Expect Higher Dividends From These Stocks

In investing, the only way to be absolutely certain that something will happen is to wait until it actually happens. But when it comes to companies with long histories of paying higher dividends each year, counting on them to do everything in their power to keep their dividend hike streaks alive is the next best thing to a sure thing.

Respect the streak
Every year, Standard & Poor's announces its list of Dividend Aristocrats. In order to qualify, a company has to increase its annual dividend payments to shareholders every year for at least 25 years. For 2010, just 43 stocks made the list.

Being a Dividend Aristocrat carries a lot of prestige, especially lately as many investors have started to appreciate stocks that provide consistent income to their shareholders. Demonstrating an ability to maintain ever-increasing payouts over the course of several business cycles shows that a company has the financial strength not just to thrive in bull markets but to survive in tough business environments. Now more than ever, in the aftermath of 2008's financial crisis, investors want assurance that the stocks they own are stable and won't bring them any surprises.

With that reputation on the line, once companies reach the Dividend Aristocrat milestone, they have every incentive to stay on the list. But like those who file their taxes every April 15 at five minutes to midnight, a few companies are letting things go down to the wire before announcing a dividend hike in 2010.

Timing the increase
Among the Dividend Aristocrats, companies use various strategies in timing their payout increases. Many stocks set their increases for the first quarter of every year, thereby leaving no suspense whatsoever that they'll extend their streaks. But others make an annual hike in a different quarter, based on seasonal factors or just historical tradition. Still others make unpredictable dividend increases, sometimes doing so early in one year and late in another.

This year, a fair number of stocks have let things go to the bitter end. Just yesterday, Automatic Data Processing (Nasdaq: ADP  ) extended its streak to 36 years by raising its quarterly dividend from $0.34 to $0.36. Similarly, Emerson Electric (NYSE: EMR  ) boosted its payout last week by a penny, preserving a streak that goes back 54 years.

But there are still a few stocks that should be making a move in the near future:

Stock

Current Dividend Yield

Years of Dividend Increases

Becton, Dickinson (NYSE: BDX  ) 1.9% 37 years
Brown-Forman (NYSE: BF-B  ) 1.9% 26 years
Integrys Energy (NYSE: TEG  ) 5.1% 51 years

Sources: Yahoo! Finance, company releases.

Of these, Becton and Brown-Forman typically wouldn't have paid a dividend yet, so it's reasonable to expect that their next payouts will be higher. With Integrys, though, it's a different story. In October, Integrys announced that it would declare the same $0.68 dividend it had paid out during the previous three quarters, thereby leaving it in a position to end its streak. Technically, the record date for the dividend hasn't passed yet, giving the company a chance to change its mind if it wants. But given the financial trouble Integrys has gone through recently, it's a long shot to expect a special dividend at this point.

Giving up the ghost
In addition, two other stocks will almost certainly leave the list at the end of the year. For SUPERVALU (NYSE: SVU  ) , the departure comes as no surprise, as the company cut its dividend in half earlier this year.

The shocking move, however, comes from Eli Lilly (NYSE: LLY  ) , which inexplicably chose to leave its dividend unchanged when it made its fourth-quarter payout. The company is in good financial shape, but coming patent expirations may have the company wanting to preserve capital for a possible acquisition. The stock goes ex-dividend today, and unless Lilly comes through with an unexpected bonus payout, its 43-year history of dividend increases will come to an end.

No sure things
Given the panache of being a Dividend Aristocrat, you can expect Becton and Brown-Forman to come through with dividend hikes in the coming weeks. But as Lilly and Integrys show, you can't be 100% sure that your wishes will come true.

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Fool contributor Dan Caplinger loves to get bigger checks. He doesn't own shares of the companies mentioned in this article. Becton, Dickinson is a Motley Fool Inside Value selection. Automatic Data Processing and Emerson Electric are Motley Fool Income Investor recommendations. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Fool's disclosure policy has more than a streak of integrity.


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Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On November 10, 2010, at 4:34 PM, dfish wrote:

    Integrys' streak has ended, since they have declared an unchanged fourth-quarter dividend, meaning that they will have paid out the same total in 2010 as in 2009.

    A better listing is the Dividend Champions, which can be found here:

    http://dripinvesting.org/Tools/Tools.asp

    It lists 97 stocks that have current streaks of 25 years or more, plus about 130 with streaks of 10-24 years and almost 200 stocks with streaks of 5-9 years.

  • Report this Comment On November 11, 2010, at 12:25 PM, leovanzandt wrote:

    Integrys Energy is indeed a very nice stock!

    Currently number 3 in the S&P 500 Dividend Aristocrats:

    http://www.phoenixmir2.com/dividend

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