PPL Corporation

PPL Corporation (PPL) is a utility headquartered in Allentown, Pa. The company website says PPL controls or owns about 19,000 megawatts of generating capacity in the United States, sells energy in several U.S. markets, and delivers electricity and natural gas to about 10 million customers in the United States and the United Kingdom. “With a diverse mix of fossil-fuel, nuclear and renewable energy facilities, our competitive-market generation fleet is positioned for success when wholesale power markets rebound.”

PPL companies include Kentucky Utilities, Louisville Gas and Electric, PPL Electric Utilities, PPL EnergyPlus, PPL Generation, PPL Montana, and PPL Global (U.K).

On November 8, 2012, PPL announced third quarter earnings of $.61 per share, compared with $.76 per share for the third quarter of 2011.  Earnings for the first nine months of 2012 were $2.00 per share, compared with $1.91 in 2011.  The company adjusted its 2012 forecast range of EPS from ongoing operations to $2.30 to $2.40. In the third quarter earnings call, CEO William Spence said, “...our rate-regulated businesses are providing financial stability as we continue to effectively manage through challenging wholesale market power crisis.”

Morningstar indicates PPL’s long-term debt as a percentage of capital is 60.8%.  PPL’s current quarterly dividend is $.36, for an annual rate of $1.44.  At the December 24, 2012 closing price of $28.92, the yield is 5.0%. PPL has a good history of steady dividend increases except for 2011, which maintained the same $.35 quarterly dividend that was paid throughout 2010. The company has paid $.36 per quarter for the past four quarters.  Except for 2011, the company has increased the dividend beginning with the March payment. If PPL continues the trend that was resumed in 2012, there should be an announcement of a dividend increase in the coming weeks.

I own shares of PPL in a retirement account for dividend income and I would consider buying more at $26.67 or less.  I would consider selling some of the shares at $36 or more.  I will adjust these figures if PPL continues its pattern of increasing its dividend in the first quarter.

I think PPL is a company worth investigating for inclusion in a dividend portfolio. As always, this is not a recommendation to buy, but a suggestion for a stock to study. Use your own judgment.

W. P. Carey Inc.

W.P. Carey Inc. (WPC) is a publicly traded real estate investment trust (REIT) that provides long-term sale-leaseback and build-to-suit financing for companies worldwide and manages an investment portfolio of approximately $13.7 billion. The company was founded in 1973 by William Polk Carey, who died in 2012 at the age of 81.

W. P. Carey’s portfolio is "diversified by geography, property type and industry so that overall performance may not be impacted by any one industry, tenant, property type or region.”

In 2012, WPC converted from an investment company to a REIT. This was not a change in business model, but simply a reclassification for tax purposes. The change coincided with a merger with an affiliated company. The result was an increase in the September 28, 2012 quarterly dividend from $.567 to $.65.  The dividend was raised again in December, 2012 to $.66 per share, for an annual rate of $2.64. At a December 24, 2012 closing price of $51.96, WPC’s yield is 5.1%. The company has a long history of a small dividend increase each quarter.  

The quarterly earnings call on November 8, 2012 was the first call after the merger and the conversion to a REIT.  CEO Trevor Bond said the pro forma results AFFO for the combined company for three quarters would have been $2.78 per share.  He said, “...our core business remains strong and growing, our dividend coverage is solid and the portfolio is in good shape as we enter into our first full quarter as a REIT.”  Bond pointed out that one result of the merger was a dramatic increase in the volume of daily trading.  Prior to the merger, the average daily volume was less than 50,000 shares.  In the first weeks after the merger, the daily volume was about 448,000 shares.

WPC has been the best performing stock in my retirement income portfolio. I first purchased shares in 2009 at $23.99 a share and I have steadily added to the holding.  I would consider adding more at $43.75 or less and I would consider selling some shares at $55.32 or more.  I believe it is worthy of study for possible inclusion in a dividend portfolio. This is not a recommendation to buy, but a suggestion for a stock to study. Do your own research.

National Retail Properties, Inc.

National Retail Properties, Inc. (NNN) is a real estate investment trust (REIT). The company focuses on “triple-net” leases in which the tenant pays all real estate taxes, building insurance, and maintenance (the three "Nets") in addition to normal fees such as rent and utilities, etc. This form of lease is most frequently used for commercial freestanding buildings, such as those owned by NNN.

