Four Dividend Machine Criteria
Three % Dividend Yield
EPS greater than Dividend
Dividend Increases every year since at least 2007
D/E ratio 1 or less or industry standard.
My hunt for dividend income leads
me to the dividend news column in the Wall Street Journal. (This column is published Tuesday through
Saturday.) Lately each time I review its list of companies that have increased
dividends, I am amazed at how many are on that list. Yet, few of those companies meet the
demanding criteria of “Dividend Machine” status.
I am adding Cincinnati Financial
Corporation, symbol CINF, to my 2013 dividend machine list because it has an
excellent history of dividend increases.
Read on to see why this company qualifies as a dividend machine and why
I will add to my position.
Dividend Increases
S&P reports that dividend
increases in the fourth quarter of 2012 numbered 1,262 companies. In 2011 only 649 companies increased their
dividend. One can speculate why so many
more companies increased in 2012 but it does not matter why. What is most important to income investors,
and especially to investors who use dividends for part or all of their income,
is that we have more choices from which to pick.
Regular dividend increases are
vital for income investors. Just look
back 10 or 20 years and measure the cost of a car, milk, your utilities, or
house maintenance; they are all up and up a lot. Few
older dividend investors have a mortgage so we do not benefit from low interest
rates. Our expenses go up every year;
therefore, our dividend income has to go up every year.
CINF has a proud history of
dividend increases. In fact, CINF
sports a fifty three year history of annual dividend increases.
Cincinnati Financial Corporation
Dividend Machine Fundamentals
On Friday, February 15, 2013,
CINF closed at $44.84. If you own it by
March 20, 2013 (ex-dividend date is March 18, 2013) you will be paid a
quarterly dividend of $.4075 per share on April 15, 2013 for a yield of
3.65%. So we know CINF meets our
minimal dividend yield criteria.
CINF’s last four quarters of
earnings were $2.23. Dividends paid out
during that same four quarters were $1.615 per share. In 2013, dividends should equal $1.65 per
share. CINF makes more money than it
pays out.
DIVIDEND MACHINE
|
2/19/2013
|
Cincinnati
Financial Corp.
|
CINF
|
Price when profiled
|
$44.84
|
Last 4 Qtrs Earnings
|
$2.23
|
Last 4 Qtrs Dividends
|
$1.62
|
Current Qtr Dividend
|
$0.41
|
Annualized Div Yield
|
3.64%
|
No. Years Div Increase
|
53 years
|
Debt/Equity ratio
|
0.17
|
As noted above, CINF has
increased the dividend every year for fifty three years. Finally CINF, which is a property and
casualty insurer, has a very solid balance sheet. Their D/E (debt to equity) ratio, which is
simply a measure of how much debt they have, is only .17 which is well below
our maximum debt ratio of 1.
Add to My Position
Consider CINF for the dividend
income portion of your portfolio. I
have owned this company since August of 2012 when I found it on my dividend
machine hunt. I want to put some money
to work, but all dividend producing companies are getting expensive. Therefore, I need to make sure that I have a
good chance of increasing the income my investment delivers just in case I buy
too high.
TheMoneyMadam
