6 Dividend Companies Losing their Streaks

Karin is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.

There are many dividend-paying companies out there from which to choose for your portfolio, and one of the methods many people use to help narrow down the list is the length of time that a company has been paying and raising dividends.

David Fish, from dripinvesting.org, keeps a comprehensive worksheet updated with many dividend-paying companies.  He separates them into three categories: Dividend Champions, which are companies that have 25+ years of paying and raising dividends; Dividend Contenders, which have 10-24 years; and Dividend Challengers, which have 5-9 years. The key to these lists is not only the fact that the companies have not cut their dividends, but that they are actually raising them every year.

David seems to give these companies a bit of breathing room, because he is permitting some of them to maintain their streaks, even though their last raise was in 2010. He said that he is giving them until Dec. 31 to redeem themselves and rescue their streaks.

There are currently 6 companies on David’s list that are going to lose their dividend streaks if they don’t raise their dividend by the end of December. It seems to me that if you have any of these companies in your dividend portfolio, you should be looking to replace them as soon as you can find a better company.

And I believe there are many better companies.

Knight Transportation (NYSE: KNX) is the first company in danger of losing its streak. The company is currently trading at approximately $15 per share and yields 1.6%.  It has been paying and raising dividends for 7 years, but currently has not raised its dividend since Q2 2010. Knight is considered a Dividend Challenger, since its streak is under 10 years. It has already declared its dividend for 4Q and it is maintaining it at $0.06 per share, which has been the norm throughout 2011 and 2012. The refusal to increase its dividend is a bit surprising, actually, since its payout ration is a low 30%.

However, Knight has actually declared a special cash dividend of $0.50 that is separate from its regular quarterly dividend of $.06. David does not consider a special dividend to be an actual raising of the dividend, so I believe he will be removing Knight from his list with the next monthly update

First Capital (NASDAQ: FCAP) has been paying and raising its dividend for 10 years, making it a Dividend Challenger. However, it has not raised its dividend since Q3 2010. There is still a chance that it will raise this year, since it has not yet announced its 4th quarter dividend.

First Capital is trading at approximately $20 per share, and its yield is 3.6%, with a 56% payout ratio.

Strayer Education (NASDAQ: STRA) has been paying and raising its dividend for 8 years, which makes it a Dividend Challenger. Its annual dividend is 8.2%, which is extremely attractive, with a 54% payout ratio.  But the company has not raised its dividend since 4Q 2010, and it is not raising it for 4Q 2012, which has already been declared. The company was aggressively raising its dividend up to that point, and its 5-year dividend growth rate (DGR) is a hefty 30.4%, but I believe the company’s streak ends here.

Shares of Strayer are down nearly 50% over the past twelve months, which is one reason for its high yield. Don’t let the high yield and the excellent DGR fool you. This is not something you want to be holding in your dividend portfolio.

Citizens Holding Company (NASDAQ: CIZN) has been paying and raising dividends for 11 years, which makes it a Dividend Contender. Citizens is another company that has not raised its dividend since 4Q 2010, keeping it flat for all of 2011 and 2012. It is currently yielding 5.0%, with a 62% payout ratio.  The company has not yet declared its Q4 dividend, so there is still a chance that it will raise it and maintain its streak.

Lake Shore Bancorp (NASDAQ: LSBK) has a 6-year history of paying and raising dividends, making it a Dividend Challenger, and it yields 3.7% with a 57% payout ratio. But the company just declared its 4Q dividend, and it cut the payout from $.07 per share to $.04. Therefore, this company is definitely off the Dividend Challenger list.

Avon Products (NYSE: AVP) has a 22-year history of paying and raising dividends, which makes if a Dividend Contender, and just a few years short of Dividend Champion status. Avon’s dividend has been in danger for quite a while, as its payout ratio was running at 161%, and weak earnings have made it impossible to keep up. Avon just declared its 4Q dividend, and it cut from $0.23 per share to $0.06 per share, a 73% decrease. It was yielding 6.5%, but the yield has decreased to 1.7%. Avon is also off the Dividend Contender list.

If you have any of these companies in your portfolio, I urge you to sell and replace them with something much better. Check out some of my other articles for companies that I recommend.

I am constructing a model dividend portfolio with all of my best recommendations, which I expect to introduce in late December or early January.

khern0203 has no positions in the stocks mentioned above. The Motley Fool has no positions in the stocks mentioned above. Motley Fool newsletter services recommend Strayer Education. 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!

blog comments powered by Disqus

Compare Brokers

Fool Disclosure