sure dividend€¦ · next dividend record date: early march, 2015 next earnings release: february...

Sure Dividend HIGH QUALITY DIVIDEND STOCKS, LONG-TERM PLAN

January 2015 Edition

By Ben Reynolds

Table of Contents

Opening Thoughts ......................................................................................................................... 3

The Top 10 List ............................................................................................................................. 4

Review of January’s Top 10 Stocks ............................................................................................. 5

Wal-Mart (WMT) ....................................................................................................................... 5

ExxonMobil (XOM) ................................................................................................................... 6

Deere & Company (DE) ............................................................................................................. 7

PepsiCo (PEP) ............................................................................................................................. 8

ConocoPhillips (COP) ................................................................................................................ 9

Coca-Cola (KO) ........................................................................................................................ 10

General Mills (GIS) .................................................................................................................. 11

Philip Morris International (PM) .............................................................................................. 12

McDonald’s (MCD) .................................................................................................................. 13

Kellogg (K) ............................................................................................................................... 14

List of Stocks by Sector .............................................................................................................. 15

List of Stocks by Rank ................................................................................................................ 18

Portfolio Building Guide ............................................................................................................ 20

Examples ................................................................................................................................... 20

List of Past Recommendations ................................................................................................... 21

Ending Thoughts ......................................................................................................................... 22

Opening Thoughts

The S&P 500 closed out the year up 13.69%. Stock returns were boosted by low

interest rates in 2014. The 10 year treasury yield has remained under 3% since June

of 2011. The average historical 10 year treasury yield is 4.6%. We are in an

unprecedented error of hyper-low interest rates.

Low interest rates prop up real asset values by reducing the required rate of return

investors demand on their money. If interest rates were to rise, stock prices would

likely fall. The Federal Reserve is expected to raise interest rates this summer.

The S&P 500 has had 6 consecutive years of positive returns, with 5 out of the 6

having total returns above 10%. The non inflation adjusted US GDP has grown at a

compound rate of 3.2% over the same time. It would appear that expectations have

jumped ahead of reality over the last 6 years. With interest rates set to rise and

weakness in Europe and Asia, 2015 could be a difficult year for the stock market. I

want to be clear that I don’t know what will happen to the market in 2015. It could

very well rise 30%+. The macroeconomic environment does not look favorable,

however.

Whatever happens in the overall market, sticking to a sound investment plan is

critical. When stock prices fall, take advantage of the buying opportunity. Stock

price declines don’t change the long-term favorable economics of high quality

businesses. The dividend income stream of businesses with strong competitive

advantages should remain unhampered. Think of stock price declines as opportunities

to buy great businesses at more attractive yields than as permanent losses of capital.

This month, Abbott Laboratories fell out of the Top 10 and was replaced by Deere &

Company. Consumer goods stocks continue to comprise a disproportionate amount of

the Top 10 Sure Dividend stocks. The Top 10 Sure Dividend stocks for January break

down by sector as follows:

Consumer Goods: PEP, KO, GIS, PM, K

Basic Materials: XOM, COP

Services: WMT, MCD

Industrial Goods: DE

Currently no past recommendations are up for sale based on The 8 Rules of

Dividend Investing.

The Top 10 List

Ticker Name Yield Payout Growth Volatility

WMT Wal-Mart 2.24% 37.94% 8.17% 18.98%

XOM ExxonMobil 2.97% 34.68% 6.15% 25.37%

DE Deere & Co. 2.72% 27.84% 10.32% 35.16%

PEP PepsiCo 2.77% 57.47% 10.74% 17.26%

COP ConocoPhillips 4.24% 38.68% 6.00% 30.65%

KO Coca-Cola 2.89% 58.84% 9.04% 18.47%

GIS General Mills 3.09% 60.74% 6.76% 17.05%

PM Philip Morris 4.94% 74.63% 8.63% 24.05%

MCD McDonald’s 3.65% 66.67% 6.91% 19.73%

K Kellogg 2.99% 51.58% 5.25% 17.37%

Once again, Wal-Mart is the topped ranked stock using The 8 Rules of Dividend

Investing. Long-time Sure Dividend favorites PepsiCo, ExxonMobil, Coca-Cola, and

McDonald’s remain on the list as well.

Abbott Laboratories was replaced by Deere & Company this month. Deere &

Company is in a down-cycle in the highly cyclical agricultural machinery industry.

This has made the stock cheap relative to its long-term growth prospects.

