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Helmerich & Payne, Inc. (HP) provides contract drilling services in the oil and gas industry. The company operates primarily in the United States but also has some international operations in countries such as Colombia, Argentina, Ecuador, Tunisia, Bahrain and the United Arab Emirates.
Founded in 1920, Helmerich & Payne is one of the primary land and offshore platform drilling contractors in the world. The company has been a top industry performer for over 90 years and continues to maintain this reputation through innovation and quality service.
The company has roughly 300 U.S. land rigs, 9 offshore rigs and 29 international rigs reports as of Fiscal Year ended 2013.
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It’s no secret that the stock market has been on an upward terror over the past few years. And as prices continue to climb, many stocks are becoming less and less appealing to value minded investors as they become fair and overvalued.
As current stock valuations continue to climb, I am hearing more and more investors decide to accumulate cash since they are no longer finding any bargain or undervalued stocks worth purchasing.
But I’m hear to tell you that you don’t always have to buy undervalued bargain stocks. Dividend growth investors can and should consider investing in solid consistent industry leading companies even though they are not getting a bargain price.
Paying a fair value for dividend growth companies with solid reputations of being great companies is perfectly fine. In fact, I would encourage it. Don’t stop investing just because you can’t find any bargains. Find the fair value stocks and keep moving forward towards your investing and financial goals.
It’s OK to Invest in Fair Valued Stocks!
Recent history, due to the big stock market and economy crash of 2008/2009 has offered up some of the best investment bargains that many have ever experienced. Investors were able to pick up shares of their favorite companies at bargain basement prices.
As the years have passed since, prices have been on the rise and now the bargains are hard to come by. Sure there are still a few to find but an investor has to do a lot more digging to uncover the buried treasure. Instead, it is more common to find companies with valuations on the higher side making them not worth a current investment.
Investors became used to purchasing shares of companies at bargain prices. As prices have increased, investors are getting more and more scared to pull the trigger. Instead, many investors are shying away and instead choosing to accumulate cash waiting for the next great investing opportunity.
But I don’t believe that is necessarily the best strategy.
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Just over halfway through the year and I’m ready to do my semi annual dividend growth portfolio review.
At least twice a year, I believe you should do a full review of your dividend growth portfolio to make sure everything is going good. It’s important to review the investment decisions you make (buys and sells) to make sure you are sticking within your investing rules and process so that you can hopefully avoid making any investment errors. It’s also important to review the companies within our portfolios so that we know they are performing to our expectations and decide if we need to make any changes.
For my semi annual review, I like to compare my portfolio performance to the performance of the stock market as a whole. I like to review the buys and sells I made the first part of the year. And I also like to review the companies in my portfolio to make sure they are continuing to grow their dividends and meet my expectations.
My Dividend Growth Portfolio Performance
In order to judge the performance of my dividend growth investing portfolio, I first like to compare my results to that of the S&P 500 index. My goal is always to beat the index although I realize this won’t be possible 100% of the time.
My feelings are that I should be able to beat the index a majority of the time or else I would be better off just purchasing the index itself and not putting in the effort of researching and trading individual stocks.
However, I also have the goal of a growing passive income which owning individual dividend growth stocks provides me. Also, I enjoy the process of investing too much to just purchase an index fund. I truly enjoy the process of finding, researching and buying stocks.
But I’m competitive so I want to see how I’m doing against the S&P 500 index. Let’s take a look at my performance the first 6 months of 2014 and compare to the performance of the S&P 500.
The S&P 500 ended 2013 at 1,848.36. The market started off 2014 with a down month but it’s been climbing up each month after. The S&P 500 ended the first six months at 1,960.23. This gives the S&P 500 a return in the first half of 2014 of 6.05%. So far the market is on pace for another pretty good year.
While the S&P 500 is up to a pretty good first half of the year, I’m happy to say that the dividend growth strategy is serving me well as my own personal portfolio is beating the index by a couple percent! According to my calculations, my dividend growth portfolio has a total return of 8.77% for the first half of 2014.
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Visa Inc (V) is the world’s largest retail electronic payments network. Visa provides payment processing services to retailers as well as credit, debit and prepaid payment products. Visa also has one of the world’s largest global ATM networks which offers cash access in local currencies in more than 200 countries.
It seems more and more people continue get and use credit cards for their daily purchases. As more people use credit cards, companies such as Visa and Mastercard will benefit. Recently, for a few different reasons which will be detailed below, I decided to pick up some shares of Visa for my personal portfolio. For this reason I wanted to take this opportunity to review the dividend growth company for readers.
