vectren has a tangible plan to drive this high level of earnings growth moving forward. The company’s modernization investments are expected to drive profitability moving forward, and its gas utility infrastructure investments will also be a notable contributor.

 

VVC Vectren's Long-Term Outlook Improves, Continued

Source: Vectren Presentation at the May 2017 AGA Financial Forum, slide 11

Further, Vectren is investing in a sustainable energy future through its Vectren Energy Services (VESCO) operating unit. This segment is focused on improving energy efficiency and developing renewables and clean energy.

Over the next tend years, Vectren is expected to report cumulative capital expenditures of $6.5 billion, broken down as follows:

VVC Vectren Smart Energy Future - 10 Year CAPEX Plan Overview

Source: Vectren Presentation at the May 2017 AGA Financial Forum, slide 15

Altogether, Vectren’s growth prospects appear robust.

Vectren currently pays a quarterly dividend of $0.42 per share. The company’s current stock price of $61.63 is trading at a dividend yield of 2.7%. Vectren’s above-average dividend yield make it attractive for dividend growth investors.

Vectren reported adjusted earnings-per-share of $2.55 in fiscal 2016. The company’s current stock price of $61.63 is trading at a price-to-earnings ratio of 24.2 using 2016’s adjusted earnings.

In addition, Vectren is expecting adjusted earnings-per-share of $2.55-$2.65 in fiscal 2017, very close to its 2016 figure. This means that Vectren’s valuation on a look-ahead basis is not meaningfully different than its valuation using last years earnings.

Vectren appears slightly overvalued using the price-to-earnings ratio and investors would do well to wait for a better price to accumulate shares.

You can read more Sure Dividend analysis on Vectren at the following link:

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Final Thoughts

The Dividend Kings list quickly shows many of the strongest, most long-lived businesses around. You can see more high-quality dividend stocks in the following Sure Dividend databases:

Alternatively, another great place to look for high-quality business is inside the portfolios of highly successful investors.

To that end, Sure Dividend has created the following stock databases:

You might also be looking to create a highly customized dividend income stream to pay for life’s expenses.

The following two lists provide useful information on high dividend stocks and stocks that pay monthly dividends:

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