A while back I wrote a blog post titled, “Dividend Aristocrats You Never Heard Of.” The point of the article was to introduce new and seasoned dividend investors to potential new picks for their dividend growth portfolios that get little to no attention among the financial blogging community. Sure, we already know everything there is to know about The Coca-Cola Company (KO), Johnson & Johnson (JNJ), Unilever plc (UL), Caterpillar Inc. (CAT), Emerson Electric Co. (EMR) and the like. Their dividend histories and stock performances speak for themselves.
The reality is that there are a great number of high quality dividend paying companies that exist, but for whatever reason, certain companies, that also have a great dividend paying history never get mentioned nor find themselves in various dividend growth portfolios. Among some of those names mentioned in the article were W.W. Grainger, Inc. (GWW), Bemis Company, Inc. (BMS), CR Bard Inc. (BCR) and V.F. Corporation (VFC), each of which have lengthy dividend raise histories and decent to excellent dividend growth rates too. With that being said, I’d like to do an overview of some additional dividend aristocrats that have each raised their dividends for at least twenty five years and deserve, at the very least, some consideration as a potential investment for a long term dividend growth portfolio.
One of the first high quality dividend names that seems to fall under the radar is The Sherwin-Williams Company (SHW). Founded in 1866 and based in Cleveland, OH, SHW develops, manufactures, distributes paints and coatings for commercial, industrial and retail customers. We all know there’s not much that’s too exciting about paint, except maybe watching it dry, but it’s these types of “boring” business that sometimes offer the best and most reliable returns, whether in the form of dividends or gradual capital appreciation. We all know Warren Buffett has an affinity for predicable businesses with wide moats which is why Berkshire Hathaway Inc. (BRK-A) wholly owns paint manufacturer Benjamin Moore & Co. Does paint belong in your dividend portfolio?
Currently yielding 1.09% with a low payout ratio of 24.5% based on an EPS of 10.92, SHW has a long dividend raise history going back 36 years. Based on current cash flow the dividend of SHW is considered to be safe with plenty of room for future raises. In fact, SHW has a pretty impressive ten year annualized dividend growth rate of 12.46%. The current PE of SHW stands at 25.2 which is slightly higher than its five year average of 23.6. Forward PE looks a lot more enticing at 19.0. Of course a four star rating from Morningstar doesn’t hurt either. You know the saying. Sometimes you have to pay up for quality or wait a bit for share price to come down a bit.
Another high quality dividend aristocrat is PPG Industries, Inc. (PPG). Founded in 1883 and headquartered in Pittsburgh, PA, PPG, like SHW, also manufactures coatings and specialty paints along with glass products, sealants and cleaners. Another “yawn” business that is predicable and reliable in terms of operations. PPG has a long dividend raise history going back 42 years and currently yields 1.55% with a low payout ratio of 25.1% based on an EPS of 5.73. Like SHW, this dividend appears to be safe with further room for growth. In fact, the ten year annualized dividend growth rate for PPG is 3.88%. Not as impressive as SHW, yet still shows us consistent growth over multiple decades. From a valuation perspective, PPG sports a current PE of 23.0 which is still slightly higher than its five year average of 20.1. Forward PE for this stock looks better at 14.4.
Going back to the Warren Buffett, Berkshire Hathaway business model of buying reliable businesses that continue produce returns through all types of economic climates is furniture producer Leggett & Platt, Incorporated (LEG). Founded in 1883 and based in Carthage, MO, LEG produces various home furnishings and fixtures which include seat and bed frames, mattresses, ornamental beds, bedding products and upholstered furniture along with carpeting underlay, casters, office chairs and much more. As quoted from their web site, “Hidden products that make life more pleasant.” Sometimes, it’s these under the radar companies that produce the best returns. Of course, Warren Buffett is no stranger to the furnishing industry owning several companies in the space including, Jordan’s Furniture, Nebraska Furniture Mart, RC Willey Home Furnishings and Star Furniture. Clearly, Warren Buffett and his Berkshire Hathaway Inc. (BRK-A) see some tremendous long term value in this sector.