Changes in the Top 10 occur only when companies release new financial data, or

when stock prices change or reduce dividend yields. The stability of the Top 10 list

shows the ranking method is consistent, not based on rapid swings. An equally

weighted portfolio of these 10 businesses has the following characteristics:

Top 10 S&P500 Dividend Yield: 3.25% 1.81%

Payout Ratio: 50.90% 36.11%

Growth Rate: 7.80% 7.43%

Volatility: 14.87% 20.34%

PE Ratio: 15.94 19.96

- P/E is calculated as the current price divided by trailing-twelve month earnings ; lower is better - Dividend Yield is calculated as the most recent quarterly dividend x 4 divided by the current price; higher is better - Payout ratio is the most recent quarterly dividend x 4 divided by trailing-twelve month earnings; lower is better - Growth Rate is the lower of 10 year revenue per share or dividend per share compound growth; higher is better - Volatility is the 10 year standard deviation of the dividend and split adjusted price series; lower is better

Review of January’s Top 10 Stocks

Wal-Mart (WMT)

Overview & Current Events

Wal-Mart employs 2.2 million people in its 11,150+ stores across 27 countries. The company is the

largest retailer in the world with annual sales of nearly $280 billion. Wal-Mart is the 9th

largest

corporation in the world based on its market cap of $277 billion.

Wal-Mart grew EPS 1% in its most recent quarterly report (11/13/14). The company is expecting slow

EPS growth over the next 2 to 3 years as it funnels cash flows into digital and e-commerce growth.

Wal-Mart expects e-commerce growth of between 30% to 40% per year over the next 3 years on its

current e-commerce revenue base of $12.5 billion. The company’s stock was essentially flat this

month after gaining about 14% over the last 3 months.

Next Dividend Record Date: Early March, 2015 Next Earnings Release: February 19th

, 2015

Competitive Advantage & Recession Performance

Wal-Mart’s competitive advantage comes from its massive scale and operating efficiency. The

company pressures suppliers to lower their prices and passes savings on to consumers which results in

an even greater size advantage. Wal-Mart is attempting to leverage its strong distribution network to

provide online shoppers with convenient in-store pick up options and fast delivery.

The company’s low prices are appealing to consumers during recessions. The Great Recession of 2007

to 2009 did not impede operations as Wal-Mart grew revenue, earnings, and dividends each year

through the recession. Wal-Mart is among the most ‘recession-proof’ publicly traded businesses.

Growth Prospects, Valuation, & Catalyst

Wal-Mart’s future growth will come from smaller layout stores and grocery stores as well as digital/e-

commerce growth. Wal-Mart is expecting 30% to 40% e-commerce growth a year over the next

several years. The company’s neighborhood market stores experienced 5.5% comparable store sales

growth in Wal-Mart’s last quarter.

Wal-Mart is currently trading at a P/E ratio of 17 which is well below the market’s P/E ratio of 20.

Wal-Mart is the cheapest publicly traded discount retailer in the US. It has a lower P/E ratio than

competitors Target (P/E ratio of 31.5) and Costco (P/E ratio of 29.4) despite being the industry leader.

Wal-Mart’s P/E ratio will likely rise as the company’s e-commerce sales continue to grow and the

company reports favorable comparable store sales in the US.

Maximum Drawdown (starting in year 2000): -37% in October of 2000

Dividend Stats Dividend Yield: 2.24%

10 Year Dividend Growth Rate: 14.00% per year

Most Recent Dividend Increase: 2.13%

Dividend History: 41 Consecutive years of dividend increases

ExxonMobil (XOM)


ExxonMobil holds the record for most profits in any one year by a corporation. The company is

currently the 2nd

largest publicly traded corporation in the world (behind only Apple). ExxonMobil has

generated $34 billion in earnings over the last 12 months. ExxonMobil can trace its lineage back to

Rockefeller’s Standard Oil.

ExxonMobil’s stock has been very volatile this month as oil prices have plunged below $60 a barrel.

The company’s stock fell under $87 before recovering to a high of just under $95 this month. The

company’s short-term earnings will likely be affected by oil prices. Long-term earnings power remains

strong for ExxonMobil.

Next Dividend Record Date: Mid February, 2015 Next Earnings Release: End of January, 2015


ExxonMobil’s competitive advantage comes from its size, history, and technical knowledge in its

highly profitable upstream business. ExxonMobil’s industry leading size coupled with its history

working with the US government and other large oil companies give it access to lucrative oil & gas

investment opportunities that smaller companies don’t have.

Despite its strong competitive advantage, ExxonMobil’s short-term earnings are affected by recessions

and falling oil prices. ExxonMobil’s earnings took a significant dip from $11.58/share to $6.60/share

in 2008. The company’s profit margins are somewhat sensitive to recessions, as oil prices tend to

decline during times of economic hardship. The company’s long-term outlook is not impacted by short

term (or even multiyear) recessions as ExxonMobil tends to remain profitable in economic downturns.

This means the company can whether recessionary storms without fears of bankruptcy.


ExxonMobil’s future growth will come from increasing demand for energy brought on by global GDP

per capita growth. Energy demand for oil is expected to rise as far out as 2040. The company is well

positioned to take advantage of rising global energy demand. Oil price fluctuations will cause the

company’s earnings to be ‘lumpy’ over any one year, but stable over multi-year periods.

ExxonMobil is still undervalued with a P/E ratio of just 11.7. The company is trading near the bottom

of its historical P/E 10 ratio range, despite a shareholder friendly management and long growth runway.

