These 3 Unheralded Stocks Have Lengthy Dividend Increase Streaks
When it comes to dividend investing, the fact that a stock pays a dividend is only one part of the equation. There are other factors that investors need to consider such as the company's ability to continue paying the dividend and the ability to grow the dividend over time.
Regarding dividend growth, this is an essential component to income investing because, over the long-term, reinvestment of steadily growing payouts can make a significant difference on a portfolio's overall returns.
Really, it is simple math. Say Bob owns two stocks today, both of which yield four percent with annual dividend of $1 per share. All other factors being equal, Stock A proceeds to increase its payout by an average of eight percent per year over the next decade.
On the other hand, Stock B is not a chronic dividend raiser. Over the next 10 years, the company only commits to two or three dividend increases. Chances are that Stock A will have delivered superior returns to Bob. With that in mind, consider the following names that have lengthy dividend increase streaks that also have a tendency to fly under the radar relative to other serial dividend raisers such as Coca-Cola (NYSE: KO) and Procter & Gamble (NYSE: PG).
Mine Safety Appliances (NYSE: MSA) Pennsylvania-based Mine Safety Appliances produces health and safety products used by the military, fire departments, homeland security and other law-enforcement personnel. The company also sells its products to mining companies, such as coal producers, and weakness in that sector does represent one potential risk to the Mine Safety storing going forward.
With a market cap of $1.6 billion, Mine Safety makes for a credible addition to a portfolio that needs some small-cap dividend exposure. The payout ratio of 46 percent is not overly taxing. On the other hand, the yield of 2.5 percent is not thrilling. Still, it is worth noting that the eight percent payout increase Mine Safety delivered in the second quarter of 2012 extended the payout increase streak to 40 years. The shares have surged almost 29 percent in the past year.
SJW Corp. (NYSE: SJW) California-based SJW is about as boring of a company as an investor could hope to find. Although the company is based near the Silicon Valley, home to some of the sexiest names in U.S. business, SJW simply engages in the production, purchase, storage, purification, distribution, wholesale, and retail sale of water.
The payout ratio of 58 percent is knocking on the door of being troublesome, but what investors will really want to consider here is SJW's long-term debt/equity ratio of 1.24. That could be a sign the company is using debt sales to fuel dividend growth. SJW's dividend increase now rests at 44 years following three percent hike a year ago.
Genesis Energy LP (NYSE: GEL) Investors that are familiar with master limited partnerships (MLPs) will not be surprised to see one on this list. What may be surprising is that the MLP in consideration is not one of the group's biggest names such as Enterprise Products (NYSE: EPD) or Kinder Morgan (NYSE: KMP). With a market cap of $3.1 billion, Genesis Energy is far cry from being as big as many of the MLPs investors are most familiar with.
However, with a yield of 5.1 percent, Genesis yields 30 basis points more than Enterprise Products and 110 basis points more than Magellan Midstream (NYSE: MMP). The units have risen 31.6 percent in the past year and on top of that stellar capital appreciation, Genesis has a dividend increase streak going of 30 consecutive quarters.
This MLP's quarterly distribution has more than tripled since late 2005.
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