Dividend Growth and Current Yield
Visa Inc. had their stock IPO (initial public offering) just a few short years ago in 2008. Since the company’s IPO, they have been growing their dividend payment to shareholders every year. Visa currently has a 6 year dividend growth streak.
Visa has a dividend rate of $1.60. At the close of market on Friday July 11th, shares of Visa were selling for $217.00 per share. This gives Visa stock a current dividend yield of 0.74% (1.60/217). Many investors may be turned off by the lower dividend yield of Visa. In fact, for me the current dividend yield doesn’t meet the minimum yield of 2% I usually like to get with my dividend growth investments. But, as we’ll see later, Visa is a high growth company and I’ve decided that they can be forgiven at the present time for their lower yield.
Visa has a 5 year dividend growth rate of 45.93% compounded annually. The company’s most recent dividend increase was 40.40%. Since the company’s IPO, Visa has been growing their dividend rate like gangbusters.
It doesn’t take a genius to see that if the company can keep growing their dividend at such a high rate, the dividend can become quite significant for investors. Visa has been growing well lately and I believe they have a strong potential for growth at least through the end of the decade which I will hope continues to provide fairly high dividend growth.
Earnings Per Share Growth
Like their dividend growth, Visa has also been doing a great job growing their investor bottom line, EPS (earnings per share). In 2008, Visa announced earnings per share of $2.25. Their most recent EPS in 2013 was $7.59. The company has grown their EPS every year since their IPO. Visa has a 5 year compound annual earnings per share growth rate of 27.53%.
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This past week, I realized that I made a fairly novice mistake with my dividend growth investing. This mistake didn’t cost me to lose any money. However, I realized that I was worrying about something when in the grand scheme of things it was pointless to be worrying.
Last week, I made the decision that I was ready to make my first purchase of Visa (V) shares. I’ve been watching/interested the company for awhile and finally decided I was going to pull the trigger and add some shares to my portfolio.
I like Visa a lot. More and more people are switching from using cash to using credit cards to pay for everything they purchase. In my own house we use credit cards for everything. We are collecting points to use for air travel and as long as we pay our bills in full each month, we incur no additional interest charges or fees.
It is my belief that credit and debit card usage will continue to grow and become more popular worldwide. Visa is a dividend growth company set up to be one of the leaders in this electronic payment society.
Currently, Visa trades with a P/E ratio around 25. This is normally higher than I am willing to pay for any of my companies. However, Visa also offers high growth opportunities as they have had 5 year net income and earnings per share growth both over 20% compounded annually. I decided I was going to take the chance and pay a little higher valuation for Visa than I would normally be willing to accept on other companies.
So last Monday, I was ready to pull the trigger. But when I logged onto my brokerage account, I saw that Visa was up around 0.50% for the day. For some reason, it is difficult for me to psychologically make a purchase when a stock is having an up day. I decided I would wait until the next day when I figured the stock would come back down.
But Visa stock didn’t come back down. Instead, the stock continued to go up in price. I felt like I missed out. Last week, Visa stock climbed every day of the week for a total gain of 3.1%.
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Happy 4th of July weekend! Hopefully everyone’s having fun with their friends and family gatherings, bbq’s, fireworks and whatever else you do to celebrate!
Today I thought I’d help you figure out how to celebrate with some of your favorite dividend growth companies. Here are 7 dividend growth stocks that will help make sure you have a safe and fun holiday weekend!
Wal-Mart (WMT) - To get supplies for your holiday cookout, head on over to your nearest Wal-Mart retail store. You can buy all the supplies you need at Wal-Mart ranging from the food you’ll eat, the drink you’ll drink and the yard games you’ll want to play! Not only can Wal-Mart provide all your party needs, but they are a dividend growth company with 41 consecutive years of dividend growth!
Coca-Cola (KO) – While at the store, be sure to pick up some of America’s favorite beverages, Coke and Diet Coke. The Coca-Cola Company will help you stay hydrated throughout the day while you are having so much fun! You can enjoy drinking your Coca-Cola beverages knowing this company is a great dividend growth stock for your portfolio. They have 52 straight years of dividend growth.
PepsiCo (PEP) – If Coca-Cola isn’t your flavor, maybe you’d prefer one of the many drink choices PepsiCo has to offer. More important from PepsiCo though, don’t forget to pick up some of their famous Doritos which are sure to be a hit at your cookout! PepsiCo is another great dividend growth company with 42 years of growing dividends.
ConAgra Foods (CAG) - You can’t have a 4th of July cookout without great food. ConAgra can help make your cookout great. Try some of their Hebrew National brand hot dogs or some of their Manwich Sloppy Joe sandwiches! ConAgra has been increasing dividends for 6 years in a row.