ExxonMobil shareholders will likely benefit from gains due to an increase in the company’s P/E ratio

when the business reports increasing volume growth, or when oil prices increase.

Maximum Drawdown (starting in year 2000): -37% in July of 2010

Dividend Stats

Dividend Yield: 2.97%



Dividend History: 32 consecutive years of dividend increases

Deere & Company (DE)


Deere & Company is the largest manufacturer of farming machinery in the world. In addition, the

company manufactures construction equipment, forestry equipment, and operates a financing division

to help sell its expensive equipment. Deere & Company was founded in 1837 and has a market cap of

$30.4 billion.

Next Dividend Record Date: March 31st, 2015 Next Earnings Release: Mid February, 2015


Deere & Company’s competitive advantage comes from its brand recognition and reputation for quality

in the farming machinery industry. The company charges a premium price for its farming equipment,

but it is known for increasing production and reducing down time thanks to its high quality products.

Deere & Company’s competitive advantage have given it a 60% market share of the farming

equipment industry in the US and Canada.

Deere & Company is affected by recessions. The company saw EPS fall from a high of $4.70 in 2008

to a low of $2.82 in 2009 at the height of the Great Recession. Despite this, the company remained

profitable and increased dividend payments each year of the recession. Deere & Company’s earnings

are cyclical and dependent upon grain price. Farmers tend to hold of large capital investments when

their cash flows are low from reduced grain prices.


As mentioned above, the farming machinery industry is highly cyclical. Deere & Company is expected

to be in a cyclical trough next year as grain prices have fallen while farmer input costs have increased.

As a result, the company is expecting EPS of about $5.22 next year versus EPS of $8.63 in 2014. Long

term growth prospects are bright for Deere & Company. Increased affluence and population growth in

emerging markets will drive demand for farming equipment globally. Over the last decade, Deere &

Company has grown EPS at over 12% a year and revenue per share at over 10% a year.

Deere & Company is currently trading at a P/E ratio of just 10.25. The company’s P/E ratio is low due

to expected weakness in 2015. After 2015, the company will likely resume strong growth and benefit

patient shareholders. The cyclical nature of the farming equipment industry has presented a solid entry

point for Deere & Company stock. The catalyst for the company is the recovery of grain prices and

farmer profits, which will likely take place after 2015.

Maximum Drawdown (starting in year 2000): -73% in March of 2009


10 Year Dividend Growth Rate: 11.56%


Dividend History: 27 consecutive years without a reduction

PepsiCo (PEP)


PepsiCo sells much more than sodas. Despite being the 2nd

largest non-alcoholic beverage company in

the world (behind only Coca-Cola), the company generates more than 50% of its revenue from food

and snacks including its Frito-Lay and Quaker brands. In total, PepsiCo has 22 brands that generate

over $1 billion per year in sales including: Gatorade, Tropicana, Cheetos, and Ruffles.

PepsiCo’s 3rd

quarter results were positive. Constant-currency EPS grew 11%, emerging market

revenue grew 8%, and the company expanded its gross margin. In addition, the company raised its full

year guidance from 8% EPS growth to 9% and increased its dividend 15%.

Next Dividend Record Date: Early March, 2015 Next Earnings Release: Mid January, 2015


PepsiCo’s competitive advantage comes from its powerful brands. It reinforces brand awareness

through large advertising spending. In 2013, PepsiCo spent $3.9 billion on advertising and marketing,

which is nearly 6% of total revenues. PepsiCo’s branding and low priced consumer food and beverage

products insulate it from much of the effects of recessions.

PepsiCo’s operating performance was stellar over the 2007 to 2009 Great Recession. The company’s

revenue dipped slightly from 2008 to 2009, and earnings had a small dip from 2007 to 2008.

Recessions have historically slowed PepsiCo’s growth, but have done little to impact its profitability.


PepsiCo’s flagship Pepsi brand and other carbonated beverages are experiencing stagnant growth as

consumers change their beverage preferences to still (water, tea, juice) drinks. The company’s growth

potential lies with its Frito-Lay and still beverage brands coupled with market penetration in the

developing world.

PepsiCo’s current P/E ratio of 20.7 is close to its historical average. The company is slightly more

expensive than the overall market, but is of a much higher quality than the average publicly traded

stock. PepsiCo has had double-digit revenue and dividend growth over the last ten years. The

company has positioned itself to take advantage of growth in the developing world with its popular

chip brands.


Dividend Stats




Dividend History: 42 Consecutive years of dividend increases

ConocoPhillips (COP)


The United States is now the 3rd

largest oil producing nation (behind only Saudi Arabia and Russia)

thanks to unconventional oil plays in the US. ConocoPhillips is one of the leaders in US

unconventional oil with its large stakes in both the Eagle Ford and Bakken fields.

Like ExxonMobil, ConocoPhillips has experienced stock price volatility in December. ConocoPhillips

stock fell to under $62 a share before recovering to a high of about $71 this month. Falling oil prices

have brought about this price volatility.