NNN is one of only 104 publicly-traded companies to have increased dividends for 23 or more consecutive years.  NNN acquires and owns single-tenant net lease retail properties nationwide. Additionally, they offer real estate financing programs and occasionally sell properties. NNN owns a diversified portfolio of 1,530 investment properties in 47 states. These properties are leased to more than 300 tenants in 36 industry classifications. Current occupancy is 97.9%.

The number of consecutive-year dividend-raising public companies decreased dramatically during the Great Recession.  NNN is one of only four REITs among the list of 104 companies that have increased dividends for at least 23 consecutive years. They were able to maintain this record because of the conservative nature of the triple net lease and because they were not heavily leveraged with debt.

NNN most recently increased its quarterly dividend in July, 2012, from $.385 to $.395, for a current annual dividend rate of $1.58.  At a closing price of $31.26 on December 24, 2012, this is a yield of 5.1%.

Diluted earnings per share (EPS) for the third quarter of 2012 were $.29 before extraordinary items, compared with $.23 during the third quarter of 2011.  Funds from operations (FFO) were $.52 per share, compared with $.39 per share in the third quarter of 2011.

At the end of Q3 2012, total liabilities were $1.656 billion and total assets were $3.935 billion, leaving shareholder equity of $2.278 billion.  Total shares outstanding as of September 30, 2012 were 109,422,000.  Book value was $20.82 per share.

I own shares of NNN and I would consider buying more at $29.81 or less.  I would consider selling some of the shares at $35.91.  I think it's a company worth investigating for inclusion in a dividend portfolio. As always, this is not a recommendation to buy, but a suggestion for a stock to study. Price is an important consideration. Use your own judgment.

Universal Health Realty Income Trust

Universal Health Realty Income Trust (UHT) is a real estate investment trust (REIT) formed in 1986. UHT has 54 real estate investments in 15 states, including acute care hospitals, medical office buildings, rehabilitation hospitals, behavioral healthcare facilities, sub-acute facilities and childcare centers. 

Dividends have increased steadily from 42.5 cents per quarter in 1997 to the current 62 cents per quarter, beginning 12/31/12. On October 25, 2012, UHT released third quarter 2012 results, which indicated earnings per diluted share of $.24, compared with $.26 per diluted share in the third quarter of 2011.  UHT reported adjusted funds from operations (AFFO) of $.71 per diluted share, compared to .66 per diluted share for the first quarter of 2011. At a price of $49.48 (as of December 24, 2012), the dividend yield is 4.9%.

REITs can be an important part of a portfolio of dividend-paying stocks. One advantage REITs enjoy is freedom from corporate income tax if at least 90% of company profits are paid as dividends. I own shares of UHT and I believe it is worth studying as a possible holding in a dividend portfolio. This is not a recommendation to buy, but a recommendation to study. Make your own judgment.

UHT has appreciated significantly in the past two years. Price is an important consideration.  UHT is well above my target “buy” price of $42.07, and near the price that I would consider selling some shares ($50.83).  My strategy is what some investors call trading around a core position, which means holding a core position in a stock and selling a percentage of the holding as it increases beyond a target “sell” price, and adding to the position when it falls below a target “buy” price.

I began buying UHT in 2008 at $34.55 and I have never sold any shares.  I have added to my position during pullbacks.

Johnson & Johnson

Johnson & Johnson (JNJ) is a holding company with subsidiaries operating in three healthcare-related business segments: Consumer, which includes baby care, skin care, oral care, wound care, and women's health fields among others; Pharmaceutical, which includes anti-infective, antipsychotic, contraceptive, dermatology, hematology, immunology, and neurology among others; and Medical Devices and Diagnostics, which includes products distributed to wholesalers, hospitals and retailers.

During a conference call on October 16, 2012, Dominic Caruso, Vice President for Finance and CFO, summarized JNJ’s third quarter results:

“Despite continuing marketplace and economic pressures, we reported solid sales growth in the third quarter of 6.5%, which was slightly higher than analyst estimates as published by first call. Foreign currency, in particular the weak euro, continues to negatively impact sales results. Third quarter sales on an operational basis excluding the impact of unfavorable currency grew 10.8%. Currency translation negatively impacted sales by 4.3%.”

Earnings per share for the first nine months of 2012 were $2.96, compared with $3.40 for the first nine months of 2011.  Adjusted earnings per share for the first nine months of 2012 was $3.91, compared with $3.87 for the first nine months of 2011. 

