Dividend Aristocrats You Never Heard Of

As a dividend growth investor I am always on the lookout for new investing opportunities. The financial blogs and specifically the dividend investing blogs are all teeming with great ideas and inspiration but what I have found is that some dividend stocks are more loved than others. In recent times I have noticed a lot of attention placed on TGT, ESV, ARCP, KMI and the like. While none of the previously mentioned dividend stocks are inherently bad investment choices they do garner a lot of attention on the blog sites. I can certainly understand the allure of those stocks as they are all high yielding by any measure and have stable dividends. However, I wanted to bring to your attention some stocks from my dividend portfolio that some of you may not have heard of or even considered as a dividend growth stock pick for your portfolio. For whatever reason the following dividend stocks all fell under peoples radar.

 

First, we have Johnson Controls Inc. (JCI), a consumer goods manufacturer that operates in three distinct business sectors (Building Efficiency, Automotive Experience and Power Solutions). I recently wrote about JCI as it was a recent stock purchase of mine in May and I have received several comments from people stating they never looked at or considered JCI. JCI’s building efficiency unit designs, produces, markets, and installs integrated heating, ventilating, and air conditioning systems (HVAC). It’s automotive experience division designs and manufactures interior products and systems for passenger cars and light trucks. If you ever sat in a vehicle, chances are you saw and used a JCI dashboard. Finally, the power solutions segment produces lead-acid automotive batteries and lithium-ion battery technologies for hybrid and electric vehicles. Think all the hype about Tesla’s new battery facility being built. With that being said, JCI is a very good candidate for creating a stock spin off of any one of its divisions.

 

JCI has a long history of dividend payments going back about 30 years. JCI’s payout ratio is extremely low by any measure at 28.0% which can ensure a dividend payment and even a raise in coming months. Though not a traditional annual dividend grower it does offer a consistent yield now at 2.00%. The PE is a little rich these days at 22.35 but I was light in this sector at only 2.63% of my portfolio and was looking to boost my interest in this space.

 

Next is W.W. Grainger, Inc. (GWW). W.W. Grainger, Inc. operates as a distributor of maintenance, repair, and operating supplies; and other related products and services that are used by businesses and institutions in the United States and Canada. Basically, think of GWW as your one stop shop for everything needed to run and operate any storefront, warehouse or facility. Need lighting and electrical products, safety equipment, power tools or cleaning supplies think GWW. It’s kind of like a business to business version of Home Depot. GWW is another great long term dividend grower that you rarely read about on the financial blogs. GWW has been raising dividends for well over 40 years yielding a relatively low 1.71% but has an impressive annualized dividend growth rate of over 12.0%. This is what you want to look for if you are a dividend growth investor. It’s about future dividend raises more than current yield. The payout ratio of GWW is low at only 34.2% which allows plenty of room for future dividend raises. The current PE of GWW is 22.2 which is relatively high compared to the S&P but not high relative to its peers.

 

Following GWW is Bemis Company, Inc. (BMS). BMS manufactures and sells packaging products all over the world for food, medical, pharmaceutical, personal care and electronics. Basically, if you ever unwrapped a candy bar, pulled open a foil lid from your yogurt, opened a bag of salad, ripped open toilet paper or paper towel over-wraps or ate a frozen dinner you used a BMS product. These are the types of companies I just love. The ones you never hear about, yet everyone uses their products every single day. BMS offers a decent yield of 2.70% and has been raising dividends for over 30 years. While not readily discussed on the dividend blogs either BMS does have an impressive dividend growth rate of over 10% annualized. It has a moderate payout ratio of 43.7% which allows for dividend increases in the future. The PE of BMS might be a bit high at 19.94 relative to its peers and the S&P so you may want to wait for a better entry point on this one.

 

Following BMS I want to talk about CR Bard Inc. (BCR). BCR designs, manufactures, packages, distributes, and sells medical, surgical, diagnostic, and patient care devices worldwide. Not exactly the most exciting industry but what BCR lacks in excitement it more than makes up for in its dividend history and payment. BCR currently yields, and I’ll be the first one to admit it, a low 0.60% which probably explains why it is rarely discussed among the dividend blogs. But, it currently offers a very attractive current PE of under 16 which is below the S&P and its peers and has a very impressive 40+ year history of raising dividends with a annualized growth rate of just under 10%. What BCR lacks in current yield it more than makes up for in its dividend growth. BCR also sports a ridiculously low payout ratio of 10.2% which pretty much means this stock has lots of room for future dividend increases.

