Tag Archives: dividend-growth

Dividend Growth Stock Overview: SJW Corporation

About SJW Corporation SJW Corporation (NYSE: SJW ) provides water services to customers in the San Jose, CA metropolitan area and to customers in the region between San Antonio and Austin, TX. The company was incorporated in California in February 1985, and is headquartered in San Jose. SJW has 395 full-time employees. The company is organized into four subsidiaries: (1) the San Jose Water Company; (2) SJWTX, Inc.; (3) SJW Land Company; and (4) the Texas Water Alliance. SJW Corporation does not report financial information for each of the subsidiaries separately. Originally incorporated in 1866, San Jose Water Company is the predecessor organization to SJW Corporation. In the 1985 reorganization, San Jose Water Company became a wholly-owned subsidiary of SJW Corporation. San Jose Water is a public utility that provides water service to over 1 million people in the metropolitan San Jose area. The company’s supply comes from a variety of sources, including groundwater, surface water, reclaimed water and imported water. Roughly 40-50% of its annual water production is purchased. SJWTX was incorporated in Texas in 1985, and does business as Canyon Lake Water Service Company. This subsidiary provides water service to roughly 36,000 people located in the region between San Antonio and Austin, TX. SJW Land Company owns undeveloped land in California and Tennessee, owns and operates commercial buildings in California, Arizona and Tennessee, and has a 70% interest in a real estate limited partnership. Finally, the Texas Water Alliance subsidiary is developing a water supply project in Texas to ensure future water supplies for the Canyon Lake Water Service Company. As a regulated utility, local and state authorities dictate SJW’s revenues and income. In 2014, the company had operating revenue of $320 million, which was up 15.5% from 2013. Net income more than doubled from 2013 to $51.8 million. Earnings per share did the same, coming in at $2.54, which gives the company a payout ratio of about 31% using the current annualized dividend of 78 cents per share. The revenue and income increase was due to approved rate changes, slightly offset by a reduction in customer water usage. The revenue increase continued in the 1st quarter of the year, with a 13.7% increase in revenue and a more than quadrupling of net income for the quarter year-over-year. In addition to the rate increases, the significant increase in net income was also due to a reduction of groundwater extraction costs. As a company that predominantly operates public utilities, SJW has had, and expects to have, large capital improvement expenditures. The company spent nearly $92 million on capital expenditures in 2014. In 2015, it plans to spend over $133 million as part of more than $660 million in capital improvements from 2015 to 2019. The company is a member of the Russell 2000 index and trades under the ticker symbol SJW. As of mid-July, the stock yielded 2.5%. SJW Corporation’s Dividend and Stock Split History (click to enlarge) SJW has grown dividends at less than 4% a year since 1995. SJW Corporation and its predecessor companies have paid dividends since 1944, and increased them since 1968. It announces annual dividend increases at the end of January, with the stock going ex-dividend in the first half of February. In January 2015, SJW announced a 4% dividend increase to an annualized rate of 78 cents per share. The company should announce its 49th consecutive annual dividend increase in January 2016. SJW Corp. historically increases its dividend in the low- to mid-single digit percentages, and the dividend growth rates reflect this. The company’s 5-year compounded annual dividend growth rate (CADGR) is 2.78%. Longer term, the CADGRs are slightly higher: the 10-year CADGR is 3.81%, the 20-year CADGR is 3.94% and the 25-year CADGR is 3.76%. SJW has split its stock twice. The splits occurred in close succession, with the company splitting the stock 3-for-1 in March 2004 and then 2-for-1 in March 2006. A single share purchased prior to March 2004 would have split into 6 shares. Over the 5 years ending December 31, 2014, SJW Corporation stock appreciated at an annualized rate of 10.40%, from a split-adjusted $19.35 to $31.73. This underperformed the 13.0% compounded return of the S&P 500 index and the 14.0% compounded return of the Russell 2000 Small Cap index over the same period. SJW Corporation’s Direct Purchase and Dividend Reinvestment Plans SJW does not have a direct purchase or dividend reinvestment plan. (The company initiated one for investors in 2011, but terminated it in 2014.) In order to invest in the stock, you’ll need to purchase it through a broker; most will allow you to reinvest dividends without any fee. Ask your broker for more information on how to set this up, if you are interested. Helpful Links SJW Corporation’s Investor Relations Website Current quote and financial summary for SJW Corporation (finviz.com) Disclosure: I do not currently have, nor do I plan to take positions in SJW.

