America's Oldest Dividend Paying Stocks - Part 4
In Parts 1-3 of this series we listed the oldest dividend paying stocks in the U.S., and profiled four of them - York Water - (YORW), DuPont - (DD), Lorillard - (LO), and Valspar - (VAL). In this final article we'll profile two additional companies worth looking into: Colgate-Palmolive (CL), and John Wiley & Sons (Once again, here are the members of this "Old Timer's Club":
LORILLARD - 1760 - Consumer Goods
BANK OF NY ? 1784 - Bank
CIGNA - 1792 - Insurance
WASHINGTON TRUST - 1800 - Community Bank
DUPONT - 1802 - Industrial Diversified Chemicals
COLGATE-PALMOLIVE - 1806 - Consumer Goods
VALSPAR - 1806 - Industrial
JOHN WILEY & SONS - 1807 - Publishing
HARTFORD GROUP - 1810 - Insurance
CITIGROUP - 1812 - Bank
YORK WATER - 1816 - Utility
Colgate-Palmolive (CL), is a member of the prestigious S&P Dividend Aristocrats group, having increased its dividend payouts 47 years in a row. (This group requires a minimum of 25 consecutive years of increasing dividends ).
CL concentrates on 4 areas: Oral care, Personal care, Home care, and Pet nutrition. It has seen robust growth in Latin America, which contributed 26% of the March 2009 quarter's sales. CL enjoys a dominant market share there in toothpaste, and manual toothbrushes, and has also seen its market share increase in other categories, such as: liquid cleaners, mouthwash, soaps, dishwashing detergents.
The company recently completed a 4-year restructuring program that should help it maintain consistent earnings growth.
Within its Consumer Staples - Household Products peer group, CL is second in size only to giant Procter & Gamble (PG). Its 2.39% dividend yield puts it at the low end of the 7 stocks that pay dividends within this group. Its current dividend payout ratio is a conservative 41%.
Currently selling at $73.65, its sitting just 8.5 % below its 52-week high of $80.49. Like P&G, CL is often used as a defensive stock, since it has quite a low beta of approximately .54. (If you look at a comparative chart of CL vs. the S&P 500, you'll often see inverse movements).
Since it has average implied volatility, (around 25), CL's options aren't very juicy. For example, selling a January 2010 $75 call, (CLAO), would pay $3.80, an additional 5.2%, for just under 6 months.
By selling covered calls, you'd also collect $.88/share in dividends prior to expiration, which adds another 1.2% to your 6-month yield.
Your third potential for profit here is if your shares get assigned, which would net you an additional $1.35 - ($75 strike price less your $73.65 cost basis).
Conversely, if you were afraid of a pullback, you might consider selling puts. The January 2010 $70.00 put ,(CLMN), is currently $3.20, which would give you a breakeven of $66.80, which is just below this stock's 52-week median price.
John Wiley & Sons, (JW/A), is a very old publishing company, which operates in three segments: Scientific, Technical, Medical, and Scholarly; Professional/Trade; and Higher Education.
It was recently downgraded by JP Morgan, and has a modest dividend yield of 1.72%, ($.56/share).
Debt/Equity:1.60%
Long term Debt/Equity:1.47%
Currently, the March 2010 $35.00 call, (KQWCG), is at $2.10, a 6.46% premium over JW/A's current $32.49 share price. You'd collect an additional $.28/share prior to expiration.
In addition, if your shares were assigned/sold, you'd gain another $2.51/share, ($35 strike price less $32.49 share cost), which is a nice 7.72% potential assigned gain.
Static Yield: $2.38/share 7.33%
Potential Assigned Yield: $2.51/share 7.72%
Total Potential 8-month Yield: 15.05%
Although this 15% + yield looks pretty tasty for a mere 8 months' investment term, you'd be well-advised to dig further into JP Morgan's reasons for the new downgrade on Wiley.
This article is written for informational purposes only, and author will not be held responsible for errors, omissions, or acts by third parties as a result of reading this article.
About the Author:
Robert Hauver publishes The Double Dividend Stock Alert. a monthly newsletter that features "high yield investing for low risk investors". If you're looking for "the place where high yield meets low risk", visit: www.DoubleDividendStocks.com