Next Dividend Record Date: Mid February, 2015 Next Earnings Release: Early February, 2015


ConocoPhillips’ competitive advantage comes from its globally diversified portfolio and low

production costs in the US. ConocoPhillips can produce unconventional North American oil at about

$40 per barrel, one of the lowest costs in the industry.

ConocoPhillips is sensitive to recessions because oil prices tend to drop during recessions as demand

falls. The company’s EPS decreased from a high of $10.66 in 2008 down to just $3.24 in 2009.

ConocoPhillips did remain profitable throughout the Great Recession. Oil prices dictate the company’s

profitability in the short-term. In the long-run, global demand for energy will determine

ConocoPhillips profitability.


ConocoPhillips growth plans are centered around expanding North American unconventional oil

production at about 20% per year. The fall in oil prices caused ConocoPhillips to cut its capital

spending budget 20% in 2015. The company still expects total production to increase 3% in 2015,

however. Over the next several years, ConocoPhillips’ goal is to generate 3% to 5% production growth

and 3% to 5% growth from efficiency gains each year. The company accomplished its production

growth goals (4% growth) in its most recent quarter (10/30/14). It did not accomplish its efficiency

gains goal as operating costs increased on the quarter.

Investors get paid to wait with ConocoPhillips. The company has a 4.24% dividend yield and a P/E

ratio of just 9.13; less than half of the S&P 500’s P/E ratio. ConocoPhillips appears significantly

undervalued at this time. The company should see its P/E ratio expand when oil prices rise.

Maximum Drawdown (starting in year 2000): -62.35% in February of 2009





Coca-Cola (KO)


Coca-Cola is #1 in both carbonated and non-carbonated non-alcoholic beverages around the world.

The company has 17 brands that sell over $1 billion annually including: Coca-Cola, Sprite, Fanta,

Dasani, Simply (orange juice), and Minute Maid. Coca-Cola has delivered 29 consecutive quarters of

value share gains in the beverage market.

Coca-Cola’s latest presentation (12/15/14) shows the company’s expected growth plans. The company

expectes long-term EPS growth of between 7% and 9%. The company is expecting full year constant-

currency EPS growth in 2014 and 2015 of 6% in each year, which is below long-term expectations.

Coca-Cola is refranchising its bottling assets in North America to decentralize decision making and

better adapt to local preferences. The company also plans to integrate its soon-to-be-acquired Monster

beverage non-energy drink brands (Hubert’s Lemondae, Hansens’s, and Peace Tea) in 2015.

Next Dividend Record Date: Mid March, 2015 Next Earnings Release: Late January, 2015


Coca-Cola’s competitive advantage comes from its powerful brands. Coca-Cola supports its brands by

spending over $3 billion per year on advertising. The company’s dominance in the beverage industry

gives it more advertising power than competitors (other than PepsiCo), further reinforcing Coca-Cola’s

brand based competitive advantage.

Coca-Cola was minimally affected by the Great Recession of 2007 to 2009. The company’s earnings

per share dipped 2.6% in 2009, but overall performance was not severely impacted. The company is

resistant to recessions because it sells low cost consumer beverages.


Coca-Cola’s long-term growth will come from increasing market penetration in developing markets.

The company’s still beverages (juice, water, tea) will be its growth drivers in the developed world.

Over the next few years, growth will come from margin enhancement through streamlined operations

from the company’s current restructuring and bottling refranchising plan as well as through strategic

partnerships with both Keurig and Monster Beverage.

Coca-Cola trades at a P/E ratio of 20.4 which is slightly above its 10 year historical average. The

company is trading about in line with the S&P 500’s P/E ratio at this time. Traditionally, it has traded

at a premium of 1.1x to the overall stock market. Coca-Cola appears fairly valued based on the

markets current P/E ratio. Investors should expect gains from dividends, share repurchases, and

organic growth, not valuation multiple expansion.


Dividend Stats





General Mills (GIS)


General Mills is the leading packaged foods company in the US with a market cap of $32 billion. The

company brands include: Annie’s, Yoplait, Nature Valley, and Cheerios (among others). Over 70% of

the copmany’s operating profits come from US retail.

General Mills 2nd

quarter 2015 results (released 12/17/14) showed flat constant-currency EPS growth.

General Mills saw revenue drop in the US in several key categories including: cereal (down 5%), pre-

packaged meals (down 7%), and baking products (down 5%). The company is supporting its EPS

numbers with strong share buybacks and growth in US yogurt, snacks, and food services.

Next Dividend Record Date: Mid January, 2015 Next Earnings Release: Mid March, 2015


General Mills is able to sell its grocery products at premium prices because of its well established

brands. The company is especially dominant in cereal, where it owns the Cheerios, Lucky Charms,

Chex, Trix, and Wheaties brands.