A closer look at LEG shows a much more enticing yield of 2.94% with a moderate payout ratio of 61.8% based on an EPS of 2.07. While higher yielding than SHW and PPG, LEG’s payout ratio still allows for future dividend raises based on current cash flow. LEG has been raising its dividend for over 43 years and has a ten year annualized dividend growth rate of 8.10%. Looking at the valuation of LEG we see another relatively expensive stock with a PE of 25.3 which is slightly higher than its five year average of 22.0. Forward PE, as with the other stocks mentioned, looks better at 18.5.
I find it interesting that the above companies still sport relatively high PE’s despite the massive market swoon from all time highs. Just goes to show that certain sectors have been hit a lot harder than others in recent months with energy and industrial stocks seemingly taking the biggest brunt of the recent sell off as a rush to high quality names became apparent. There are, of course, many other dividend aristocrats that deserve more attention but the three names above seem to have fallen off of everyone’s radar as I have not come across any of those stocks in any dividend growth portfolio.
What do you think about some of the names mentioned above? Does The Sherwin-Williams Company (SHW), PPG Industries, Inc. (PPG) or Leggett & Platt, Incorporated (LEG) deserve a spot in your portfolio? W.W. Grainger, Inc. (GWW), Bemis Company, Inc. (BMS), CR Bard Inc. (BCR) and V.F. Corporation (VFC) are already in mine. Perhaps it may be time to consider some new high quality dividend payers in my own portfolio. As always, please let me know your thoughts below.
Disclosure: Long KO, JNJ, UL, CAT, EMR, GWW, BMS, BCR, VFC
41 thoughts on “More Dividend Aristocrats You Never Heard Of”
We own stock in a competitor to Bard, Becton-Dickinson. I worked for BDX in the early 1980s and remember management reviewing any new products from Bard. We held stock in VFC at one time, but sold it and reinvested in stock that I perceived as having greater value/potential/yield (I don’t remember the specifics). VFC is a fine company, though, and we probably should have kept the stock.
I installed hardwood floors in the bedrooms this summer. (One of the perks of retirement is having time to do the things you want to do.) Long story short, I used a MINWAX polyurethane specifically made for hardwood floors and am not at all happy with it. The Behr poly I used 19 years ago was far superior, but I couldn’t find it anywhere. The MINWAX product pulled off the floor after I put painters tape down to touch up the new baseboards. The tape was only on for a couple of hours and this after the poly had over 3 weeks to dry (it is supposed to completely cure after 7 days). If it happened in one spot I would have suspected that a contaminate got on the floor, but it happened everywhere I put down the tape. Why this seemingly irrelevant story? MINWAX is a Sherwin-Williams product that we purchased in the local Sherwin-Williams store after discussing the project with the workers there. If others are having similar issues with Sherwin-Williams products, it probably indicates cost reduction programs are hurting the quality of said products. Here is a link to the product I used: http://www.minwax.com/wood-products/hardwood-floors/minwax-super-fastdrying-polyurethane-for-floors
Thanks for sharing your work experience as well as SHW’s MINWAX product review. BDX is a great company and I have held it in my portfolio for many years. In fact, I’m thinking about adding it to baby DivHut’s portfolio too as he only has one health stock, JNJ. Sorry to hear about all the troubles MINWAX caused you. As you stated, a perk of retirement is having the time to keep busy with all kinds of side projects even though some may end up being a hassle. I wonder about the quality of SHW’s products now that you mention their cost reduction programs which may have impacted product quality. In any case, the stock still has performed well and so has the dividend. Warren Buffett loves paint, and I think it’s for good reason. Thank you for stopping by and commenting.
Great post and luckily, I live in Cleveland and know all about Sherwin! Great company for sure. I’ve always had an eye for LEG and it’s interesting seeing the yield begin to creep up. Nice post DH, we appreciate it.
