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Kellogg’s Consistent Dividend – K

Kellogg Company (K) has been making products that American consumers love since 1906. The company is largely known for its cereal brands: Rice Krispies, Frosted Flakes, Corn Flakes, Special K, and Apple Jacks. Kellogg makes just about any food product that you could think of including cookies, crackers, beverages toaster pastries, cereal bars, fruit snacks, and frozen waffles. The company also owns the Keebler, Cheez-It, Murray, Austin, and Famous Amos brands.

Kellogg’s competes in the processed and packaged goods industry. This industry is dominated by a few big name market players. The company’s three largest competitors are General Mills, Kraft, and ConAgra Foods. There are several other generic brand manufacturers but their market share is not close to the larger industry bell cows. Kellogg’s is second only to General Mills in the industry in terms of revenue, net income, market cap, and number of employees.

Kellogg’s financial numbers are solid. The company generated $12.4 billion dollars in sales this year. That’s actually a 1.4% drop from the $12.5 billion dollar mark in 2009. Earnings before interest, taxes, and depreciation were $2.5 billion dollars. The company has $1.23 billion dollars in net income.

Gross margins are outstanding at 43% which outpaces the industry average of 32%. Operating margins were double the industry average of 8%, coming in at 17%. The only negative for the year was the negative revenue growth figure. Quarterly revenue growth dipped 3% last quarter due to increasing competition in the industry. This does bear watching to see if the trend continues going into 2011.

The company had 4% earnings growth for the current year and is forecasting 5% growth for next year. Earnings grew at a 7.5% rate over the past five years and should grow at 8.5% over the next five years. Those are decent numbers for a mature company with a $18.8 billion dollar market cap in a slow growth industry.

The stock trades at 15.7 times this year’s earnings and 14.7 times next year’s earnings estimate. The company trades at 1.83 times earnings growth and 1.5 times book value. All of these numbers are below the industry average. Kellogg’s stock is particularly attractive because of its steady dividend.

Kellogg’s stock pays a dividend of $1.62 which equates to a dividend yield of 3.20%. This yield is slightly higher than the historical yield of 2.60% and the company’s payout ratio of 47% is incredibly low. This demonstrates that Kellogg’s has significant room for a dividend increase.

Kellogg’s has been a solid dividend play for years. Despite the company’s earnings hiccup, Kellogg’s increased its dividend 8% a few months ago. There is no need to ever worry about Kellogg’s dividend. The company has paid its dividend for 342 quarters. Now you can see why Kellogg’s stock is a staple in the portfolios of many institutional investors and fixed income investors.

There Is Energy In PPL Corporation – Dividend Stock

You may be wondering what the initials PPL stand for. PPL Corporation (PPL) stands for Pennsylvania Power and Light. PPL Corporation is based out of Allentown, Pennsylvania and provides electricity and natural gas to over 5 million customers. PPL’s operations are not just limited to the northeast. The company recently acquired two large utility companies in Kentucky for $7.6 billion dollars and provides electric services to customers in the western United States and the United Kingdom as well.

PPL has been slowly switching its business model’s composition. The company’s acquisition of Kentucky utility company E.ON US signifies a transition towards the regulated side of the utility business. PPL has been focused more on the commodity side in years past. This will also give the company access to more markets and increase the earnings potential of the company over time.

PPL participates in the heavily regulated utilities industries. Its chief competitors are Allegheny Energy, Excelon Energy, and FirstEnergy Corporation. Excelon is the market leader with a market cap twice the size of its competitors. Although PPL may not be as large as Excelon, the company is no slouch with 22% quarterly growth rates and 27% gross margins.

PPl estimates that growth will double over the next few years due to its most recent acquisition. Analysts are looking for growth of 3.6% per annum. CEO James Miller estimates that the company can grow at a 7% annual rate once the two companies are fully integrated. PPL is on pace to earn just under $9 billion dollars for the full year and have an effective EPS of $2.86 per share. That’s due to 18% sales growth from the previous year.

Shares currently trade at 9 times this year’s earnings. That number is lower than its competitors which have double digit P/E’s. Nine times earnings is not too much to pay for a company with the future earnings growth and dividend yield of PPL. Shares trade at just 1.5 times book value. This is attractive to any value investor.

As every investor knows most energy companies are good investments because of their consistent earnings and high dividend yields. PPL is no different. The company generates $2.3 billion dollars in free cash flow and is currently paying out a dividend of $1.40 per share. That’s a 5.50% yield which is markedly higher than the 5 year average of 3.50%. The current payout rate of 75% is comparable to the company’s historical payout.