SCHD: A Natural Core Holding For Dividend Growth Investors

Summary SCHD offers a great portfolio for dividend investors to build around. During previous recessions (and corrections) the dividend paying companies of the S&P 500 held up better than those without dividends. With the high P/E ratios climbing over the last few years we have seen the market become more dangerous. Dividend stocks underperformed the last few years as the market became more bullish (expensive). A more bullish market makes me prefer SCHD over SPY. The holdings offer some great stocks and exposures that create natural hedges to the macroeconomic challenges. Dividend growth stocks offer investors a solid combination of current income and growth, but some investors still don’t understand their power. One of my favorite ETFs for this sector is the Schwab U.S. Dividend Equity ETF (NYSEARCA: SCHD ). Some investors will point out that they can pick and choose which individual dividend stocks offer the most compelling investments and there is nothing wrong with that plan. If an investor feels comfortable picking out individual stocks, they are welcome to do so. However, every investor needs to remember to stay diversified and that is where a low fee dividend ETF comes in. The Schwab U.S. Dividend Equity ETF has an expense ratio of only .07, is free for trading in Schwab accounts, and offers investors a yield of 2.88%. That isn’t a great yield, but it isn’t bad when considering how many companies the ETF needs to provide solid diversification. In this area I favor enhanced indexing. SCHD doesn’t need to be the only dividend investment in the portfolio, but it provides a solid piece to build around. Dividend Growth Performance Investors looking at returns over the last few years may feel like SCHD is failing to keep up with the market, but that is a natural consequence of the market getting bullish on stocks that don’t pay dividends. I prefer stocks with solid dividends. While investors should consider total return, I see no reason to move away from dividend stocks. Instead, I see the recent underperformance as making them more attractive. Since early November 2011, right after SCHD was formed, it has delivered returns of 64.6% compared to the SPDR S&P 500 Trust ETF ( SPY) delivering 79.13%. That weakness for SCHD has been a reflection of the large dividend stocks underperforming the index as shown in the chart below. (click to enlarge) Dividend stocks are out of favor and appeared to be going out of favor since 2012. As the P/E ratios climb to dangerously high levels, I would rather invest in the companies that are paying out dividends and delivering a meaningful portion of their earnings. I would rather invest in industries with strong dividend payouts. During the weakest markets, these stocks have held up better. If this market overheats, then SCHD looks like a great option to survive the weakness. If investors want to avoid losing by selling out at the bottom of a market, they would be wise to hold an investment where they can focus on the dividends rather than the panic. Holdings The following chart shows the top holdings of the Schwab U.S. Dividend Equity ETF ranked by their values. (click to enlarge) What dividend growth investor doesn’t like these companies? In my opinion, this is precisely the kind of diversification a dividend investor should be seeking. Who doesn’t like Procter and Gamble (NYSE: PG )? Some analysts can get bearish on it or argue that it is over-valued, but the point of the diversification is to protect investors from overpaying for a few companies. Verizon Communications Inc. (NYSE: VZ ) is one of the high yielding stocks (4.66%) that concern me because the telecommunications industry looks far less attractive when Sprint (NYSE: S ) is waging a price war that could severely damage earnings throughout the industry. I love the yield, but I have tried holding companies that in highly competitive industries marked by excessive growth of capacity and battles to deliver the lowest price. That was the investment where I had my worst losses and it taught me to be very wary of price based competition with excessive building of capacity. Exxon Mobile Corp. (NYSE: XOM ) is a great play on the oil industry and either it or another major oil company belongs in every dividend growth investor’s portfolio. The beauty of oil is that crashing prices on oil mean more income for middle class and lower class consumers. Cheap oil means lower costs for transporting materials. Cheap oil is good for most of the portfolio. On the other hand, expensive oil is a headwind for many major companies and a tailwind for the big oil players like XOM. This should be a natural holding for dividend growth investors. Conclusion SCHD is a solid way for investors to get a core holding for their dividend growth portfolio. It offers an excellent selection of major dividend growth champions which allows investors to build their portfolio around those champions by overweighting the companies that best align with their risk tolerance and goals. Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. (More…) I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article. Additional disclosure: Information in this article represents the opinion of the analyst. All statements are represented as opinions, rather than facts, and should not be construed as advice to buy or sell a security. Ratings of “outperform” and “underperform” reflect the analyst’s estimation of a divergence between the market value for a security and the price that would be appropriate given the potential for risks and returns relative to other securities. The analyst does not know your particular objectives for returns or constraints upon investing. All investors are encouraged to do their own research before making any investment decision. Information is regularly obtained from Yahoo Finance, Google Finance, and SEC Database. If Yahoo, Google, or the SEC database contained faulty or old information it could be incorporated into my analysis.