In April, 2012, JNJ increased the quarterly dividend from 57 cents to 61 cents. Dividend increases have occurred annually since 1963. If the present trend continues, another dividend increase may be announced in April, 2013. 

The JNJ closing price on December 24, 2012 was $70.02. At an annual dividend rate of $2.44, the yield is 3.5%. I think this company is worth investigating for inclusion in a dividend portfolio. It offers both growth and stability. Morningstar indicates that the long-term debt as a percentage of capital is 14%. I own shares of JNJ and I would consider adding more at $68.50 or less, and I would consider selling some shares at $76.25. As always, this is not a recommendation to buy, but a suggestion for a stock to study. Price is an important factor. Use your own judgment. 

JNJ will host an analyst meeting at 8:30 a.m. (Eastern Time) on Tuesday, Jan. 22, 2013, to discuss fourth-quarter and full-year 2012 financial results.

Genuine Parts Company

Genuine Parts Company (GPC) distributes automotive replacement parts, industrial replacement parts, office products and electrical/electronic materials. Standard and Poor's puts them in the consumer discretionary sector.

GPC increased its quarterly dividend in February, 2012 from 45 to 49.5 cents per share. It was the 56th consecutive annual increase. 

Third quarter results were released on October 18, 2012.  Compared with Q3 2011, sales were up 3%, net income was up 14%, and earnings per share were up 14%.  

For the first nine months:

Automotive Group revenue was up 4%, operating profit was up 11%, and profit margin was up from 8.2% to 8.7%. 

Industrial Group revenue was up 8%, operating profit was up 10%, and profit margin was up from 7.9% to 8.1%. 

Office Products revenue was down 1%, operating profit was up 2%, and profit margin was up from 7.4% to 7.6%. 

Electrical Group revenue was up 7%, operating profit was up 27%, and profit margin expanded from 7.2% to 8.6%.  

Morningstar indicates that GPC's long-term debt as a percentage of capital is 14%. At the December 24, 2012 closing price of $63.82, GPC yielded 3.1%.  I own shares of GPC and I would consider buying more at $60 or less.  I would consider selling some of the shares at $69.47.  I will adjust these figures if GPC continues its pattern of increasing its dividend in February.

I think it's a company worth investigating for inclusion in a dividend portfolio. As always, this is not a recommendation to buy, but a suggestion for a stock to study. Price is an important consideration. Use your own judgment. 

Simplify

This is the first post since November, 2010.  (I haven't been as "retired" as I thought I would be!)  I have simplified my retirement portfolio. Currently, there are 14 dividend-paying stocks and one closed-end fund.

The stocks are ranked according to the number of consecutive years each one has raised its dividend or distribution. The year that the annual increases began is listed for each stock. Each stock's percentage of the portfolio is given.  Currently, W.P. Carey is the largest holding.  JLA is the most recent addition, with a small initial investment.

Genuine Parts Company (GPC), 1957, 3.9%
Johnson & Johnson (JNJ), 1963, 5.6%
Universal Health Realty Income Trust (UHT), 1987, 7.2%
National Retail Properties (NNN), 1990, 6.9%
W.P. Carey, Inc. (WPC), 1999, 7.9%
Southern Company (SO), 2002, 7.0%
NuStar Energy LP (NS), 2002, 7.9%*
Natural Resource Partners LP (NRP), 2004, 7.1%**
Starwood Property Trust, Inc. (STWD), 2009, 7.5%***
Eaton Corporation (ETN), 2010, 7.5%
LinnCo LLC (LNCO), 2010, 7.1%

LTC Properties, Inc. (LTC), 2012, 7.8%
PPL Corporation, (PPL), 2012, 7.2%

Annaly Capital Management, Inc. (NLY), 7.1%****
Nuveen Equity Premium Advantage Fund (JLA), 0.5%*****
Cash 2.4%

*NS's last distribution increase was declared on July 29, 2011
**NRP's last distribution increase was declared on October 21, 2011
***STWD's last regular dividend increase was declared on May 10, 2011
****NLY recently has reduced its dividend several times
*****JLA's dividend was reduced slightly in the wake of the Great Recession

LNCO is a new issue, holding shares of Linn Energy (LINE).  LINE has increased its distribution since 2010.