You may be familiar with the Dividend Champions spreadsheet, which can be found here, that also lists Contenders and Challengers. (Note that all references to Champions mean companies that have paid higher dividends for at least 25 straight years; Contenders have streaks of 10-24 years; Challengers have streaks of 5-9 years. “CCC” refers to the universe of Champions, Contenders, and Challengers.)
But what you may not realize is that a new swell of dividend growth has been building at other companies that started raising their dividends after the “Great Recession” gave way to economic recovery.
[ad#Google Adsense 336×280-IA]Among the many companies that are just now establishing a “culture” of Dividend Growth are what I call the “Near-Challengers,” which are defined as firms with four straight years of higher dividends.
By definition, those companies may join the CCC listings in the next 12 months.
There are two things that are significant about the recent growth of the Near-Challenger roster, which can be found under Appendix B on the Notes tab of the spreadsheet.
First is the sheer number of companies involved.
There are currently 128 companies in the list, up from just 50 at the end of 2012.
The additional companies began increasing their payouts in 2010, following the June 2009 “official” end of the recession, and they will no doubt be followed by cohorts of dividend raisers that started in 2011 and later.
The second significant aspect to the increase in Near-Challengers is that it mirrors what happened after the previous recession, which can be seen in the numerical shift of companies from Challenger to Contender status, which takes place when a company declares its 10th straight year of higher dividends.
A year ago, on August 31, 2012, there were 176 Contenders and 190 Challengers; now there are 209 Contenders and only 157 Challengers. The companies that “graduated” to Contender status began their streaks in late 2003 or sometime in 2004.
While the shift of companies from Challenger to Contender status will continue – there are currently 39 companies with 9-year streaks – that shift may be dwarfed by the additions of new Challengers mentioned above.
And the next wave of Challengers – which should push the number of CCC companies from 471 to over 500 by March or April – offers a wide variety of attractive investments in virtually every industrial sector.
Many of the names are familiar, such as Activision Blizzard (ATVI), Applied Materials (AMAT), *Ashland (ASH), BlackRock (BLK), *Bristol-Myers Squibb (BMY), Chico’s FAS (CHS), Diageo plc (DEO), *Dr Pepper Snapple (DPS), *Hershey Company (HSY), *Home Depot (HD), *Marriott International (MAR), *Mattel (MAT), Nordstrom (JWN), *Omnicom (OMC), *Rayonier (RYN), *Staples Inc. (SPLS), Time Warner (TWX), Tupperware Brands (TUP), *United Parcel Service (UPS), UnitedHealth Group (UNH), WD-40 Company (WDFC), and Western Union (WU).
Others – such as numerous small banks, real estate investment trusts, master limited partnerships, and foreign firms – may become more familiar as their dividend streaks grow, potentially offering more growth than existing CCC stocks in the years ahead.
*Offers Company-sponsored Dividend Reinvestment/Stock Purchase Plan. Unlike brokerage “DRIPs,” these allow cash investments of as little as $25. For a list of No-fee company-sponsored DRIPs, click here.
— David Fish
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Disclosure: Author owns shares of DPS.