Interview: Haverford Shares 8-Pack of Dividends (WHR, HD, UNP, UTX, APD, COP, PEP, JNJ, INTC, MSFT, HAVGX)May 16, 2011 by Jon C. Ogg
Investors love dividends, particularly from companies which are raising dividends or which have a history of raising dividends. There is a new diversified sample dividend portfolio for investors called the “8-Pack of Dividends” for A-rated high-quality stocks with dividends. The sampling of stocks was compiled in a cross-section of managed equity holdings by Radnor, Pennsylvania-based Haverford Investments, which manages more than $6.5 billion in assets for investors and has a history of more than thirty years. 24/7 Wall St. just had a brief opportunity to speak with Hank Smith, the Chief Investment Officer of Equities at Haverford, to hear about these picks and some other key dividend observations about dividends, the market, and the economy.
The new “8-Pack of Dividends” includes Whirlpool Corporation (NYSE: WHR) and The Home Depot, Inc. (NYSE: HD) as having pent-up U.S. demand & global consumer growth. Two dividend picks for the U.S. industrial renaissance are Union Pacific Corporation (NYSE: UNP) and United Technologies Corp. (NYSE: UTX). Air Products & Chemicals Inc. (NYSE: APD) and ConocoPhillips (NYSE: COP) are two dividend picks for the run in commodities. Lastly, the “Safe & Steady” picks were in Pepsico, Inc. (NYSE: PEP) and in Johnson & Johnson (NYSE: JNJ).
While these two tech giants were not a part of this “8-Pack,” Hank Smith gave some interesting insight when it comes to Intel Corporation (NASDAQ: INTC) versus Microsoft Corporation NASDAQ: MSFT). As you have likely read, Intel just raised its dividend yet again last week and is now among the highest dividend yields in technology. He called this very shareholder friendly. Smith maintains that the acquisition of Skype is not as much of a shareholder-friendly move as it would have been to see a significant boost to Microsoft’s dividend. Smith noted, “If Microsoft would have opted to double its dividend and commit to a 10% to 12% dividend growth strategy rather than making a large acquisition of a questionable company, then Microsoft’s share price would be significantly higher.”
Haverford mostly handles managed accounts but a smaller Large-Cap fund it manages is Haverford Quality Growth Stock (HAVGX) fund, and its returns have been solid during the recovery when you consider the dividend aspect of this growth. Since the early-2009 lows, this fund has jumped up nearly 85% from the bottom.
When you look at the “8-Pack of Dividends,” these all have relatively high payouts and have all increased those payouts recently. We included the company, the approximate dividend yield, and by how much the dividend hike was in each:
- Whirlpool Corporation (NYSE: WHR) yields 2.4% and its recent payout was raised by 16%.
- The Home Depot, Inc. (NYSE: HD) yields 2.7% and its recent payout was raised by 6%.
- Union Pacific Corporation (NYSE: UNP) yields 1.8% and its recent payout was raised by 25%.
- United Technologies Corp. (NYSE: UTX) yields 2.1% and its recent payout was raised by 11%.
- Air Products & Chemicals Inc. (NYSE: APD) yields 2.5% and its recent payout was raised by 18%.
- ConocoPhillips (NYSE: COP) yields 3.5% and its recent payout was raised by 20%.
- Pepsico, Inc. (NYSE: PEP) yields 2.9% and its recent payout was raised by 7%.
- Johnson & Johnson (NYSE: JNJ) yields 3.5% and its recent payout was raised by 6%.
Mr. Smith also noted that today’s environment offers dividend investors a tremendous opportunity in dividend-growing stocks. After 18 months to 24 months of a recovery, now companies are really moving to return more capital to shareholders.
One additional point was made as far as which companies are strong… Smith said, “About three-quarters of dividend portfolio companies actually managed to raise dividends during the recession.” The current dividend yield for most managed accounts at Haverford today is 2.5%, but they also have a dividend value strategy that includes utilities and other dividend-paying companies with a combined portfolio yield that is closer to 3.8% today.
When we are given a large group of picks in this manner, it is almost impossible not to ask for which of the lot is the best of the best. Haverford Investments’ Hank Smith believes that the giant recovery is becoming the mature stage of the recovery period now. In this stage, he is more inclined to look at some of the more defensive names which have lagged many of the others in their performance. Those two names were Pepsico, Inc. (NYSE: PEP) and Johnson & Johnson (NYSE: JNJ).
JON C. OGG