In my view, PPL’s management is setting the company up nicely for long term success. The company’s recent investments are positioning the company to be a larger player in the utilities industry with greater pricing power. PPL Corporation’s recent asset sales are increasing the company’s cash position so that the company is free to pursue investment opportunities. The strategy appears to be working as PPL is rewarding shareholders with eight consecutive years of dividend increases.

Nucor Increases Its Dividend Again

Nucor Corporation (NUE) has been around since 1940 and is the largest steel producers in the world. The company is the largest recycler of steel products and one of the largest recyclers of any metals. Nucor relies on its mini mills to efficiently melt scrap metal. Nucor operates 53 steel locations in the United States. The company has been very aggressive in expanding in recent years adding Harris Steel and DJJ to increase its reach.

Nucor’s chief competitors in the steel industry are US Steel, Mittal Steel, and AK Steel. The steel industry is a competitive marketplace with steel companies pricing power based entirely upon demand for steel products. The global recession has hit steel company stocks especially hard with most companies reporting negative earnings over the past two years. Nucor has been a shining star in a downtrodden industry.

Nucor is on pace to book $15.7 billion dollars in sales this year. That’s a 40% increase over last year’s results. Nucor is an effectively managed company producing almost the equivalent revenue of U.S. Steel with half the number of employees. The company’s great management can be seen in its fortified balance sheet and consistent operating results.

Last quarter Nucor earned a net profit of $23.5 million which resulted in earnings of 7 cents per share. This was below Wall Street forecasts of 11 cents per share. Any positive earnings growth is impressive in the steel industry due to the challenging environment. The bright spots were in quarterly sales which were up 33% and shipments which rose 10%. Unfortunately revenue was down 1%.

Nucor has the best balance sheet in the steel industry with $2 billion dollars in cash. The company has $6 per share in cash alone. Nucor generates nearly half a billion dollars in free cash flow. Margins have been depressed due to the pricing concerns. The company’s profit margin is 1.3% and operating margins are 3.7%. Return on equity and return on assets both came in at 2.7%.

Shares of Nucor currently trade at nearly 80 times this years earnings of 50 cents per share. The P/E is misleading considering that the company has faced a global slowdown not seen since the great depression. Nucor’s earnings are expected to rebound drastically and come in at $2.27 per share next year. Growth is forecast at 15% for the next 5 years which is remarkable for an industry which typically sees growth in the low single digits.

The company is a dividend darling. The dividend has tripled over the past three years and Nucor has increased its dividend 10 times from where it was back in the year 2000. The company has a history of rewarding shareholders having increased its dividend for 38 consecutive years. Nucor is currently yielding 3.50% as the company just increased its dividend to $1.45 per share last week.

Investors that want to own a piece of a great company with a growing dividend should feel comfortable buying Nucor Corporation.

Qualified Dividends

Qualified dividends are currently a subject of frequent discussion in the national news media, especially in relation to the future status of US federal government tax cuts. The IRS (Internal Revenue Service) classifies these dividends as dividends meeting certain requirements that allow them to be taxed at the lower long-term capital gains tax rate rather than the higher rate, according to an individual’s yearly income. Because Obama reached a deal with Republicans to extend the Bush tax cuts the current rates will stay in place.

For the years 2003 to 2007, such dividends were taxed at 15% or 5%, relative to the taxpayer’s income tax bracket. From 2008 to 2012, the tax rate for such dividends fell to 0% for each taxpayer within the 10–15% ordinary income tax brackets.

To satisfy the necessary criteria to be taxed at these rates, dividends must be paid on a date falling between January 1, 2003 and December 31, 2012. They must be paid by a US corporation, a business incorporated in a US possession, or a non-US corporation in a country qualified to receive benefits according to certain stipulations of a US tax treaty. Such dividends can also be paid on a non-US corporation’s stock which is eligible for trading in the US stock market. Also, the taxpayer must have held the stock for greater than 60 days during the 121-day requirement period. When calculating the number of holding days, count the day the stock was given up by the taxpayer, but not the day he or she originally acquired it.

The Bush tax cuts have been extended until 2012. Unless Congress votes to extend the Bush tax cuts (which became law during the administration of former US President George W. Bush), or passes other legislation to maintain current or similar tax rates on these dividends, these rates will change. After December 31, 2012, dividends of all types will be taxed at the rate of ordinary income, with income tax rates reverting to the rates prevailing in the year 2000. In fact, the maximum tax rate on dividends will soar to 39.6%.