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Thank you for your kind words regarding the post. SHW has a pretty amazing track record which is why I’m a little surprised not to see it in any dividend growth portfolio. The stock and dividend have both appreciated nicely over multiple decades yet seems to be unloved among DGI bloggers. LEG was a new name brought to my attention. I love those behind the scenes type companies, like ITW or MMM for example. Companies that make so many products better or useful yet you never hear of them. As always, I appreciate your comment.
They are all great names, I was invested in GWW and kept looking at SHW and PPG, but unfotunately for tax reasons I had to let them go because the yield is really really low… Still pretty interesting companies there! Nice write up 🙂
You bring up an interesting point regarding the relatively low yield of SHW and PPG. I think that may be a reason why we don’t see it in more DGI portfolios. The dividend growth rates are still pretty impressive going back multiple decades but I can understand your hesitation in owning any of those stocks because of tax consequences. I’m still holding on to my GWW for the long term. The other names mentioned might be of interest to me as well in the future once I am ready to add new names to my portfolios. Thank you for your comment.
My guess as to why these companies kind of fly under the radar is because the yield isn’t quite as enticing although the growth rate sure is. Plus for most of our community we’re after dividends that can be reinvested or used to cover expenses whereas PPG and SHW seem to be much better total return candidates. But that doesn’t mean once your portfolio/dividends are well established that you can’t add some of the low yield high growth companies, because afterall they will make you money. I own companies like SBUX, V, and ROST despite their low yields because their growth is fantastic and mainly because they are flat out excellent companies.
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Always appreciate your opinion regarding dividend investments and why or why not you hold certain stocks in your portfolio. Of the three stocks you mention I like SBUX the most and can see myself adding that to my portfolio one day. I guess some of the stocks mentioned in the post do not have attractive current yields either and I know most in the DGI world are going after quality companies that have a minimum yield to help get that snowball rolling. Still, these are some high quality companies that have been paying dividends and raising them for multiple decades which certainly is a testament to their business acumen. Thank you for commenting.
As a foreigner it is not difficult to come up with Dividend Aristocrats I’ve never heard of.
For example, even companies like JNJ, PG, CAT & EMR were unknown to me, before I started this journey.
By reading a lot of blogs, you get to know this companies pretty fast though.
Thanks for highlighting companies that nobody else seem to do 🙂
Dividend for Starters recently posted…Recent buy – September 2015
That’s the beauty of reading different blogs and blogs from outside your home country. You are constantly introduced to new and different investing styles as well as companies that you may have never considered or heard of even though they are among some of the highest quality names out there. Glad to bring some new names to your radar. I appreciate your comment.
They haven’t crossed my screens yet because of the PE. I will take a closer look at them once they drop.
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Sometimes screens will never bring up some very high quality names because of some metric that was used to filter certain investments. CL, CLX, KMB and many others have consistently sold at high valuations yet provided some of the best long term gains and dividend growth despite a high PE. As always, I appreciate your comment.
I can see why these businesses never show up on people’s radars: They are so expensive! I’m waiting for a reduction in share price on them as I would love to have them in my portfolio.
LEG is something I would love to have BACK. I bought them when I started investing and sold when their P/E went above 60. Great company, but I’m okay without them for the moment. I used the profits to initiate a position in ITW.
I would love to have some SHW into portfolio as well. Paint is a great consumer staple; nice and safe and always delivering consistent returns. I once looked up Benjamin Moore to see what it’s stock ticker was. I had really wanted to diversify into one paint company. That’s when I saw they were taken. Oh well.
Great write up! And now I have to read the first article in this two parter because I don’t think I saw that one either.
ARB–Angry Retail Banker
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Remember, price and value are two different things. The reality for the companies mentioned is that they are all long term consistent dividend growers no matter their price or current value. Sure, their current yields might not be that impressive but it’s long term dividend growth that we’re really after.
Nice move from LEG to ITW. I have held ITW for almost a decade now and have no intention of selling it. It’s one of my best performers too. Glad you enjoyed the blog post and keep looking for “boring” businesses like paint that can consistently return dependable dividends. Thank you for stopping by and commenting.