General Mills sells staple food products. Food is one of the few items people don’t cut back on during

recessions. General Mills increased revenue, earnings, and dividends each year from 2007 through

2009 during the Great Recession. The company is highly insulated from the effects of economic

downturns.


General Mills growth has stagnated. The company currently generates 70%+ of operating income from

US retail. Cereal is especially important to the company. The US cereal industry is losing ground to

other breakfast options. The cereal industry declined in the late 1990’s before recovering; it will likely

recover again in the future. Despite market share gains, General Mills’ US cereal sales fell 5% over the

last 12 months.

General Mills long-term growth will be driven by its natural/organic portfolio (Annie’s, Cascadian

Farms, LARA Bar), growth in Yoplait, and a potential rebound in cereal. General Mills also has

growth opportunities internationally. The company has grown international sales at a 16% CAGR

since 2009.

General Mills has a P/E ratio of about 19.7, slightly below the S&P 500’s P/E ratio. The company has

traded at a slight discount to the S&P 500 over the last 5 years and is likely at fair value relative to the

overall market. Gains will come from growth and share repurchases, not valuation multiple increases






Philip Morris International (PM)


Philip Morris International is the largest cigarette company in the world. Philip Morris International

sells Marlboro, Parliament, Chesterfield, and other cigarette brands outside the United States. The

company has 40% or more market share in 45 countries/markets including: France, Hong Kong, Saudi

Arabia, and Mexico.

Philip Morris is one of the most well-managed companies I have analyzed. Despite operating in a

declining industry, the company grew EPS by 10.4% in the 3rd

quarter of 2014 versus the same quarter

a year ago. Philip Morris was able to grow EPS in double digits despite cigarette volume declines by

increasing prices, reducing expenses, and repurchasing shares.

Next Dividend Record Date: Late March, 2015 Next Earnings Release: Mid January, 2015


Philip Morris’ competitive advantage comes from its strong brands. Marlboro is one of the most

valuable global cigarette brands. Philip Morris controls nearly 40% of the cigarette market in Europe.

In addition, Philip Morris sells a highly addictive product and can increase prices to offset additional

taxes levied by governments around the world due to the inelastic demand curve for its products.

Philip Morris was spun-off from its sister company Altria during the most recent recession. Because of

this the company does not have financial data from the last recession. Tobacco businesses have

traditionally performed well through recessions, as consumers tend to smoke the same amount (or

more) of cigarettes during times of economic hardship.


Philip Morris shareholders will receive strong returns from the company’s high dividend yield, large

share repurchases, and organic growth. The company’s long-term growth will come from the e-vapor

and heated tobacco industry, which is still in its infancy. Philip Morris has partnered with Altria to

create new products and to license each other’s current offerings in the burgeoning e-vapor and heated

tobacco industry. The company expects constant currency EPS growth of between 8% and 10% in

2015. The stock currently has a dividend yield of over 4.8%, for total returns of between 12.8% and

14.8% for shareholders in 2015 before valuation changes.

The company trades at a P/E ratio of about 15.1, which is in line with its historical P/E average. Philip

Morris is a high quality business trading around fair value. Its management’s capital allocation skills

are first class, which will likely result in continued strong 12%+ returns for shareholders.


Dividend Stats


10 Year Dividend Growth Rate: 10.82% per year for past 5 years, (10 year data not available)



(Counting Altria history before spin-off)

McDonald’s (MCD)


McDonald’s has 35,000+ locations around the world. McDonald’s is the largest publicly traded

restaurant in the world; nearly 3 times as large as its closest competitor (Yum! Brands) by market cap.

The company now generates more revenue in Europe than in the US.

McDonald’s November sales report (released 12/08/14) showed comparable store sales were down in

all 3 of its segments. The company saw its comparable store sales rate worsen from October numbers

in 2 of its 3 segments. The US segment numbers look especially bad as McDonald’s continues to lose

ground to its competitors. Despite one of the worst years in the company’s last decade, McDonald’s

has still grown constant currency sales 1.3% through the first 11 months of 2014.

Segment November Comparable Sales October Comparable Sales

U.S. Down 4.6% Down 1.0%

Europe Down 2.0% Down 0.7%

APMEA1 Down 4.0% Down 4.2%

Next Dividend Record Date: Early March, 2015 Next Earnings Release: Late January, 2015


McDonald’s derives its competitive advantage from its strong brand and franchising business model.

McDonald’s franchising model allows it to grow quickly and realize higher return on assets than a

store-owned business model. The company’s golden arches and McDonald’s brand are recognizable

throughout the world. The company’s brand is associated with cheap hamburgers and fast service.

The Great Recession of 2007 to 2009 did not impact McDonald’s. The company grew revenue per

share, earnings per share, and dividends per share each year throughout the recession. The company’s

low priced food items do well in recessions as consumers switch from more expensive restaurants.


McDonald’s has had a bad year. The tainted meat situation in China and store closures in Russia due

to political issues are likely onetime events that will not impact long-term performance. Weak

performance in Europe and the US is more troubling. The company is updating its menu and

advertising to enhance sales. McDonald’s has time to find the right mix; despite all the negativity

surrounding the company, constant currency sales have increased in the year.

