Cash Flow Kings With Rising Dividends
by John Bajkowski
Investors continue to seek out dividend income from common stocks even as the uncertainty about future dividend tax rates weighs on people’s minds. The 15% maximum rate for qualified dividends is set to expire at the end of this year unless Congress and the president act. However, the environment of low interest rates coupled with the relative stability of high-yield stocks during market downturns keep dividend-paying stocks on investor’s shopping lists.
The First Cut seeks out domestic, exchange-listed stocks that have consistently raised their annual dividend payment over the last seven years while maintaining positive free cash flow over each of the last seven years. Financial stocks were excluded because their financial statements are not comparable with firms in other industries.
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Cash flow is fundamentally different from earnings. Earnings are determined using principles of accrual accounting, while cash flow measures the direct consumption and generation of cash. The First Cut screens for positive free cash flow, which is calculated by examining cash flow from operations (a measure of a firm’s ability to generate cash from day-to-day operations) and then subtracting capital expenditures and dividend payments. Free cash flow is considered to be excess cash flow that a company can use as it deems most beneficial. Strong free cash flow provides financial flexibility to increase dividends, develop new products or services, enter new markets, pay off debt, or buy shares back.
The 30 stocks with the highest dividend yield (annual dividend payment divided by price) and with a current dividend yield above their average yield of the last three years made the First Cut. The historical growth rates and the consensus earnings growth rate estimate measure past and expected company performance. The 52-week price change highlights recent stock market performance.
|
Company (Ticker) |
Div Yield |
Ind Div ($/Sh) |
Free Cash Flow ($/Sh) |
Annual Growth Rate (%) |
Share Price (10/15) ($) |
52-Wk Price Change (%) |
|||||
|
Current (%) |
3 Yr Avg (%) |
Historical |
Est EPS 3-5 Yr |
||||||||
|
Div |
Free Cash Flow |
EPS |
|||||||||
| Description | |||||||||||
| Courier Corp. (CRRC) | 5.3 | 3.9 | 0.84 | 0.77 | 20.5 | 59.2 | -28.5 | na | 15.82 | 8 | book manufac'g & publishing |
| Lockheed Martin Corp. (LMT) | 4.3 | 2.2 | 3.00 | 5.28 | 23.2 | -12.1 | 10.3 | 8.5 | 70.02 | -6 | advanced tech sys & prods |
| Kimberly-Clark Corp. (KMB) | 4.0 | 3.8 | 2.64 | 2.40 | 7.0 | 36.0 | 11.6 | 8.3 | 66.38 | 12 | personal & healthcare prods |
| Watsco, Incorporated (WSO) | 3.7 | 3.6 | 2.08 | 1.52 | 25.8 | -8.5 | -22.0 | 15.3 | 56.80 | 7 | air-cond, heat & refrig equip |
| Johnson & Johnson (JNJ) | 3.4 | 3.0 | 2.16 | 3.61 | 9.7 | 8.8 | 5.7 | 6.3 | 63.57 | 4 | healthcare prods |
| Abbott Laboratories (ABT) | 3.3 | 2.8 | 1.76 | 3.28 | 10.7 | 19.1 | 48.8 | 9.7 | 53.17 | 2 | healthcare prods |
| Automatic Data Processing (ADP) | 3.2 | 3.1 | 1.36 | 1.55 | 15.3 | 19.0 | 9.5 | 10.6 | 42.94 | 5 | business outsource solutions |
| National Semiconductor Corp. (NSM) | 3.1 | 1.7 | 0.40 | 1.15 | 31.7 | -5.5 | -8.1 | 7.3 | 13.04 | -11 | integrated circuits |
| Procter & Gamble Company (PG) | 3.1 | 2.7 | 1.93 | 4.19 | 12.0 | 10.9 | 7.5 | 8.8 | 62.76 | 10 | consumer pkgd goods |
| Campbell Soup Company (CPB) | 3.0 | 2.9 | 1.10 | 1.10 | 10.5 | 139.6 | 6.6 | 6.5 | 36.61 | 13 | convenience food prods |
| PepsiCo, Inc. (PEP) | 2.9 | 2.6 | 1.92 | 3.42 | 15.3 | 7.5 | 4.1 | 8.9 | 66.68 | 6 | food, snacks & beverages |
| Analog Devices, Inc. (ADI) | 2.8 | 2.7 | 0.88 | 1.80 | 12.6 | -14.4 | -15.3 | 16.0 | 31.67 | 12 | integrated circuits |