 

Finally, I would like to mention V.F. Corporation (VFC). I have seen VFC mentioned a few times on the dividend blogs but like the aforementioned doesn’t seem to get the recognition as a great dividend investment. For those who are not familiar with VFC you are more than likely familiar with their brands: The North Face, Vans, Timberland, Jansport, Eastpak, lucy, Nautica, Wrangler and Lee jeans to name a few. They also supply officially licensed apparel products for the NFL and MLB. VFC currently yields 1.68% with a relatively low payout ratio of 34.0% which allows it room to grow its dividend. It has raised its dividend for over 40 years and has an annualized dividend growth rate of 9.72%. VFC’s PE currently rests at 22.6 which is low relative to peers but on the high side relative to the S&P.

 

I can see why some of these dividend aristocrats fly under the radar of many dividend investors: Current yield. But don’t let a low current yield make you miss great annualized dividend growth of around 10% or greater. That’s where the real mojo of dividend stocks comes in. Their dividend growth rates.

 

All five of these companies mentioned make great long term dividend growth investments. Just make sure you purchase when valuations are more reasonable and of course do you own due diligence.

 

Disclosure: Long JCI, GWW, BMS, BCR, VFC

31 thoughts on “Dividend Aristocrats You Never Heard Of

  1. Interesting read, and I am the first to admint that none of these stocks even made it onto my “watchlist”, mostly (because of what you already mentioned) because of the current yield. Thanks for putting them to my attention, I will spend some time the coming weeks to have a deeper look at them.

    Best,

    DW

    • Hi D&W,

      Glad you enjoyed the read. That was my main point of the article to highlight some pretty awesome dividend aristocrats that get little to no attention. I always say focus on dividend growth more so than current yield. I can understand why people gravitate to current yield but you have to consider long term inflation rates and when a stock can grow its dividend around 10% annually you know you’ll always be ahead of the inflation rate.

  2. I’ve had my eye on JCI and GWW for a while as part of my target Industrial sector investment, but looking for better entry point.

    VFC, I stay away from as people’s tastes change when it comes to fashion and its hard to stay on top in the industry. Also the fact that any upstart can disrupt the space, doesnt bode well for me to invest in them.

    BMS is something that I havent heard of – and looks very interesting…I will be reading up and researching it further. Thanks for bringing it to my attention.

    regards
    R2R

    • Hi R2R,

      Glad I could bring a “new” stock to your attention. BMS is something special that has really flown under the radar for such a long time yet has produced some pretty amazing returns in terms of capital appreciation and its very long history of dividend growth.

      Regarding VFC, I think you may be missing out on another great company that I wouldn’t necessarily call a “fashion” brand. True, it is in the clothing industry but is very different than the trendy Abercrombie & Fitch, Aeropostale or even American Eagle where fickle tastes and trends rule the day. VFC has been in business since 1899 and I would say focuses more on the “everyday” type fashion that people can afford worldwide.

  3. VFC and JCI were companies I’ve looked at before but missed out on good buying opportunities. I’ve never had the time to really dive in to BMS but it’s definitely one of those companies that everyone has touched their product before but no one knows who it is. Their stuff just kind of shows up and is boring as hell. Sounds like the makings of a great investment if the price is right. I’ll have to look into BCR because I really like the medical device/supply companies although that yield leaves a lot to be desired. Thanks for reminding me about some of these companies and bringing some new ones to my attention.

    • Hi PIM,

      VFC just had a 4:1 stock split as it continues its rise. That being said, I agree that a better buying opportunity will come for that stock. I know people don’t really like that BCR yield but it is in a great industry and has an equally amazing dividend growth rate that stays way above inflation rates. It also has a super low payout ratio so you know that dividend isn’t just safe it has lots of room for future growth.

  4. DivHut,

    Very nice writeup on those companies. With that said of course you know that I am going to disagree with you. πŸ™‚

    I know that you are not fond of MLPs and REITs because of high payouts and slower dividend growth. So let’s take a look at a couple of high yielding utilites…T and one you like SO. At a 5 % YOC, if you do nothing other that drip your shares, within about 4 years you are at 6% YOC. After about 10 years your share count is 60-100% higher and with just 2% DG you are over 10% YOC. At a 1.5%-2% YOC, even with 10% DG it will take forever to out earn these utilites. I’m not saying the overall returns will be higher with T and SO, but then we are talking about speculation instead of passive income creation.