McDonald’s has significant upside potential that will likely be realized when the company returns to

positive comparable store sales growth.


Dividend Stats





1 APMEA stands for Asia Pacific, Middle East, & Africa

Kellogg (K)


Kellogg is the global leader in cereal and 2nd

largest publicly traded packaged foods company (behind

General Mills). The company generates 55% of sales in the US and owns the Kashi, Cheez-It,

Pringles, Pop-Tart, Frosted Flakes, Rice Krispies, Froot Loops, and Bear Naked brands, among others.

Kellogg’s latest earnings release (10/30/14) showed revenue was down in North America and the Asia

Pacific region. The company saw positive revenue growth in Europe and Latin America. Kellogg is

struggling in North America as consumers are slowly switching away from unhealthy cereals and

weight-loss products to ‘total health’ options. Kellogg’s Kashi and Bear Naked brands are

experiencing rapid growth, while other key brands are suffering.

Next Dividend Record Date: Early March, 2015 Next Earnings February 12th

, 2015


Kellogg’s competitive advantage comes from its strong brands. Kellogg has seen its competitive

position weaken somewhat as management has failed to keep pace with growing health trends in food.

The company appears to be on the right track now, with a focused effort on the health benefits of its

products.

Kellogg increased its EPS each year through the Great Recession of 2007 to 2009. The company’s low

priced consumer food products are minimally impacted by recessions. Consumers will buy chips and

cereal regardless of the overall economic climate.


Over the long-term, Kellogg’s growth will come from further expansion into international markets.

The company is rumored to be discussing a potential acquisition of United Biscuits. United Biscuits is

the UK’s market leader in biscuits. The company maintains a #2 position in France, The Netherlands,

Ireland, and Belgium.

Over the next 1 to 2 years Kellogg’s focus on health and increased marketing spending should return

cereal to growth. Kellogg has experienced headwinds in cereal before. The company did not eclipse

cereal revenue highs from 1995 until 2005. Kellogg’s history shows it can recover from cereal

declines.

Kellogg is currently trading at a P/E ratio of 17.2. Kellogg has historically traded in line with the S&P

500’s P/E ratio which currently sits around 20. Kellogg appears to be undervalued relative to the

market at current prices. Kellogg will likely see its P/E ratio revise upward when its US cereal division

returns to growth.

Maximum Drawdown (starting in year 2000): -36.49% in March of 2009





List of Stocks by Sector

Each of the 143 stocks with 25 or more years of dividend payments without a reduction are sorted

by sector below. Stocks are listed in order, with the highest ranked based on The 8 Rules of

Dividend Investing first, and the lowest ranked last.

Basic Materials 1. ExxonMobil (XOM)

2. ConocoPhillips (COP)

3. BHP Billiton (BHP)

4. Helmerich & Payne (HP)

5. Chevron (CVX)

6. Valspar (VAL)

7. Enbridge (ENB)

8. Imperial Oil (IMO)

9. Sherwin-Williams (SHW)

10. Sigma-Aldrich (SIAL)

11. HB Fuller (FUL)

12. PPG Industries (PPG)

13. National Fuel Gas (NFG)

14. RPM International (RPM)

15. Air Products & Chem. (APD)

16. Energen (EGN)

17. NACCO Industries (NC)

18. Nucor (NUE)

Consumer Goods 1. PepsiCo (PEP)

2. Coca-Cola (KO)

3. General Mills (GIS)

4. Philip Morris International (PM)

5. Kellogg (K)

6. J.M. Smucker (SJM)

7. Kimberly-Clark (KMB)

8. Altria (MO)

9. Ecolab (ECL)

10. McCormick & Company (MKC)

11. Hormel Foods (HRL)

12. Archer-Daniels-Midland (ADM)

13. Flowers Foods

14. Colgate-Palmolive (CL)

15. Procter & Gamble (PG)

16. Nike (NKE)

17. Universal Corporation (UVV)

18. Mondelez (MDLZ)

19. Clorox (CLX)

20. Church & Dwight (CHD)

21. Sonoco Products (SON)

22. Hershey (HSY)

23. V.F. Corporation (VFC)

24. Kraft (KRFT)

25. Stepan Company (SCL)

26. Weyco Group (WEYS)

27. Brown-Forman (BF-B)

28. Bemis Company (BMS)

29. Carlisle Companies (CSL)

30. Tootsie Roll Industries (TR)

31. Lancaster Colony (LANC)

32. Leggett & Platt (LEG)

33. Johnson Controls (JCI)

34. Nestle (NESN)

35. HNI Corporation (HNI)

Financial 1. AFLAC (AFL)

