The Madness of March and An Elite Group of Eight: Part One
Jeff is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
March is a favorite month for many reasons. One of the principal reasons is because of the madness that descends every year at this time on sports fans and basketball courts all across the country. From high school sectionals all the way to the college championships, I love what the games represent. The madness of March, like capitalism itself, allows for the best to rise and be recognized. Through hard work and preparation, diligent effort, tremendous will, heart, and sometimes a little luck, excellence rises and is rewarded. The madness of March is one of the few remaining examples of a pure competitive American spirit. No politics, no spin--pure will, effort and accomplishment. Like many others, I love it.
With that competitive American spirit in mind, there is a way to sort through the statistics and spin on countless publicly traded companies to find a few successful long-term competitors with some very impressive records. The method I'm speaking of is to look at the dividend and distribution history of a company.
These Companies aren't Sexy
Dividends, in a nutshell, are the way companies share some of the profits of their activities with their shareholders. Every quarter they send a check to the shareholder or their IRA. Some companies also have the wonderful habit of increasing the amount of those checks every year. But only a very few have the absolute distinction of increasing the amount each year for the last 50 years. Now, these companies are in no way sexy. They rarely make the "Hot Stocks" lists. They are often called stodgy, old-fashioned, or even, heaven forbid, boring. But they pay their shareholders. And they have paid them in increasing amounts for 50 or more years.
But 50+ Years of Raising Dividends is Very Sexy.
Since it's bracket, bubble and Cinderella time, I'd like to talk about these dividend companies (i.e. teams) in the terms of March Madness. I’ve broken the teams into two divisions, A & B. Division A has acceptable current yields and are at or near their 52-week highs. Call them your big conference teams “playing well late in the season” with potential to stretch their wins deep into tournament play. Division B has good current yields and are at relatively attractive prices for entry. Call them your smaller conference championship teams with potential for a few Cinderellas to emerge.
All of our Division A and B teams have raised their dividends and or distributions each of the last 50 years or more and are rated 3 stars or higher by Standard & Poor's (except for one Division B team, which has no star rating from S&P).
Allow me to present Division A:
The team formerly known as Minnesota Mining and Manufacturing.
Similar to another superstar from the Twin Cities and formerly known by some other name, 3M (NYSE: MMM) comes out of the Midwest with a deep bench and a long 102-year-tradition of success. Regardless of what kind of opposition the team faces, the strength of its bench continues to perform. On the floor or quick off the bench, the team can draw revenues from services and or products in Industrial and Transportation, Health Care, Consumer and Office, Safety, Security, and Protection, Display and Graphics, and Electronics and Communications. Supporting the team from behind the bench include wholesalers, retailers, jobbers, distributors, and dealers. As part of the powerful “DOW 30 Conference,” with a current yield of 2.4% and powering through its 52-week high on Feb. 28, 3M may be one to watch this tournament season and into the summer.
Suburban Chicago powerhouse with low expectations from “professionals.”
A team that doesn't have quite so deep a bench is the powerhouse from suburban Chicago, Dover Corporation (NYSE: DOV). Dover still has a formidable revenue generating lineup, including products and services in Communication Technologies, Energy, Engineered Systems, and Printing and Identification. Also, it set a new 52-week high recently (Feb. 22) and has a current yield of a little less than 1.9%. A Forbes “scouting report” showed that the team is still somewhat out of favor with so-called “professional” investors. As of Feb. 15 it is the 89th most shorted stock of the S&P 500, with a “days to cover” stat of 5.15. If Dover continues to move higher and those shorts get nervous, the team may make for a strong tournament showing and a great summer.
Frank, Feisty Coach and attractive yield for this long time competitor.
Possessing yet another deep bench and displaying great performance as we head deeper into tournament month is one of the many fine teams from the “show me” state of Missouri. Emerson Electric (NYSE: EMR), a diversified technology team out of St Louis, has revenue generators on their bench, including product and service providers in the fields of Process Management, Industrial Automation, Network Power, Climate Technologies and Commercial and Residential Solutions. Always frank, often entertaining, their Coach (CEO) David Farr recently lambasted the press with his Feb. 11 outburst, stating, "We are not a one-trick pony." He continued, "If I see that in writing, one more g— d— time, I'm going to tear them apart." Mr. Farr was criticizing those who had suggested his team is one-dimensional—highly successful in China but otherwise uninspiring in performance elsewhere. Pulling back just over 4% from its Feb. 19 high of $58.50, and with an attractive current yield of 2.9%, and a leader trying to prove some things to the press, Emerson is a team worth watching this spring and into the summer.
With probably the deepest bench of any of our competitors and a tradition of solid long-term performance, increasing dividends, and quality products, Procter & Gamble (NYSE: PG) is a pretty sure bet to go if not all the way, then at least as long as the madness of this bull lasts. A magnificent bench with seven revenue generating prime-time-players, including Beauty, Grooming, Health Care, Fabric Care, Home Care, Baby Care and Family Care, make PG a solid pick for any bracket. PG has a 2.9% yield, and is seeing consolidation after setting a new 52-week high on Feb. 19 at, get this, $77.77. PG and its magnificent seven revenue producers may make for a great pick for this bullish season.
We’ll talk about the Division B teams after halftime. Go ahead, order some more wings and beer, but be sure to come back!
jcbinkley has no position in any stocks mentioned. The Motley Fool recommends 3M, Emerson Electric Co., and Procter & Gamble. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!