For once, we will focus today on the performance of our dividend payers. Not that this usually disinterests us, but it is rather one among others of the criteria used to judge the quality of a title. Paradoxically, contrary to the opinions of many dividend hunters, yield is not the most important criterion. Nevertheless, one can seek to obtain at some point in one's life an immediate income from a given capital.
In this case, we must ensure that this manna is not only generous, but also that it is solid over time. Since stocks are not fixed income securities (unlike bonds), it would indeed be dangerous to seek only the best returns on the market. We must therefore look for quality stocks that:
- offer above-average dividend yields
- show long-term stability in the payment of distributions
OUR portfolio offers a wide range of securities that meet the second criterion, let's see among these those which offer the best return.
- Sunoco Logistics (NYSE:SXL): current yield 4.5% (average 7.13%), 9 consecutive years of dividend increases, payout ratio 66.58%
- Consolidated Edison (NYSE:ED): current yield 4.1% (average 5.78%), 37 consecutive years of dividend increases, payout ratio 64.64%
- Legget & Platt (NYSE:LEG): current yield 4.9% (average 5.63%), 40 consecutive years of dividend increases, payout ratio 92.75%
- Sanofi (SAN.PA): current yield 4.5% (average 4.68%), 11 consecutive years of dividend increases, distribution ratio 74.40
- Kimberly-Clark (NYSE:KMB): current yield 3.9% (average 4.31%), 37 consecutive years of dividend increases, payout ratio 66.89%
As you can see, the yields on these stocks are all below their long-term averages. This means that these stocks, while offering a generous dividend relative to their price, are currently trading at a moderately overpriced. This is also generally observed on the US market at the moment, as evidenced by a total market capitalization ratio to GNP of 92.1.
The situation is nevertheless not catastrophic, the yields offered by these securities being still quite decent. On the other hand, if we had to put a small flat, it would be on Legget & Platt and Sanofi, the two companies distributing a significant part of their profits in the form of dividends. The situation is apparently less delicate for Sanofi, with a payout ratio of 74.40%, but on the other hand Legget & Platt has certainly seen others, with its 40 consecutive years of dividend increases.
These five titles are not buy recommendations. However, they may be of interest to anyone looking for a Generous immediate return and which has shown stability in the past.
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Interesting article.
I noticed that the SANOFI line was in "sold" status in your portfolio.
Can you tell us more?
Thank you. I am repeating the answer already given to Erik in the link below:
http://www.dividendes.ch/portfolio/comment-page-1/#comments
In fact it's simple, we must not forget that I am focusing first and foremost on dividends, and there for Sanofi the prospects are mediocre:
– distribution ratio of 74.40%: there is not much room left for increases, and we must hope that the profit does not fall in the future. When we reach such levels, it smells of stagnation of the dividend in the more or less short term, unless there is a significant improvement in the fundamentals.
– annual dividend growth of 5.74%, which confirms that the company is struggling to increase it
What's more, my algorithm is all the more severe with companies that have a relatively young history of increasing dividends (only 11 years), because the company has not yet been able to prove the robustness of its business model and dividend policy. Edison for example is somewhat in the same situation, but is still in "hold", thanks to 37 consecutive years of increases... that's solid.
So, despite a good yield, I think it is better at present, from the point of view of an investment in dividends, to close this position and move towards a stock which has more potential.
What's more, the stock is highly correlated to the dollar. You'll tell me that for you it's equal because SAN is listed in your currency, that's true. But a dollar that would weaken again (which is still more than likely in the long term), would make SAN's exports more difficult, which would have an impact on the company's business.
I hope I've answered your question.