The only fact that is certain today is that tax rates will increase for everyone concerned unless Congress takes action again in 2012. Decisions must be made and agreed upon by Congress and the President. Let’s hope they decide on a tax plan including multiple income brackets and qualified dividends which is agreeable with US taxpayers’ paychecks, profits (or losses), and pocket money.

A Top Dividend With A Safe Yield

The top 100 dividend stock and safe dividend lists are both out for December and it’s a communications company that is topping both lists with a rating of 98 out of 100.

Other communication competitors like AT&T and Verizon have high yields but they don’t have the strong fundamentals like this stock does.

With a yield over 6%, a dividend growth rate of 64 percent, net income growth rate of 20% and a industry return rank of 27 it makes a strong case for being a part of any dividend portfolio. The payout ratio is a little high at 90% but this company has raised dividends for over 25 consecutive years so we can be pretty confident in its safety.

There are 6 stocks that yield 5% or higher on the December safe dividend list.

A highlight from our international dividend list is a company that makes GPS products and has a yield over 5%. It has a DSO rating of 94 out of 100 with some very strong dividend fundamentals.

Our dividend newsletter for December discusses recent events like the decline in performance in the big three indexes, European debt, the Korean issue and consumer confidence. We also talk about the top performing dividend aristocrats that have been raising their dividends for 25 years or more.

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Heinz Has A Sweet Dividend

Heinz is number one in the United States when it comes to ketchup. The company is headquartered in Pittsburgh, Pennsylvania and sells over 150 food products in over 200 countries worldwide. H.J. Heinz sells mustard, relish, pickles, gravy, vinegar, prepackaged meals, sauces, and frozen food products under the Ore Ida, Weight Watchers, Bagel Bites, Boston Market, TGI Fridays, and Budget Gourmet brand names.

Heinz competes in the diversified foods segments against Conagra and Campbell Soups. Conagra Foods is the biggest competitors to Heinz’s signature brand with its Hunt’s ketchup product. Heinz is still the biggest player in the industry with its $15.5 billion dollar market cap and $10.5 billion dollars in sales. Heinz’s gross margins and operating margins are superior to all industry competitors except for Campbell Soup.

Heinz has been able to increase earnings 6.40% over the past five years and is expected to increase earnings 6.8% over the next five years. The company generates 55% of its earnings from United States, Canada, and Mexico. Heinz had a solid earnings report last quarter in which the company saw earnings grow 8.60% despite sales declining 1.2%.

The company’s management team has done a great job of spreading the Heinz brand internationally. Heinz has a wide economic moat as the company’s name is synonymous with ketchup throughout the world. Management has also done a great job of managing company assets. Return on equity is extremely high at nearly 44% and return on assets is up to nearly 10%.

The company has bolstered its balance sheet over the past two quarters increasing their cash position to $728 million dollars. Heinz also reduced its debt load from $4.7 billion to $4.4 billion dollars. H.J. Heinz generates significant amounts of free cash flow bringing in over $1.4 billion dollars this year.

Sales growth is estimated at 3 to 4% over the next year by the company and earnings are expected to grow 7 to 10% over the next five years. Shares currently trade near their 52 week high of $48.80. The stock is a bit expensive since it is currently selling at nearly 16 times earnings, 2.4 time earnings growth, and 1.5 times sales. These numbers are slightly higher than the industry average.

Heinz pays investors $1.80 per share and the stock is currently yielding 3.70%. The current dividend yield is slightly higher than the historical yield of 3.50%. The current dividend payout is 61% of earnings. Heinz has a history of increasing its dividend with the company raising its dividend 7.1% six months ago. Heinz has increased its dividend nearly 67% over the last seven years for a compound annual growth rate of 7.6%.

In my opinion Heinz is a solid investment but is a little pricey at $48. The stock would be more attractive to income seeking investors at $45 a share.

November 2010 Dividend and Stock Market Report

After two good months and a slight rally at the beginning of the month, the stock market began a slow decline that lasted throughout the month. Because the downturn started just after the elections, some experts say that the earlier rally could be attributed to Wall Street’s desire for a major change in Washington.

International factors also played a part.

Between European debt problems and the unsettled situation in Korea, some investors pulled out of the market and put their money in safer places. This theory can be supported by the fact that gold prices are rising. They were up 2.2% for the month and 26% for the year. Market analysts are hoping for a better December. Historically, the last month of the year is good more often than bad.

