My market order to purchase 13 shares of BKH executed at market open today for the price of $77.00. I updated the portfolio which includes a summary by sector. The portfolio’s performance to date can be found here. These exhibits will be updated periodically and will have more meaning as the portfolio grows.
There are six Dividend Kings in the Utility sector as of the time of this writing. On the whole, the Utilities are a bit overpriced. This is partly due to the fact that they are Dividend Kings, which tend to trade at a premium to their fair value. The other reason is that with inflation at its highest level in 40 years, the markets have moved towards defensive and inflation-protected sectors such as Consumer Staples, Health Care and Utilities.
When money is tight, people can put off discretionary items such as a new car, new furniture, or the latest iPhone. However, groceries, medical care, heat, and electricity are essential. Thus, utilities have very reliable revenue streams, and this allows them to pay consistent dividends. It is no surprise then, that we have six utilities among the 45 Dividend Kings. But only one is attractively priced right now: Black Hills Corporation [BKH].
…I was kicking around on Yahoo! Finance, trying to tie back to their calculation of Beta for one of my holdings, Federal Realty Investment Trust [FRT], when I stumbled across a free article by Motley Fool on FRT. It was published on July 23rd, just a few hours before my own post where I stated my intent to acquire some shares of FRT. It’s always nice, when a respected institution confirms your thoughts on a matter. We’re on the same page with FRT.
Come back this weekend to find out which Dividend King I’ll be acquiring this coming Monday.
Probably not. I mean let’s settle down here and assume that no dividend streak could go on forever. Even if a company were to perpetually stay in business, some adverse event out of their control, is sure to happen. Something that throws their profitability so off-kilter that it is in their best interest to freeze, reduce or even suspend the dividend. There are companies that have been around in one form or another for over a hundred years. Even a few hundred years. Suppose for a moment, there is a publicly traded company who has increased their dividend every year for 50 years. What would be a realistic expectation of how many more years they could keep the streak alive? If you knew nothing about the company’s past and absolutely zero insight into the future, what would your best guess be? Might it be another 50 years?
That seems as good a guess as any. After all, if a company just raised their dividend for the 50th year in a row, it says they’re capable of a 50-year streak. Who better to go another 50 years? It would seem a bit ridiculous to make that same guess if they were just coming off a 5-year streak. It might even seem equally ludicrous to suggest that they’re only good for another 5 years. Have I convinced you that, barring any other information, going another 50 years is the best, most realistic estimate one could make?
…This past weekend, using Sure Dividend’s, Sure Analysis Research Database, I stumbled across a company with a 50-year streak of annual dividend increases whose name I did not recognize. I am pretty familiar with the complete list of Dividend Kings, and I knew this one wasn’t on the list. I contacted Sure Dividend about the inconsistency and their founder and CEO, Ben Reynolds, responded in less than 12 hours. He confirmed that it would be added to the list and surmised that it was the first non-U.S. Dividend King.
The universe of Dividend Kings is growing, and I am keeping my eye on a dozen or so that, barring any unforeseen circumstances, will make the list in the next two years. Nevertheless, it is always a pleasure to see another company make this exclusive list.
All hail Canadian Utilities Limited!
…My market order to purchase 10 shares of FRT went through at market open today for the price of $102.83. I updated the portfolio which includes a summary by sector. Obviously, these exhibits will have more meaning as the portfolio grows. These exhibits will be updated periodically.
This week’s selection is the only Dividend King representing the Real Estate sector. In fact, it is a Real Estate Investment Trust (REIT). If you have ever thought owning real estate might be a good investment but either a) don’t have the assets to acquire another property, or b) aren’t interested in the management of rentals, REITs are a great way to get in on the action. Congress legislated REITs into existence in 1960. REITs allow investors like you and I to own shares in commercial real estate portfolios – portfolios containing buildings and properties we wouldn’t be allowed to walk into, let alone acquire.
There are private REITs, public non-listed REITs, and public exchange-listed REITs. Among the last category, we have equity REITs, mortgage REITs, and equity/mortgage hybrid REITs. Equity trusts own and manage income-producing real estate. Mortgage trusts borrow money on a low rate, short-term basis and turn around and lend that money to real estate owners on a high(er) rate, long-term basis. They expect to profit from the interest rate spread and thus are highly sensitive to interest rates. Hybrids do a little of both. Why do we care?
Aside from other requirements, a REIT must pay out at least 90% of its taxable income in the form of dividends. That’s right, if they make money, they have to pass on nearly all of it to the shareholders. And Federal Realty Investment Trust has been doing it since the beginning.
…Don’t go looking for a ticker symbol, that’s not the name of a company. On my About page, I mention three simple steps for sound investing:
I have been writing a lot about investing in the Dividend Kings, but I think a little variety is nice. I will periodically share my thoughts on saving money. After all, everything hinges on that.
…The S&P 500 Index is currently yielding 1.62%. This number is often used as a yardstick for assessing the magnitude of a stock’s dividend. If it is used, it should be used only as a floor or a minimum level, as it is very misleading as an average. Here’s why.
As of the time of this writing the following companies make up the top 25% of the S&P 500:
Those percentages aren’t adding to 25%, so they’re clearly not the weights. They are the current dividend yields! Only 2 of the 7 pay a dividend and they are paltry at that.
…What exactly is Dividend Yield? According to Investopedia, the dividend yield, expressed as a percentage, is a financial ratio (dividend/price) that shows how much a company pays out in dividends each year relative to its stock price. That’s as good a definition as any, but it leaves a few details out. It makes no mention of why we calculate it in the first place. Yield helps us put every stock on an even playing field, by relating their dividend to the magnitude of their price. A company with a $10 dividend trading at $100 per share will have the same yield as a company with a $1 dividend trading at $10. The dividend yield is 10% in each case. But the devil is always in the details. Most sites use either the last day’s closing price or even the real-time, current stock price as the denominator, and that makes perfect sense. However, it’s typically the choice for the numerator that creates the greater difference in published yields for a given stock. Some will use the trailing twelve month’s paid dividend and others will annualize the last paid dividend.
My formula for Dividend Yield annualizes the most recent declared, regular dividend and divides it by the last closing price. This is the best calculation because it is both prospective and conservative. It answers the question of what a purchaser of the stock today can conservatively expect to receive over the next year. Let’s look at the same example for Lowe’s Companies, Inc [LOW] using one of my favorite locales for accurate dividend information, Nasdaq’s own website.
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