Editor’s Note: This article has been amended to correct Dupont’s dividend history. Motley Fool apologizes for the error.
Many dividend-seeking investors like to screen for sky-high yielding companies when looking for their next possible investment opportunity. While there is nothing inherently wrong about this strategy, high yields alone can often mean little if the company lacks the financial strength to maintain and continually increase their dividend payouts. Some of the most consistently well-performing companies have been those who value dividend appreciation. And in the world of consistent dividend payers, few are more consistent than companies with more than a hundred years of dividend payments.
Hundred Years of Baking Soda
Church & Dwight Co., Inc. (NYSE:CHD)’s management team has done a wonderful job of positioning the company to be able to pay out a dividend for another 112 consecutive years. If you looked at the company 10 years ago, you would hardly recognize it. A decade ago, Church & Dwight Co., Inc. (NYSE:CHD) was a company with just one signature brand (Arm & Hammer) and sales almost entirely from the United States. Today, Church & Dwight has seven additional “Power Brands” (OxiClean, Trojan, Nair, Spinbrush, Orajel, First Response and XTRA) and receives 18% of its sales from overseas. With seven of their eight Power Brands (all except XTRA) occupying the No. 1 position in their respective product categories, and management’s increased emphasis on international sales, current investors should be very optimistic about the future growth of Church & Dwight Co., Inc. (NYSE:CHD).
Hundred Years of Chemicals
E I Du Pont De Nemours And Co (NYSE:DD) is a true superstar in the world of dividend-paying companies. E I Du Pont De Nemours And Co (NYSE:DD) has demonstrated an impressive long-term commitment to dividend appreciation.
Like all chemical companies, E I Du Pont De Nemours And Co (NYSE:DD) is partially at the mercy of the price of various hydrocarbons (oil, natural gas) as one of the company’s biggest raw material cost. But in recent years, E I Du Pont De Nemours And Co (NYSE:DD) has had a major leg up on its European and Asian competition. While natural gas prices elsewhere in the world are relatively high, natural gas prices in America are near all-time lows thanks to the fracking revolution.
Since natural gas is not easily transported or priced on a world market like oil is, foreign chemical companies have no choice but to purchase the much more expensive hydrocarbon raw materials available to them. Although plans are in the works, by companies like Cheniere Energy, Inc. (NYSEAMEX:LNG), to build export facilities to ship American natural gas overseas where prices are much higher, the advantage of operating in America with an abundance of cheap natural gas will continue to benefit E I Du Pont De Nemours And Co (NYSE:DD) for many years to come.
Hundred Years of Canadian Deposits
Non-US companies and investors tend to not place as much emphasis on consecutive annual payout increases. That is why Bank of Montreal (USA) (NYSE:BMO) will likely never appear on a Dividend Champion list. This Canadian bank’s policy is to pay out 40% to 50% of its earnings out as dividends. During some years that might mean a significantly higher dividend payout, while during others it might mean the same payout or even lower. What earns BMO a place on this list is the company’s record as the longest-running dividend paying company in Canada, having paid a dividend every year for the past 184 years.
Canadian banks, such as BMO, generally remained strong during the global financial crisis. While the largest American banks were highly exposed to the sub-prime nonsense and mortgage-backed garbage, Canadian banks simply profited from the making and collecting loans (or what a bank should be doing in the first place).
Since the financial crisis, BMO has used American banking sector weakness to acquire their way into the United States on the cheap. This includes the acquisitions of two Wisconsin banks in 2007, a US municipal bond dealer in 2008, American International Group Inc (NYSE:AIG)’s Canadian life insurance business in 2009, Citigroup Inc. (NYSE:C)’s Diners Club North American franchise in 2009, a mid-western regional bank in 2010 and M&I Bank in 2011 (in additional to other transactions that are still pending). While there has and will continue to be short-term integration costs associated with their recent acquisitions, longer-term will see greater profits as American banking recovers and BMO brings its conservative lending philosophy to the States.
Bottom Line
Although a sky-high yield can be a huge selling point for investors looking for their next dividend paying companies, a history of dividend appreciation can arguably be even more important. These three companies have the track record for consistency, and are positioning themselves well to possibly deliver another hundred years of dividend payments. All good examples of what to look when searching for long-term dividend paying opportunities.
The article The Hundred-Year Dividend originally appeared on Fool.com and is written by Matthew Luke.
Matthew is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
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