| Colgate-Palmolive Company (CL) | 2.8 | 2.2 | 2.12 | 3.35 | 11.2 | 39.4 | 21.1 | 9.1 | 75.89 | -4 | consumer pkgd goods |
| Medtronic, Inc. (MDT) | 2.7 | 1.7 | 0.90 | 2.52 | 23.1 | 15.1 | 5.0 | 9.2 | 33.29 | -10 | medical therapy devices |
| General Dynamics Corp. (GD) | 2.6 | 2.1 | 1.68 | 4.70 | 18.2 | 11.1 | 13.9 | 7.8 | 63.93 | -5 | aviation & weapon sys |
| McGraw-Hill Companies, Inc. (MHP) | 2.6 | 2.5 | 0.94 | 2.68 | 7.2 | 3.2 | -1.0 | 5.6 | 35.54 | 20 | information servs provider |
| Pool Corp. (POOL) | 2.5 | 2.3 | 0.52 | 1.49 | 8.2 | 39.3 | -39.3 | 15.0 | 20.76 | -12 | swimming pools; leisure prods |
| Brady Corp. (BRC) | 2.4 | 2.3 | 0.72 | 2.63 | 7.7 | 19.4 | -8.2 | 8.0 | 30.40 | 7 | facility & cable ID; bar-codes |
| Weyco Group, Inc. (WEYS) | 2.4 | 1.8 | 0.64 | 1.45 | 20.2 | 128.1 | -15.0 | na | 26.23 | 17 | men's footwear |
| Cardinal Health, Inc. (CAH) | 2.3 | 1.8 | 0.78 | 4.51 | 21.5 | 35.5 | -7.2 | 9.2 | 33.22 | 19 | healthcare prods & servs |
| L-3 Communications Holdings (LLL) | 2.3 | 1.4 | 1.60 | 9.68 | 23.1 | 10.7 | 21.7 | 8.8 | 71.05 | -6 | aircraft maintain contractor |
| Strayer Education, Inc. (STRA) | 2.3 | 1.0 | 3.00 | 5.78 | 28.5 | 35.9 | 28.2 | 17.7 | 131.48 | -42 | academic programs |
| United Technologies Corp. (UTX) | 2.3 | 2.2 | 1.70 | 3.95 | 14.7 | 5.8 | 3.6 | 10.4 | 74.10 | 15 | high-tech aerospace servs |
| Harris Corp. (HRS) | 2.2 | 1.8 | 1.00 | 3.76 | 26.0 | 27.7 | 19.7 | 5.0 | 44.47 | 19 | communications & info tech |
| ITT Corp. (ITT) | 2.1 | 1.4 | 1.00 | 3.19 | 24.5 | 12.6 | 9.9 | 11.7 | 47.81 | -12 | defense electronics; fluid tech |
| Martin Marietta Materials, Inc (MLM) | 2.0 | 1.5 | 1.60 | 1.84 | 16.6 | 63.3 | -28.7 | 10.8 | 79.54 | -15 | construction aggregates |
| Becton, Dickinson and Co. (BDX) | 1.9 | 1.6 | 1.48 | 3.47 | 15.4 | 23.6 | 15.7 | 9.4 | 76.13 | 11 | medical supplies & devices |
| Cintas Corp. (CTAS) | 1.8 | 1.7 | 0.48 | 1.59 | 7.2 | 24.3 | -12.3 | 10.7 | 27.36 | -7 | uniforms & document mgmt |
| QUALCOMM, Inc. (QCOM) | 1.7 | 1.4 | 0.76 | 1.60 | 16.3 | 42.9 | -12.9 | 17.0 | 44.79 | 6 | wireless telecommun prods |
| Moody's Corp. (MCO) | 1.6 | 1.2 | 0.42 | 1.82 | 12.2 | -4.3 | -13.2 | 11.1 | 26.50 | 11 | credit ratings & research |
| Source: AAII's Stock Investor Pro, Thomson Reuters, and I/B/E/S. Data as of 10/15/2010. | |||||||||||
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Discussion
this is very good article for individual investors like myself.
posted over 2 years ago by Corrie therese from California
Corrie, there is a print option for the article. It is along the left hand side of the screen after around two paragraphs into the article. The header is listed as "Print this article" and below you should find a link "Printer & mobile friendly version." that brings up version of the page with only the article.
posted over 2 years ago by John from Illinois
The annual dividend growth rates - Does the company raises dividends annually? For how long? By what percentage? For how many years have they done so?
Just some really important questions left unanswered.
posted over 2 years ago by Jerrold from Florida
Jerrold,
The criteria used for the First Cut are listed below the table of passing companies. This first cut required an increase in the annual dividend per share payment for each of the last six years. The screen did not require a minimum growth rate. The table of passing companies lists the three-year annual growth rates. The First Cut is limited to one page of the AAII Journal, so it can be difficult to detail the filters behind the First Cut.
posted over 2 years ago by John from Illinois
Having recently retired I am on the hunt for safe Dividends
posted about 1 year ago by N from Georgia
As a recent retire I am converting to dividend stocks. More information like this wuuld be appreciated.
posted about 1 year ago by Nash from Georgia