Johnson & Johnson (JNJ) - Sometimes we have a little too much fun on the 4th! Whether you hurt yourself shooting off fireworks or maybe you have a little too much fun with the alcoholic beverages, Johnson & Johnson is here to help. Be sure to stock up on their Band-Aid brand bandages and some Tylenol for that morning after hangover! Johnson & Johnson has had 52 long years of increasing dividends!
Procter & Gamble (PG) - Unfortunately, when the fun is all over someone has to clean up the mess! Be sure to pick up some of the great Procter & Gamble cleaning products to help get your house back in clean tip top shape. Procter & Gamble has a near 6 decade long dividend growth streak. They have been paying growing dividends for an amazing 58 years!
Visa (V) - When your all done getting supplies from the store, you can use your Visa credit card to pay for it! Nothing is more American than buying stuff on credit! Whatever the cost, whip out that Visa and pay for your merchandise. Then take it home and prepare for a great time!
So get stocked up with some of these great dividend growth companies and have a great time this holiday weekend! Here’s wishing you a happy, fun and safe 4th of July!
Which dividend growth companies are helping you celebrate? Share with us in the comments below!
While June may not have had much activity in regards to dividend increases being announced, the dividend growth companies that did raise their dividends certainly didn’t shy away from large increases.
Of the 8 dividend growth companies announcing raises, 3 companies grew their rate by more than 20% and all but one announced at least a 10% increase.
Let’s check them out!
Lowe’s Companies Inc. (LOW) - Lowe’s Companies operates as a home improvement retailer with over 1,800 stores located throughout the United States, Canada and Mexico. Lowe’s Companies has a 52 year long dividend growth streak. This past June they announced a 27.78% increase in their dividend rate growing it from $0.18 to $0.23 per share.
Helmerich & Payne Inc. (HP) – Helmerich & Payne is a contract drilling company for the oil and gas industry in North and South America. They have a 42 year long dividend growth streak. Recently, Helmerich & Payne announced that they were increasing their dividend rate from $0.625 to $0.6875 per share. This is an increase of 10%.
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As dividend growth investors, the most important idea behind our strategy is investing in companies who annually increase their dividends paid to shareholders.
Therefore, there are a few important dates that dividend growth investors need to understand and be aware of while managing their portfolios.
These dates are known as the Declaration Date, Ex-Dividend Date, Record Date and Pay Date.
Let’s look at Coca-Cola Company’s (KO) next dividend as an example. On 4/24/14, the Coca-Cola Company announced a dividend rate of $0.305 per share. This dividend has an ex-date of 6/12/14, a record date of 6/16/14 and a pay date of 7/1/14.
So what exactly do these dates mean?
The declaration date is the first date out of the group. On the declaration date, the company releases a notice (press release) announcing the significant dates of a future dividend. Essentially, the company is “declaring” that they will be paying a dividend coming up soon.
On declaration date, the company will usually announce the ex-date, the record date and the payment date. The company also will typically announce the amount of dividend that they will be paying.
In the above example, Coca-Cola declared their upcoming dividend back in April 24, 2014.
The ex-date (sometimes referred to as ex-dividend date) is the day on which all shares bought or sold no longer come with the right to receive the most recently declared dividend.
If you want to receive a company’s next scheduled dividend, you must make sure to purchase the shares before the ex-date. Those who purchase shares on or after ex-date will not receive the dividend.
If you sell a stock on ex-date or after, you will still receive the upcoming dividend payment.
In the above example, Coca-Cola has an ex-date of June 12, 2014. Anyone buying the stock before June 12th will receive the upcoming dividend payment. Anyone buying the stock on or after June 12th will not receive the dividend.
Those selling their Coca-Cola shares on or after June 12th will still receive the dividend payment.
Record date is not as important a date for dividend investors to know or understand.
Shareholders who have registered ownership of a stock on or before record date will receive the upcoming dividend. In order to have properly registered shares on record date, you have to purchase the stock before ex-date.
So as long as you are purchasing the stock before ex-date, you will be a “shareholder on record” by record date and thus receive the dividend payment.
In the above example, registered shareholders of Coca-Cola Company on the record date of June 16th, 2014 will receive the dividend. All the investor really needs to know though is to purchase the stock before ex-date and then they will be on record to receive the payment.
The most exciting date for all dividend investors is the pay date. Payment date is the date the dividend checks will actually be mailed to shareholders or credited to your brokerage account.
On pay date you will receive your dividend income payment. You can then use that income to spend as you please or to reinvest into more shares of the company (or purchase some other company).
In the example, Coca-Cola will be paying their dividend to shareholders on July 1, 2014. Those who purchased the stock before June 12th will receive their dividend on July 1st.
