Thursday, January 31, 2013

Stocks with Over 100 Years of Uninterrupted Dividends (Part II)

In addition to capital gains, a dividend is an important source of income for investors. There are several businesses that have long histories of dividend payments that are worthwhile for investors to hold for a very long time. Following my recent article featuring three such businesses, which have been paying uninterrupted dividends for more than a century, I will unveil two more stocks with similar characteristics.
Utility Company, A Great Income Stock
Consolidated Edison (NYSE: ED) is an energy provider holding company with different services including electricity, natural gas, and steam delivery in New York City, Westchester County, northern New Jersey, northeastern Pennsylvania, and other areas. In the utility business, investors would expect that it produced stable earnings and cash flow over time. Thus, the company could be in a good position to leverage on its predictable business, and the dividend would be quite sustainable.
Consolidated Edison has paid dividends continuously since 1885, meaning that the dividends have been uninterrupted for the last 127 years. In the last 10 years, it has consistently and gradually raised its dividend, from $2.22 per share in 2002 to $2.40 per share in 2011. The current dividend yield is high, at 4.4%. It seems that the company has a large amount of debt, but the capital structure is quite reasonable. As of September 2012, it had more than $11.4 billion in stockholders’ equity, more than $11 billion in total debts, short-term and long-term, and $3.24 billion cash. At the current price of $55.54 per share, the total market capitalization is $16.27 billion. The market is valuing the company at 12.1x forward earnings, and 1.4x book value.
A Global Coatings Company, Too
PPG Industries (NYSE: PPG) is another candidate for the 100+ years uninterrupted dividend stock list. It was incorporated in 1883 and is considered to be the global leader in protective and decorative coatings provider. The two major revenue sources for the company were Performance Coatings and Industrial Coatings, bringing in $4.63 billion and $4.16 billion, respectively. Those two segments also brought the majority of income back to PPG Industries, with Performance Coatings taking in $673 million and Industrial Coatings making $438 million.
...And Growing Bigger
Recently, with the purchase of North American Decorative Paint business from Azko Nobel(NASDAQOTH: AKZOY), PPG became the world’s leading in coating maker, thanks to the additional 600 AkzoNobel paint stores and 1,000 stores in the North American network. It seems that PPG was getting the bargain, as it only paid $1.05 billion, at a valuation of only 0.7x P/S. PPG used a bit of leverage in its operations.
As of September 2012, it had $3.86 billion in total stockholders’ equity, $3.37 billion in long-term debt, $636 million in short-term debt, and more than $2 billion in cash. In addition, it also booked more than $2.2 billion in pensions and other benefits, pushing its total liabilities up to nearly $11.745 billion. However, the interest coverage is still quite comfortable at 11.6x, thus, the operating income is more than enough to cover its interest expenses.
PPG has paid dividends uninterruptedly since 1899, making a record of 113 years. The current dividend yield is 1.7%. In the last 10 years, long-term shareholders also enjoyed the consistently growing dividends, from $1.70 per share in 2012 to $2.26 per share in 2011. PPG Industries is trading at $135.35 per share, with the total market capitalization of $20.76 billion. The market seems to price PPG Industries at a bit expensive valuation, at 17.2x forward earnings and 5.4x book value.
My Foolish Take
Consolidated Edison and PPG Industries, with their long histories of dividend payments, continue to return cash to shareholders via increasing dividends over time. Those two stocks should be in an income portfolio of patient investors. In the next part, I will talk about two more stocks that also paid uninterrupted dividends for a century. 

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