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Who Are the Dividend Kings?

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What are Dividend Kings?

Dividend kings are companies that have not just an impressive track record for paying dividends, but the best track records. Currently there are only 30 dividend kings - ranging from such diverse industries as food, tobacco and even utilities. 

How does a company qualify to be a Dividend King?

In order to be part of this prestigious list, a company needs to have at least 50 years of continuous dividend payments. Dividends cannot be cut or lowered in this time, or they are immediately disqualified from contention. 

Who are some of the notable members of the list?

Altria

Altria is one of the most prominent companies in the tobacco industry. Since 2015, Altria has paid nearly $25 billion in dividends. In 2015, they paid approximately 4.2 billion in dividends, and in 2019 they paid 6.1 billion in dividends. Since its inception Altria had a very strong hold on the tobacco industry - but with changing consumer behavior Altria has had to adapt to a market with fewer and fewer cigarette users. In the 10-year plan from their most recent shareholder meeting, Altria highlighted their plans for the future. One of their major goals is to convert adults to noncombustible products in the coming years. Although their combustible products ( ordinary cigarettes) are still a major focus of their business model, they want to maximize profitability and efficiency in this market sector with funding from their noncombustible portfolio

Altria Product Platform
Altria Product Platform

In recent years, noncombustible nicotine products have exponentially risen in popularity. JUUL, a prominent e-vapor manufacturer, has been a major competitor for Altria. In December 2018, Altria invested $12.8 billion for a 35% stake in the e-vapor manufacturer. This becoming a part of their growth strategy reflects reflects JUUL’s meteoric rise - especially with the young adult demographic

Altria’s 10 year strategy goal doesn’t only focus on aggressive marketing and acquisitions, but also places major focus on their environmental footprint. By 2030, Altria is planning to run their production plants on 100% renewable electricity, reducing their carbon footprint by 18% and cutting greenhouse emissions by 55%.

Currently they have a FWD Annualized Dividend Yield of 8.42% and a forward payout ratio of 79.63%.

Industry: Food & Tobacco

H.B. Fuller Company

H.B. Fuller is a leader in adhesive manufacturing. Their manufacturing presence is nearly global, as they have 72 manufacturing facilities, direct presence in 37 countries and serve over 125 countries.

H.B. Fuller Global Trends
H.B. Fuller Global Trends

The adhesive market (which is worth around 50 billion dollars) is a very fragmented market, with the top 5 companies holding less than 35% of the total market share. Because it’s such a diversified market with many future applications, H.B. Fuller has plenty of room to consolidate their growth strategy in order to gain a bigger market share. Their top 10 customers make up less than 15% of revenue, and their top 25 raw materials make up less than 20% of all purchases. Their growth plan focuses primarily around three different industries: engineering adhesives, construction adhesives and hygiene adhesives. These three sectors cover all the pricing powers and come with a great deal of specialization that H.B. Fuller can develop and cater to.

Fiscal Q2
Fiscal Q2

Industry: Chemicals 

Dividend Yield: 1.30%

Sysco Corporation

Sysco is the global leader in selling, marketing and distribution of food and non-food products to restaurants, healthcare and education facilities.

Sysco Product Categories
Sysco Product Categories

COVID-19 had a tremendous effect on the restaurant industry as foot traffic severely declined. Restaurants across the United States are a major source of income for Sysco, but after the major decline in March, restaurants have only recently seen foot traffic return recently. On the other hand, while foot traffic in food establishments decreased, foot traffic at grocery stores picked up. The trend lines now seem to be converging to pre-covid levels as states ease restrictions across the board.  In their September 10 Barclays Global Consumer Staples Conference, Sysco highlighted the major accomplishments that they had seen in the 90 days prior. Some of those highlights include $1 billion in annualized new business, $350 million in annualized cost savings and a customer closure rate that is far below industry standards. 

Industry: Food and Drug Retailing 

Dividend Yield: 2.63%

Colgate- Palmolive Company

Colgate-Palmolive specializes in the manufacture and distribution of household, healthcare, personal care and veterinary products. Colgate-Palmolive also hold ownership of some of the most well known brands on the planet, such as Colgate, Ajax, Fabuloso and Protex. In the first quarter of 2020, Colgate was able to increase eCommerce sales by more than 50%. This is part of their initiative to drive growth and provide the best customer satisfaction by increasing their online presence. Streamlining their operations over the years and focusing on stronger brand images with consumers has allowed them to grow their gross margin from 47.7% in 1996 to 59.5% in 2019. This strategic focus is in line with many of their competitors such as Clorox, as they heavily focus on online growth, and entering high growth segments that are popular with the average American consumer. 

Industry: Personal & Household Products & Services

Dividend Yield: 2.29%

Colgate Sales Growth
Colgate Sales Growth

Written by: Armand Bogdan
Published on: Tuesday, September 29, 2020 4:00 PM

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