    Just my $.02

    MDP

    • Hi MDP,

      That’s why we’re here. To discuss and agree or disagree. I don’t want you think I’m hardcore against MLPs or REITs. I have owned EPD, ETP, KMP and HCP in the past. I even owned several closed end funds for a few years, PHK & JSN. I just want to construct my current portfolio for the long term (25 – 25 years) without having to buy and sell every year or two or three which is how I see MLP and REIT investing. Just want to make it clear that I am not against these investment vehicles. And point received regarding yield and DG for some of the stocks I mention in the article and what you mention in your comment. I guess I don’t look at yield as much as actual dollars coming to me from dividend income. As my daddy used to say, “I don’t eat percent.” Thank you for stopping by. I appreciate your time to comment.

  5. Hey DivHut,

    Interesting list.. I’ve never heard of BMS before. If I was an investor in single securities, I would definitely be looking into them.

    Thanks.

    -Ravi

    • Hi Ravi,

      I know some people don’t like investing in single securities rather ETF’s or mutual funds. While I can see the allure, i believe that an individual with some guidance and common sense can construct their own”fund” by buying a collection of high quality stocks without paying yearly fund fees. Thank you for commenting and look at BMS again πŸ™‚

  6. JCI used to be a dividend champion, but froze for a while if I remember correctly. Dividend growth is surely ingrained in the company culture and that is the sort of trait which will serve long term investors well. I’m a big fan of BMS, except for the low dividend growth. It’s been on my watch list for a long time and I plan to add it (need a lower price) unless I can find something better from the basic materials sector.

    Anyways thanks for mentioning some companies that do not get a lot of attention!

    • Hi CI,

      Thanks for stopping by and commenting. I really like BMS too but I agree not at these levels. It’s nice to bring some needed attention to a few pretty great dividend stocks that rarely get talked about online.

  7. Sometimes the path to success is with the one less traveled. πŸ™‚ Based on the numbers you’ve provided for the stocks mentioned, they all appear to be great long term buys. Every single one have great payout ratios. Some are, however, better valued than others.

    But with very steady dividend increases, nice growth rate, low payout ratio, and a decent P/E, BMS tops the list for me. I plan to add BMS to my watch list and may have to pick up a few stocks soon.

    Thanks for sharing…best wishes on your financial journey!

    • Hi AFFJ,

      Thanks for stopping by. BMS seems to be added to quite a few watch lists from what I gathered. I thought it’s important to feature companies that have such a strong dividend history but seldom talked about online. Everyone likes the MLP or REIT sector which has its merit. I just wanted to focus on good old regular stocks this time. Thanks for comment.

  8. Hi DivHut,

    JCI have been actively selling their automotive parts business and recently announced that the Interiors division is joining a joint venture with Yanfeng Automotive, so they can remove it from their balance sheet but still keep their toe in the water. The automotive industry is very capital intensive and somewhat entrenched with preferred suppliers when it comes to growth. They still kept the battery plant and I suspect that’s going to be a growth area especially when lower emissions limits take effect in the coming years.

    I think they also sold HomeLink last year too – I had no idea that was owned by JCI. I think home automation is likely going to be a growth area along with the “internet of things” and it’ll be interesting to see what comes of Google’s purchase of Nest.
    I don’t own JCI or any of the stocks mentioned in your article, but I do appreciate you highlighting ‘stealth’ stocks that may be worth further research.

    One question for you – if you could make a ticker symbol for your portfolio what would it be? πŸ™‚

    Great job with the blog!

    • Hi DL,

      Always appreciate you stopping by. JCI will still have a piece of the Chinese auto interior business so, as you mentioned, they aren’t completely leaving the space. I do think their “battery” division holds the most promise longer term.

      As you know, a lot of the same old stocks get talked about on these blogs and I just wanted to bring some attention to the “lesser” known dividend growth stocks out there.

      Regarding a ticker symbol I’d go with a simple: DIV

    • Hi FRD,

      Happy to have introduced you to BMS. It really is a great long term dividend stock that many people never heard of and as a result do not own. It has many of the great characteristics every dividend investor looks for, yet gets little attention. Thank you for stopping by.

    • Hi Adam,

      Besides for owning a stable of some really great brands, VFC is also an amazing dividend payer with a very long history of rising dividends too. On a percentage basis it is my top performer and as I mentioned I’d love to add a lot more to my holding but not at current price/valuation. I have my eye on it for sure. Thank you for stopping by and commenting.

  9. Congrats on the great month of dividend increases DivHut. You are right, how can you complain when a company decides to increase the cash flow you are receiving from it? That s why I love investing in dividend growth companies!

    • Hi robertnus,

      Thank you for your kind words and support. That’s the whole point of dividend investing… growth and compounding over a lengthy time period to create that ever growing passive income stream. I appreciate your comment.

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