There is an old Wall Street maxim that the safest dividend is the one that’s just been raised. Which is why if you’re not familiar with Dividend Achievers, you should be.
You can always find that occasional company that continued raising its dividend right up until it cut it (Kinder Morgan (NYSE:KMI) in 2015). But generally speaking, it’s safe to say that a dividend stock aggressively raising its payout is a healthy company and one that is justifiably confident about its future.
Earnings per share can be aggressively manipulated, as can reported revenues. Even the cash flow statement can be suspect because it ultimately pulls most of its key data points from the income statement, which can be a work of creative fiction.
Paying a dividend requires actual cash on hand. And a dividend hike implies that management is confident that there will be a lot more cash coming down the pipeline to support a higher dividend in the quarters ahead.
But even when it comes to dividends, you have to look out for chicanery and focus on quality. That means paying the dividend out of real profits and cash flows, not debt or new share issuance. As forensic accountant John Del Vecchio, co-manager of the AdvisorShares Ranger Equity Bear ETF (NYSE:HDGE), says, “Dividends are a distribution of profits; a way for a company to reward its patient shareholders. But a dividend paid from debt or equity proceeds isn’t a dividend at all, but rather a return of capital. Don’t be fooled by a company returning your own money to you while calling it a dividend.”
Today, we’re going to take a look at Dividend Achievers – companies with a history of raising their annual dividends for a minimum of 10 consecutive years – that aren’t just providing token upticks. The idea is that we’re limiting our pool to stable companies with a long history of safely delivering the goods, but that also are well-positioned for growth in the immediate future.
Toro Company
Toro Company (NYSE:TTC), a maker of lawn irrigation systems and high-end riding lawnmowers, might not have a particularly sexy or interesting business, but the industry is a resilient one. Toro has raised its dividend every year since 2003 – the one asterisk is that it kept the quarterly payout level in 2008 amid the market meltdown, but paid more on an annual basis than it did the year prior.
At the end of 2017, Toro raised its dividend by 14%. This followed a nearly 17% dividend hike the year before. Over the past 10 years, the stock has raised its dividend at an annual clip of nearly 20%. The 1.3% current yield might not be exceptionally high, but whatever the stock lacks in yield it more than compensates with dividend growth.
In Toro, you’re getting an aggressive dividend grower backed by strong demographic trends. With the Millennials starting to nest, that high dividend growth should continue for a while.
“As Millennials move through their adult lives, they’ll hit all the familiar milestones, forming families, having children, and putting down roots,” says Rodney Johnson, co-founder of economic forecasting firm Dent Research. “The transition will add growth to our economy as they fundamentally change their spending, moving from lattes to lawn care. Nothing says ‘I’m a homeowner and I’m proud!’ quite like lawn equipment!”
To read the remainder of this article, please see 7 Dividend Achievers With Big Income Potential
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