2. Chubb (CB)

3. Commerce Bankshares (CBSH)

4. Tompkins Financial (TMP)

5. T. Rowe Price Group (TROW)

6. Franklin Resources (BEN)

7. First Financial Bank (FFIN)

8. Eaton Vance (EV)

9. RLI Corporation (RLI)

10. McGraw Hill Financial (MHFI)

11. Community Trust (CTBI)

12. Eagle Financial Services (EFSI)

13. Universal Health Realty (UHT)

14. 1st Source Corporation (SRCE)

15. HCP, Inc. (HCP)

16. Harleysville Savings (HARL)

17. First Financial Corp. (THFF)

18. Arthur J Gallagher & Co (AJG)

19. Cincinnati Financial (CINF)

20. Mercury General (MCY)

21. Old Republic Int’l (ORI)

22. Northern Trust (NTRS)

23. United Bankshares (UBSI)

24. Federal Realty Trust (FRT)

Technology 1. AT&T (T)

2. BCE Inc. (BCE)

3. Verizon Wireless (VZ)

4. Auto. Data Processing (ADP)

5. Computer Services Inc. (CSVI)

6. Diebold Incorporated (DBD)

7. Brady Corporation (BRC)

8. Telephone & Data Syst. (TDS)

Utilities 1. UGI Corporation (UGI)

2. Consolidated Edison (ED)

3. Fortis (FTS.TO)

4. Black Hills Corporation (BKH)

5. Canadian Utilities (CU.TO)

6. SJW Corporation (SJW)

7. Northwest Natural Gas (NWN)

8. Questar Corporation (STR)

9. Atmos Energy (ATO)

10. Vectren Corporation (VVC)

11. American States Water (AWR)

12. WGL Holdings (WGL)

13. MGE Energy (MGEE)

14. Connecticut Water (CTWS)

15. Middlesex Water (MSEX)

16. Otter Tail (OTTR)

17. Piedmont Natural Gas (PNY)

18. California Water Service (CWT)

Industrial Goods 1. Deere & Company (DE)

2. Dover Corporation (DOV)

3. Pentair (PNR)

4. Caterpillar (CAT)

5. 3M (MMM)

6. United Technologies (UTX)

7. Emerson Electric (EMR)

8. Parker-Hannifin (PH)

9. Nordson Corporation (NDSN)

10. Illinois Tool Works (ITW)

11. Stanley Black & Decker (SWK)

12. Donaldson Company (DCI)

13. Raven Industries (RAVN)

14. Clarcor (CLC)

15. Gorman-Rupp (GRC)

16. Tennant Company (TNC)

Services 1. Wal-Mart (WMT)

2. McDonald’s (MCD)

3. W.W. Grainger (GWW)

4. Cintas Corporation (CTAS)

5. Empire Company (EMP-A.TO)

6. Walgreen (WBA)

7. Genuine Parts Company (GPC)

8. Sysco Corporation (SYY)

9. Target (TGT)

10. Disney (DIS)

11. Family Dollar Stores (FDO)

12. United Parcel Service (UPS)

13. Lowe’s Companies (LOW)

14. ABM Industries (ABM)

15. Cardinal Health (CAH)

16. Mine Safety Appliances (MSA)

17. Bowl America (BWL-A)

Health Care 1. Abbott Laboratories (ABT)

2. Becton, Dickinson & Co. (BDX)

3. Johnson & Johnson (JNJ)

4. Medtronic (MDT)

5. United Health Group (UNH)

6. CR Bard (BCR)

7. AbbVie (ABBV)

This information is not personalized advice. It is for informational purposes only. Please see disclaimer at end of newsletter for more.

List of Stocks by Rank

Each of the 143 stocks with 25 or more years of dividend payments without a

reduction are listed below. Stocks are listed in order, with the highest ranked based

on the 8 Rules of Dividend Investing first, and the lowest ranked last.

1. Wal-Mart Stores (WMT)

2. ExxonMobil (XOM)

3. Deere & Company (DE)

4. PepsiCo (PEP)

5. ConocoPhillips (COP)

6. Coca-Cola Company (KO)

7. General Mills (GIS)

8. Philip Morris (PM)

9. McDonald's (MCD)

10. Kellogg (K)

11. The J.M. Smucker Co. (SJM)

12. Abbott Laboratories (ABT)

13. BHP Billiton (BHP)

14. AFLAC (AFL)

15. Helmerich & Payne (HP)

16. Chubb (CB)

17. Kimberly-Clark (KMB)

18. Bect. Dickinson, & Co. (BDX)

19. Chevron (CVX)

20. Johnson & Johnson (JNJ)

21. UGI Corporation (UGI)

22. W.W. Grainger (GWW)

23. Dover (DOV)

24. Altria Group (MO)

25. Medtronic (MDT)

26. AT&T (T)

27. Commerce Banc. (CBSH)

28. United Health Group (UNH)

29. Ecolab (ECL)

30. McCormick & Co. (MKC)

31. C.R. Bard (BCR)

32. Hormel Foods (HRL)

33. BCE, Inc. (BCE)

34. Archer-Daniels-Mid.(ADM)

35. Flowers Foods (FLO)

36. Valspar (VAL)

37. Enbridge (ENB)

38. Pentair (PNR)

39. Cintas (CTAS)

40. Caterpillar (CAT)

41. Colgate-Palmolive (CL)

42. Empire Co. (EMP-A.TO)

43. Imperial Oil (IMO)

44. Walgreen Company (WBA)

45. 3M Company (MMM)