The Big Three are Down

Although the numbers aren’t terrible, all three indexes are slightly down for November. Luckily, the larger gains seen in September and October weren’t fully lost. The Dow Jones Industrials finished at 11,006 for a 1% loss from October’s 11,118 figure. The Standard and Poor’s 500 Index dropped only .23% to finish at 1,180 compared to 1,183 points for October. The Nasdaq Composite Index was down by .4% for the month at a 2,498 closing number compared to October’s 2,507 ending figure. For the year, the Dow is up by 6.4%, the S&P 500 is up by 5.9%, and the Nasdaq is up by 10.3%.

European Debt

Although American spending is up, this good news was shadowed by the financial problems in Europe. The European Union approved $113 billion to bail out Ireland’s banks, and many feel that Portugal and Spain will soon ask for the same type of help. In addition to contributing to the drop in the US market, problems with European banks contributed to a drop in the London market of 2.1% and a drop in the Frankfurt market of 2.2%. In contrast, the Asian markets were up. During this same time, the dollar and the yen began to gain in value against the Euro.

The Korean Issue

While the world eagerly, or nervously, awaits another move by North Korea against their southern neighbor, most market analysts aren’t expecting this situation to have a long-term impact on the stock market. Overall, China, North Korea’s most important supporter, doesn’t agree with their actions. This means that no one expects a full-blown war or even another strike although there is some support for a softer border, or no border at all, between the two countries.

Consumer Confidence

Consumer confidence for the month of November was up by a little over 4 points. While this probably has a lot to do with the approaching holiday season, retail sales are a great way to stimulate the economy. Auto sales were up with a big increase in the number of SUVs and pickup trucks pulling off the lots. With gas prices slightly up for the month, the last part is a good indication that many auto makers may have finally found a promotion that works to clear their inventory.

Dividend Paying Stocks

While dividend paying stocks were up and down in value during the month of November, they did better than most other types of investment vehicles. For the year, the leading stocks in this category, known as the Standards and Poor’s 500 Dividend Aristocrats, are up 14.33% in total returns and 10.91% in price returns.

Year-to-date, only one dividend-paying stock has eliminated their dividend program, and only three have reduced their payments. This compares favorably to the past two years where the 2009 numbers were 10 and 62 and the 2008 numbers were 18 and 30 respectively. Overall, the Standard and Poor’s 500 had 370 dividend paying stocks in November compared to 363 last year.

The current top performing Dividend Aristocrats are:

• McGraw-Hill Cos Inc from the Consumer Discretionary sector trading at $35.83
• Walgreens from the Consumer Staples sector trading at $35.67
• Exxon Mobil Corp from the Energy sector trading at $71.33
• Family Dollar Stores Inc from the Consumer Discretionary sector trading at $50.31
• CenturyLink Inc from the Telecommunication Services sector trading at $43.91
• Lowe’s Cos Inc from the Consumer Discretionary sector trading at $23.75
• Coca Cola Co from the Consumer Staples sector trading at $64.70
• Dover Corp from the Industrials sector trading at $56.80
• Automatic Data Processing from the Information Technologies sector trading at $46.11
• PPG Industries Inc from the Materials sector trading at $79.86

The Majority of the Sectors are Down For November

While some areas did fairly well for the month of November, the majority finished down for the month. The Energy sector did the best with an impressive 5.11% growth, while the Utilities industry showed the worse performance with a decrease of 3.59%. The following list details November, 2010 price return changes compared to October, 2010 by industry along with the year-to-date figures:

• Energy sector, up by 5.11% for November, up by 8.20% year-to-date
• Materials sector, up by 0.93% for November, up by 8.86% year-to-date
• Industrial sector, up by 0.77% for November, up by 15.21% year-to-date
• Consumer Discretionary Spending sector up by 2.41% for November, up by 16.95% year-to-date
• Consumer Staples sector, down by 1.35% for November, up by 6.59% year-to-date
• Health Care sector, down by 3.15% for November, down by 3.48% year-to-date
• Financials sector, down by 0.86% for November, up by 0.18% year-to-date
• Information Technology sector, down by 1.82% for November, up by 3.71% year-to-date
• Telecommunication sector, down by 1.43% for November, up by 4.38% year-to-date
• Utilities sector, down by 3.59% for November, down by 1.84% year-to-date