How To Tap Into Developed Market Dividend Growth

Summary Developed markets offer attractive dividend growth opportunities. A highlight of the ProShares MSCI EAFE Dividend Growers ETF. Breakdown of developed countries and their dividend prospects. By Todd Shriber & Tom Lydon The U.S. remains the benchmark destination for dividend growth, but some other developed markets are credible payout growth destinations. That theme can be accessed with several exchange traded funds, including the ProShares MSCI EAFE Dividend Growers ETF (NYSEArca: EFAD ) . EFAD, which debuted in August, tracks MSCI EAFE Dividend Masters Index, which holds members of the MSCI EAFE Index that have increased their dividends for at least 10 straight years. The emphasis on dividend increase streaks is the backbone of some of the most popular U.S.-focused dividend ETFs. At the country level, EFAD is top heavy as over 48% of its geographic weight is allocated to the U.K. However, that is not a problem for an international dividend growth ETF because the U.K. is one of the best, if not the best, ex-U.S. dividend growth markets. In 2014, U.K. firms once again offered excellent dividend growth. Payouts there surged 31% to $135 billion, according to Henderson Global Investors. Despite the overweight U.K. position, EFAD’s other country holdings offer ample room for dividend growth as highlighted by the ETF’s 1.2% 30-day SEC yield. Japan, EFAD’s third-largest country allocation at nearly 8%, is finally starting to climb the dividend ladder. For the year ended March 31, total dividends paid in Japan are expected to have risen 13% to $79.5 billion. It is estimated that total payouts in Japan this year will be more than triple the number seen in 2013. The average dividend yield for Tokyo Stock Exchange first-section companies, which include almost all of Japan’s top names, is 1.36%, according to the Wall Street Journal . Switzerland, EFAD ‘s second-largest country weight at 9.8%%, is one of the steadiest Europe ex-U.K. Dividend growth markets. Estimates indicate that in 2014, the 20 largest firms listed on Switzerland’s benchmark Swiss Market Index paid a record $37.2 billion in dividends. Australia, EFAD’s fourth-largest country weight at almost 5.6%, is another high-yielding developed dividend growth market. “According to figures from Bloomberg and Lincoln Indicators, that has seen dividend payouts by Australia’s top 200 companies jump by 64 per cent in 5 years – from $38 billion in 2010 to $62 billion to date this financial year,” according to Australia’s ABC News . Australia is one of the countries where the dividend yield on the benchmark equity index is higher than the yield on government bonds. Investors are starting to embrace EFAD’s story as the ETF has more than doubled in size during the second quarter. ProShares MSCI EAFE Dividend Growers ETF (click to enlarge) Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. (More…) I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.