3 Dividend Champions You’ve Never Heard Of
These off-the-radar names have long histories of dividend growth, and solid current yields.
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The Dividend Champions are stocks that have raised their payouts for at least 25 years in a row. These companies have proven that they can manage through recessions, while continuing to pay dividends each year, and raise their dividends on an annual basis.
These three Dividend Champions fly under the radar of many investors. However, they have long histories of dividend growth, and solid current yields. And even though they do not get much attention from investors, they should continue to raise their dividends each year.
A Dividend 'North Star'
Polaris Inc. PII designs, engineers, and manufactures snowmobiles, all-terrain vehicles (ATVs) and motorcycles. In addition, related accessories and replacement parts are sold with these vehicles through dealers located throughout the U.S. The company operates under 30+ brands including Polaris, Ranger, RZR, Sportsman, Indian Motorcycle, Slingshot and Transamerican Auto Parts. The global powersports maker, serving over 100 countries, generated $8.9 billion in sales in 2023.
On July 23, Polaris announced second-quarter results for the period ending June 30, 2024. For the quarter, revenue fell 11.7% to $1.96 billion, which missed estimates by $210 million. Adjusted earnings per share of $1.38 compared very unfavorably to $2.42 in the prior year and was $0.88 less than expected.
For the quarter, Marine sales were lower by 40%, On-Road decreased 19%, and Off-Road, the largest component of the company, fell 6%. Decreases in all three businesses were due to lower volumes. Off-Road and On-Road were both negatively impacted by higher promotional spend and product mix. The Marine segment suffered from lower net selling prices.
Over the long-term Polaris can generate growth via the ongoing replacement need for ATVs, snowmobiles and similar vehicles, continued growth in international markets, bolt-on acquisitions, and margin expansion.
On February 1, 2024, Polaris raised its quarterly dividend 1.5% to $0.66. The dividend has been increased for 29 consecutive years. Moreover, with a reasonable dividend payout ratio and the potential for growth, this payment could play an important role in shareholder returns over time.
PII shares currently yield 3.2%.
An Impressive Three Decade-Plus Streak
Tompkins Financial Corp. TMP is a regional financial services holding company headquartered in Ithaca, NY that can trace its roots back more than 180 years. It trades with a market capitalization of $866 million and has total assets of about $8 billion, which produce about $300 million in annual revenue.
The company offers a wide range of services, including checking and deposit accounts, time deposits, loans, credit cards, insurance services, and wealth management to its customers in New York and Pennsylvania. Tompkins posted second-quarter earnings on July 26, and results were somewhat weak once again. Net interest margin fell from 2.83% to just 2.73% year over year, one of the weakest NIMs in our coverage universe.
Total cost of funds was up 10 basis points compared to the first quarter, a sharp change from the 24-basis point gain in Q1. Total operating expenses were $49.9 million, down $2 million year over year.
Total loans were $121 million higher, or 8.7% on an annualized basis, from Q1. Total deposits were $6.3 billion, down $164 million from last year. That has pushed the bank’s loan-to-deposit ratio from 87.5% to 91.7%, which is extremely high, and we note investors may use caution with a bank with such a high mark.
Given the state of the yield curve, we don’t see a lot of additional deterioration in margins, but it may take some time before Tompkins sees any material improvement in its lending spreads. The bank’s share repurchase program should help, but only with fractional declines in the float annually.
Tompkins has raised its dividend for 37 consecutive years, and we don’t see this streak in jeopardy by any means. Due to its modest payout ratio, it has ample room to keep growing its dividend, even with weak earnings growth.
The defensive behavior of Tompkins Financial during economic downturns is particularly important. Tompkins’ competitive advantage is its focus on targeted local markets in the Northeast U.S.
TMP shares currently yield 4.3%.
A Good Stocking Stuffer
NACCO Industries Inc. NC is a holding company for The North American Coal Corporation, which incorporated in 1913. The company supplies coal from surface mines to power generation companies.
NACCO is the largest lignite coal producer in the U.S. and ranks among the top ten of all coal producers. It operates in the states of North Dakota, Texas, Mississippi, Louisiana and on the Navajo Nation in New Mexico. The company produces annual revenues of ~$250 million.
On July 31, NACCO announced second-quarter results for the period ending June 30, 2024. For the quarter, revenue declined 14.7% to $52.35 million while earnings per share of $0.81 compared favorably to $0.34 in the prior year. Coal revenue was down 43% to $15 million while total tons delivered decreased 2.8%.
Unconsolidated coal deliveries grew 7.1% to 5.5 million tons while consolidated coal deliveries fell 53.3% to 423K tons. Deliveries from the North American Mining segment were higher by 14.8% to 16 million tons while revenue grew 28.6% to $27.9 million. Mineral Management revenue was down 39% to $5.6 million due to significantly lower natural gas and oil prices.
On May 16, 2024, NACCO Industries raised its quarterly dividend 4.6% to $0.2275. Adjusting for its spinoff history, NACCO has raised its dividend for 39 consecutive years. This is an impressive growth streak given the extreme cyclicality in the company’s earnings history. We expect a dividend growth rate of 5% going forward.
NACCO does have some opportunity for growth. For example, the company entered into an agreement in Q2 2020 to become the exclusive contract miner for the Thacker Pass lithium project in northern Nevada. Construction commenced on March 2nd, 2023 with the production of lithium expected to begin in 2027 or 2028.
NC shares currently yield 3.4%.
At the time of publication, Ciura had no positions in any stocks mentioned.