While it’s important to understand all of the dates, the most important date for investors is the ex-date. The ex-date determines who and who isn’t going to receive the upcoming dividend.
You must own the stock before the ex-date in order to receive the upcoming dividend.
Recently I received a question from a reader asking:
“Should I invest some of my money in bonds or is it OK to put everything in dividend growth stocks?”
If you’re a frequent reader of this site, you understand that I am a dividend growth investor at heart. I love researching, reading, discussing and investing in dividend growth stocks. Dividend growth investing is the strategy that I believe offers investors the best chance for long term wealth and success.
But does that mean that I think all of our money should be invested in only dividend growth stocks?
My answer is NO.
Yes I’m a big believer in dividend growth investing. But I’m also a big believer in diversification. Not only diversification by investing in many different companies in many different industries. But also diversification by investing in different asset classes. These asset classes could be anything from stocks, bonds and real estate. Diversification is important because it helps keep our financial house secure and safe.
So the short answer is Yes, I believe you should invest some of your money in bonds.
How Much Should I Invest in Bonds?
I’ve already expressed my belief that dividend growth investing is the best strategy for building long term wealth. So obviously I’m not going to sit here and tell you to invest a large portion of your wealth in bonds.
It is my opinion that the majority of your wealth should be invested in those dividend growth companies that will continue to pay you a passive income that annually increases at a pace faster than inflation. I’m talking about the Johnson & Johnson’s, the Coca-Cola’s and the Wal-Mart’s. There are tons of great companies that will help you grow your wealth.
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I’m a big fan of the investing information website Seeking Alpha. There is quite a community of dividend growth investors that hang around the site and quite a few good articles you can read on the strategy.
When I was first learning the strategy of dividend growth investing, I spent quite a bit of time on Seeking Alpha reading the different articles. There were some authors that I felt really understood the strategy and by reading their articles I was able to mold and perfect my own method of investing.
Here are 10 Seeking Alpha authors that I believe every dividend growth investor should follow.
David Crosetti – David comes out with a few new articles every month discussing the dividend growth strategy. Newbies can learn quite a bit from his articles and his ideas. Check out this recent article about creating a dividend growth portfolio.
The Part-time Investor – The Part-time Investor is a medical professional who has found the dividend growth strategy is best for allowing him to sleep at night. Check out this article discussing the Benefits of Being Patient.
Tim McAleenan Jr. – Tim has over 450 great articles helping guide dividend growth investors. His reading really drives home the power of investing for the long term in solid blue chip companies. Here is a recent article where he talks about the 5% McDonald’s Dividend Hike.
Eli Inkrot – Eli is another young author I enjoy following. He has quite a few good ideas when it comes to investing and I tend to agree quite a bit with his ideas. Eli recently published an article discussing the idea of Wal-Mart becoming a private company.
Bob Wells – Bob authors quite a few articles discussing retirement. Many people follow dividend growth investing in the hopes of one day retiring off of their dividend income. Here is a recent article from Bob discussing his Retirement Income Business Plan.
Chuck Carnevale – Chuck is the creator of F.A.S.T. Graphs which is a really neat valuation and charting tool. Chuck writes a ton of articles on dividend investing. You can find over 350 on Seeking Alpha to learn from. Recently, he released an article discussing 20 Dividend Champions to Buy Right Now.
F.A.S.T. Graphs – F.A.S.T. Graphs is the fundamental research tool created by the above author Chuck Carnevale. You’ll want to follow F.A.S.T. Graphs because they frequently publish some pretty good stock analysis using their research tool. Check out this recent article on Microsoft.
David Van Knapp – David is one of the first authors I began following and learning from. David does a great job explaining the dividend growth philosophy in a way anyone can understand. For those that like to see examples of real dividend growth portfolios, check out David’s article My Dividend Growth Portfolio’s 6th Birthday Report.
David Fish – David Fish maintains the dividend growth champions list of dividend growing companies. He frequently posts update articles on Seeking Alpha about the lists. Here you can find his Dividend Champions for June 2014 update.
Eddie Herring – Eddie doesn’t post as often as some of the above authors but when he does the articles are classic. Check out this great article Warren Buffett, Berkshire Hatheway and Dividend Growth Investing.
Dan Mac – OK selfish plug. I have written a few articles on Seeking Alpha (though not many) and plan on starting to contribute some stock analysis more often. Be sure to follow me if you enjoy company analysis. One of my most popular articles on SA was Learning from the Avon Products Dividend Cut.
There you have 10 great dividend growth authors you should be following on Seeking Alpha. Read their articles and use them to help develop your thinking and your own investing philosophy.
Do you follow any of these authors? Are there any great ones I missed and need to know about! Share your favorites in the comments below!
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