Wednesday, September 9, 2009

* Seeding A Forest Of Dividend Stocks

In the southern U.S. where I live, there has been some controversy over harvesting forests of hardwoods and reseeding them with pines. Valuable hardwood trees such as white and red oaks, cherry, ash, yellow poplar and black walnut require decades to reach financial maturity. The southern pine reaches financial maturity in a fraction of the time, but will not yield the same price as hardwoods. Growing hardwoods is very similar to investing in dividend stocks.


What you plant or invest in today will not yield much for years to come. That is not to say progress is not seen. It is just slow and deliberate. To grow hardwoods it takes great foresight and commitment to the process. The small investments we make in quality dividend stocks each month won't yield large payments in the near-term. It will take time for the payments to grow and compound, but they will.

Consider what these six "hardwood" dividend stocks have done over the last 10 years, assuming a buy at 1999's high:

Wal-Mart Stores, Inc. (WMT) - Analysis
Wal-Mart Stores, Inc. is the largest retailer in North America. The company operates retail stores in various formats worldwide. It operates through three segments: Wal-Mart Stores, Sam's Club, and International.
  • 1999 Yield on Cost: 0.3%
  • 2008 Yield on 1999 Cost: 1.40%
  • Yield on Cost Growth: 4.8 times
  • Years of Consecutive Dividend Increases: 35
AFLAC Inc. (AFL) - Analysis
Aflac Incorporated engages in the marketing and sale of supplemental health and life insurance plans in the United States and Japan.
  • 1999 Yield on Cost: 0.5%
  • 2008 Yield on 1999 Cost: 3.4%
  • Yield on Cost Growth: 6.6 times
  • Years of Consecutive Dividend Increases: 27
McDonald's Corp. (MCD) - Analysis
McDonald's Corporation is the largest fast-food restaurant company in the world. Its restaurants serve a varied, yet limited, value-priced menu in more than 100 countries around the world.
  • 1999 Yield on Cost: 0.4%
  • 2008 Yield on 1999 Cost: 3.3%
  • Yield on Cost Growth: 8.1 times
  • Years of Consecutive Dividend Increases: 32
Nucor Corp. (NUE) - Analysis
Nucor Corporation is engaged in the manufacture and sale of steel and steel products. As the largest minimill steelmaker in the U.S., Nucor has one of the most diverse product lines of any steelmaker in the Americas.
  • 1999 Yield on Cost: 0.8%
  • 2008 Yield on 1999 Cost: 8.3%
  • Yield on Cost Growth: 9.8 times
  • Years of Consecutive Dividend Increases: 36
Lowe's Companies, Inc. (LOW) - Analysis
Lowe's Companies, Inc. and its subsidiaries operate as a home improvement retailer in the United States and Canada. The company offers a range of products and services for home decoration, maintenance, repair, remodeling, and property maintenance.
  • 1999 Yield on Cost: 0.2%
  • 2008 Yield on 1999 Cost: 2.0%
  • Yield on Cost Growth: 11.0 times
  • Years of Consecutive Dividend Increases: 47
CenturyTel Inc. (CTL)
CenturyTel Inc. provides a range of telephone services in 25 states, with operations concentrated in Alabama, Arkansas, Louisiana, Missouri and Wisconsin.
  • 1999 Yield on Cost: 0.4%
  • 2008 Yield on 1999 Cost: 4.4%
  • Yield on Cost Growth: 12.1 times
  • Years of Consecutive Dividend Increases: 36
When the time comes to enjoy the fruits of your labor, the steady stream of dividend income will delight the investor. When money is not an issue, few people would say, "That's a nice cherry bedroom suite. Do you have anything in pine?"

Full Disclosure: Long WMT, AFL, NUE, MCD, CTL. See a list of all my income holdings here.

(Photo Credit)

Tags: [AFL] [CTL] [LOW] [MCD] [NUE] [WMT]

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