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Ever-Growing Income

I was asked… What do you own? I presently have 16 holdings of the Safe-Dividend Growing kind. They are these: UNH, ROST, NKE, ROL, AOS, JKHY, AFG, CSL, JNJ, UGI, SYK, HRL, CHD, TJX, MA and CVS. What do I find special about these? Well, first of all, despite any reasons I might give… do your own homework, so that you know why you want to buy and own what you’ve got… but, here’s why I own these 16.

First, I see the EPS line for 10 years of data for an average of all 500 issues in the S&P 500 to have grown only 45%, while the EPS estimate line and its past growth pattern of these 16 has risen 154%, or well more than 3-times the rate of the 500.

Second, the EPS line for the 500 takes a truly dramatic hit during the GFC, from where that line peaked in the Fall of ’07, to where it bottomed in the first qtr of ’09. I see no such dip of nearly the dramatic proportions of these 16 companies, which tells me that they are far less affected by outside economic forces. I like to say that they get to “write their own check”.

Third, the historical dividend payout line for an average of all the 500 corporations rose 89% the past 10 years, and that with a 22.5% “pay cut” during the GFC. Not so with my 16 companies. Dividend payout the past 10 years for these companies increased by 346%, or well better than 4 times over… and, with NO such pay cut during the GFC, whatsoever. No, sir, income kept right on growing during that spell!

Fourth, the average share price appreciation within the 500 these past 10 years is right at 99.6%, or a double; but among my holdings, the average share price growth was 232.3%, which is considerably better than a triple. It was 57% better! That’s serious outperformance.

Now, all this past performance is relatively meaningless, except that it is pretty much all we have to go on. But, I also have the analysts’ consensus of forward-looking earnings estimates, and they, as best they can tell me, say that these companies can pretty much keep on doing as they have done… outperform the S&P 500 in the future!

For example, the estimated future growth for the entire 500 is estimated to be at 9% as far out as 1 to 3 more years. But among my 16, that number is estimated to be 12% growth, or 33% better. Future expected dividend growth among the 500 companies is believed to be on the order of 10%, looking ahead; but among my holdings, it’s projected to be 12%, some 20% faster. Every one of my stock picks is in the very Top 10% for dividend safety, because they pay out no more than even 40% of their earnings as a cash dividend to shareholders.

Finally, fifth, at the rate my relatively small, but very rapidly growing income is coming to my wife and me, we see it doubling for us in 5 years or less, and growing at a rate that so handily beats inflation, that we see the potential for an incredibly ‘comfortable’ retirement ahead of us. What’s in your portfolio?

I am a strong advocate for buying and holding shares of Safe-Dividend Growers. These are always among the very highest-quality companies that you can buy, and they typically, over any longer term time frame, outperform the entire market, which is said to be incredibly difficult to do… I don’t happen to think that it is. I’ve been doing it with these kind of stocks for years!

I’ve yet to write up JKHY, but I will very soon.

Here’s to your successful investing!
Harold F Crowell

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4 thoughts on “Ever-Growing Income

  1. When I noticed the price heading south, then the estimates were going in the tank, and then they passed on giving any dividend increase… we were all done. I had no idea they had become so dependent on transporting oil, and when oil prices tumbled, their revenues took quite a beating. Even now, I can find no EPS estimate recovery to begin to justify the price recovery the shares have experienced. It’s more cyclical than I had previously believed, and I was mistaken. IBM was another case. I read plenty of analysis that said they were going to successfully turn around. Regardless of price since February of ’16. They have not. The EPS line is horrible still. Harold

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