Oh, by the by, I just nominated you for a Sunshine Blogger Award. It’s not an actual award. Check it out: http://www.angryretailbanker.com/2015/09/21/sunshine-blogger-award/
ARB–Angry Retail Banker
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Thank you. I always appreciate it when someone thinks of DivHut.
I’ve looked at SHW and LEG before, but did not do more than a glance due to P/E ratios. Still you are absolutely correct, they have awesome history and their track record has been inline with maintaining that. So they’re not on my buying list, but any aristocrat or one of the CCCs always deserves a look.
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While they do sport a high PE, many high quality dividend names seem to always have high PEs. I just commented to DFG, that CL, CLX, KMB and many others have consistently sold at high valuations yet provided some of the best long term gains and dividend growth despite a high PE. The bottom line is that, as you stated, any aristocrat always deserves a look. Thank you for stopping by and commenting.
Nice post. It’s good to hear about something outside the same old 20 or so companies on every DGI blog!
Financial Velociraptor recently posted…Sell Clean Energy Fuels Corp. (CLNE)
Glad you enjoyed this post. I agree that it’s nice to hear about some great dividend stocks besides the usual 20 or so that we always seem talk about. The reality is that there are many great dividend paying stocks that exist. I hope this post, at the very least, can broaden one’s potential investment ideas. Thank you for commenting.
I think a lot of it has to do with market caps. Were so used to hearing about WMT, KO, SYY, or PG in the media largely because of their size. There are a lot of great gems out there that are simply not on peoples radar because they are smaller companies. I own a few myself …
PNY – 36 Years of dividend growth ( my largest position at the moment )
WGL – 38 Years of dividend growth
TMP – 29 Years of dividend growth
UHT – 29 Years of dividend growth
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Right you are. It’s always the mega-caps that get the most attention when, in fact, there are quote a few smaller players that have just an impressive dividend growth streak as the big boys. Thanks for sharing your holdings with us. Those are some pretty impressive streaks of dividend growth for lesser known companies. Just goes to show, sometimes the more obscure can be just as good an investment as the well known. Thank you for stopping by and commenting.
Nice list of companies, DH! I’ve heard many of the companies and challenge is to select a certain set of companies within 10 or so sectors. Currently, own 52 companies and looking to add some of the new companies. Keep racing!
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Creating well diversified portfolio is always a challenge but fun at the same time as you get to go shopping for some high quality gems. You definitely have a nice size portfolio and I’m sure it’s well diversified. The question then arises of whether or not to stick to the names we all know and trust or venture into the more obscure dividend payers that have just as long a track record of raises as any of the well known names. As always, I appreciate your comment.
Nice Post. As others have mentioned there can definitely be a slowing of dividend growth with established companies, some companies have been growing dividend for over 50 years, but we aren’t going to see double digit growth like we do with younger growing companies. I think its good to diversify your holding between dividend growth companies and well established companies that may have slower growth, but offer more stability and certainty.
Well said. That’s the point of a balanced dividend growth portfolio. To aim for relative high yield stocks with lower dividend growth balanced with lower yielding higher dividend growth stocks. It’s true that past performance is not indicative of future results, but then again you can’t dismiss a company that has a dividend raise that goes back multiple decades. As you stated, established companies tend to offer more stability and certainty. Thank you for stopping by and commenting.
LEG interests me for a long time already. I like these types of companies too. Thank you for bringing more food for thoughts, I didn’t know much about the others. Worth a look!
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Glad you enjoyed the article. As I have commented, there are dozens of great companies out there besides the usual we always seem to chat about. Like you, I’m a fan of those under the radar companies that provide products and services we rarely hear about. Those “quiet” companies seem to endure practically all economic climates and have long term sustainable business models. As always, I appreciate your comment.
I never heard of any of the companies you mentioned and seem like good solid dividend paying companies. I have been always looking for good companies that are not well-known to the world as they have a full potential to reach their fair value once they become known to the world as long as they have strong fundamentals. Thanks for sharing!
