Thursday, October 30, 2008

* If It Walks Like a Duck, Quacks Like a Duck, Then It Must Be an AFLAC (AFL) Dividend Increase and Others

When I first started dividend investing, I erroneously focused on current dividend yield. I was fortunate enough to accidentally buy some good dividend stocks and hold them long enough to figure out the "secret" of dividend investing. Dividend investing is about future yield, not current yield. It is not necessarily starting with a high-yield investment, but ending up with a high-yield investment. This usually occurs by buying investments with a moderate yield, a history of growing dividends and letting time do its job.

Here is a flock of companies that are building future yield for their shareholders by raising their cash dividends:
  • Aflac (AFL) Raises Qtr. Dividend 16.7% to $0.28/Share (2.48%)
  • Brown & Brown (BRO) Boosts Qtr Dividned 7.1% to $0.075/Share (1.71%)
  • Eaton Vance (EV) Increases Qtr. Dividend 3% to $0.155/Share (3.49%)
  • Microchip Technology (MCHP) Increases Dividend 9.4% to $0.30/Share (5.72%)
  • Airgas (ARG) Raises Qtr. Dividend 33% to $0.16/Share (2.11%)
  • Hanover Insurance Group (THG) Boosts Dividend by 12.5% to $0.45/Share (1.37%)
  • Shenandoah Telecommunications (SHEN) Increases Dividend 11% to $0.30/Share (1.42%)
  • Prosperity Bancshares (PRSP) Increases Qtr. Dividend by 10% to $0.1375/Share (1.79%)
  • Tamalpais Bancorp (TAMB) Increases Qtr. Dividend 9% to $0.06/Share (2.34%)
  • Arrow Financial (AROW) Increases Qtr. Dividend by 4% to $0.25/Share (4.21%)
After running these companies through my D4L-PreScreen.xls model, EV with a NPV of MMA Differential of $87,621 justifies an more complete evaluation. MCHP has a large NPV of MMA Differential, which usually begs the question can it sustain its dividend. AFL is a stock that I own and am currently accumulating. BRO ($2,027) had a positive NPV of MMA Differential, but fell short of the $3,000 I look for from a company that is a Dividend Aristocrat. None of the others achieved the necessary NPV of MMA Differential to justify a full evaluation.

Disclosure: Long AFL.