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That’s the point of the article and the one I wrote a while back too; To introduce readers to potential new picks for their dividend income portfolios. As you know, we tend to talk about the same companies over and over, which is fine, but the reality is that there exists dozens of lesser known companies that have just as great a dividend history as the well known companies. I do own some of the names mentioned in my portfolio such as GWW, BCR and BMS to name a few. Happy to have brought some new names to your attention. Thank you for commenting.
Living in Pgh I am familiar with PPG, I looked into them a few times and they seemed expensive and with a low div I just forgot about it. I guess investing in SHW would be about as fun as watching paint dry, well perhaps a bit more considering their rise in stock price 😮
As you know, sometimes the most boring businesses are the most stable and provide some of the best long term returns in terms of capital appreciation and dividends returned. Of course, Warren Buffett knows a good business when he sees one which is why his BRK invested in Benjamin Moore a while back. Sometimes we have to look beyond the current yield of a stock and more at their dividend growth to balance higher yielding payers in our portfolio. Thank you for stopping by and commenting.
Glad to see LEG on your list. I bought into them a while back and they’ve been doing very well for me so far. In today’s market uncertainty, finding a comparatively safe port for the storm does take some of the stress out of the daily rollercoaster ride.
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Nice to meet someone that actually holds LEG in their investment portfolio. I have always liked “behind the scenes” types of companies like ITW for example and when I came across LEG I thought to myself that this business has all the makings of stability and continued growth going forward. You have to wonder why Warren Buffet bought into so many furnishing companies. No doubt LEG has performed incredibly well for multiple decades providing a nice return via capital appreciation and dividend growth. Still, I wonder why it isn’t found in more portfolios. Thank you for commenting.
I actually heard of both Sherwin and PPG stocks both last year, and the prices were high but reasonable. Today they are much higher, and the yield are a bit low for me. If another correction occurs I might consider PPG or LEG. Thanks for the tips.
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Always happy to bring some lesser discussed dividend stocks to the forefront. Sometimes it seems that high quality companies never go on sale as prices and value are always high. But, I always say that’s sometimes the price you have to pay for quality. I can’t remember the last time CL, CLX, PG, KMB, MMM and more were considered “cheap.” I guess the same could be said of SHW, PPG and LEG. Sure the yield isn’t too attractive on some of those names but the dividend growth has been stellar. Thank you for stopping by and commenting.
Keith, when I look at Sherwin Williams, I wonder if there isn’t an acquisition premium built into the shares? At an EV/EBITDA of 14.5x, and an EV/EBIT of 16.5x, it’s nowhere near cheap. Case in point, when Berkshire acquired Benjamin Moore in 2000, the purchase price was about $1B for EBIT of $175M, so around 5.7x? In typical Buffet form, it was a steal. It was pink sheet traded, no analyst coverage, simple annuity type business model. All of this while the Nasdaq crashed and the S&P 500 ended the year down 10% during the unwinding of the tech bubble.
Found this old Motley Fool article re: the Benjamin Moore deal (I hope the link works)
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There’s little doubt that SHW is trading at some sort of premium. Whether it’s an “acquisition premium” or some other metric that has made this stock relatively expensive, it’s the dividend that is really impressive for an under the radar stock. I always state that sometimes companies that trade at higher values don’t always make a bad buy. Perhaps, SHW is trading at a premium simply because many see it as a flight to quality. Look at other consumer staples, CL, CLX, PG, KMB and more that rarely trade at discounts. Thank you for sharing the link to the Benjamin Moore deal. I appreciate your insight.
This was a great post because I think we often get caught up on the old dividend standby’s and don’t always think a little outside the box with our investments. Especially as the value of a portfolio becomes larger, I think it is important to give some of these lesser known names a second look to avoid putting too many eggs in one basket. Thanks for the new ideas!
Glad you were introduced to some potential new names for your own dividend growth portfolio. I wrote another blog post about the same topic a while back featuring other lesser known names that have a long history of dividend growth. There are so many great names to invest in that pay dividends I am continually surprised when I read about people investing in penny stocks or some other high flying dot com that gets all the press. Thank you for stopping by and commenting.