46. United Technologies (UTX)

47. Consolidated Edison (ED)

48. Procter & Gamble (PG)

49. Fortis (FTS.TO)

50. Verizon Wireless (VZ)

51. Tompkins Financial (TMP)

52. Genuine Parts Co. (GPC)

53. Nike (NKE)

54. Automatic Data Proc. (ADP)

55. Sherwin-Williams (SHW)

56. Emerson Electric (EMR)

57. Sysco (SYY)

58. AbbVie (ABBV)

59. Universal Corporation (UVV)

60. Parker-Hannifin (PH)

61. T. Rowe Price Group (TROW)

62. Franklin Resources (BEN)

63. Mondelez (MDLZ)

64. First Fin. Bankshares (FFIN)

65. Clorox (CLX)

66. Sigma-Aldrich (SIAL)


67. Church & Dwight (CHD)

68. Nordson (NDSN)

69. Eaton Vance (EV)

70. Sonoco Products (SON)

71. Hershey (HSY)

72. Target (TGT)

73. Disney (DIS)

74. VF Corporation (VFC)

75. Illinois Tool Works (ITW)

76. Stanley B&D (SWK)

77. Computer Services (CSVI)

78. Black Hills Corp. (BKH)

79. Family Dollar Stores (FDO)

80. United Parcel Service (UPS)

81. Canadian Utilities (CU.TO)

82. SJW Corporation (SJW)

83. RLI Corporation (RLI)

84. Northwest Natural Gas (NWN)

85. McGraw Hill Fin. (MHFI)

86. Lowe's Companies (LOW)

87. Questar Corporation (STR)

88. H.B. Fuller Company (FUL)

89. Comm. Trust Banc. (CTBI)

90. Kraft Company (KRFT)

91. Donaldson Company (DCI)

92. Stepan Company (SCL)

93. Atmos Energy (ATO)

94. ABM Industries (ABM)

95. Vectren (VVC)

96. Weyco Group (WEYS)

97. American States Water (AWR)

98. WGL Holdings (WGL)

99. Eagle Financial Svcs. (EFSI)

100. Brown-Forman Class B BF-B

101. Univ. Health Realty (UHT)

102. 1st Source Corp. (SRCE)

103. MGE Energy Inc. (MGEE)

104. Bemis Company (BMS)

105. HCP Inc. (HCP)

106. Conn. Water Service (CTWS)

107. Harleysville Savings (HARL)

108. First Financial Corp. (THFF)

109. Cardinal Health (CAH)

110. Arthur J Gallagher (AJG)

111. PPG Industries (PPG)

112. Carlisle Companies (CSL)

113. Middlesex Water (MSEX)

114. Tootsie Roll Industries (TR)

115. Otter Tail (OTTR)

116. Clarcor (CLC)

117. Piedmont Natural Gas (PNY)

118. Raven Industries (RAVN)

119. Cincinnati Financial (CINF)

120. Mercury General (MCY)

121. Old Republic Int’l (ORI)

122. Northern Trust (NTRS)

123. Diebold Inc. (DBD)

124. National Fuel Gas (NFG)

125. Brady Corporation (BRC)

126. Gorman-Rupp Co. (GRC)

127. RPM International (RPM)

128. Air Products & Chem. (APD)

129. California Water Serv. (CWT)

130. United Bankshares (UBSI)

131. Energen (EGN)

132. Lancaster Colony (LANC)

133. Mine Safety App. (MSA)

134. NACCO Industries (NC)

135. Bowl America (BWL.A)

136. Nucor Corporation (NUE)

137. Leggett & Platt (LEG)

138. Federal Realty Trust (FRT)

139. Johnson Controls (JCI)

140. Tennant Company (TNC)

141. Telephone & Data Sys. (TDS)

142. Nestle (NESN)

143. HNI Corporation (HNI)


Portfolio Building Guide

The process of building a high quality dividend growth portfolio is not complicated:

Each month invest in the top ranked stock in which you own the smallest dollar amount.

Over time, you will build a well-diversified portfolio of great businesses purchased at

attractive prices.

Examples

Portfolio 1 Portfolio 2

Ticker Name Amount Ticker Name Amount

WMT Wal-Mart $ 1,002 WMT Wal-Mart $ 4,374

XOM ExxonMobil $ - XOM ExxonMobil $ 4,878

DE Deere & Co. $ - DE Deere & Co. $ 4,353

PEP PepsiCo $ - PEP PepsiCo $ 2,952

COP ConocoPhillips $ - COP ConocoPhillips $ 3,309

KO Coca-Cola $ - KO Coca-Cola $ 4,864

GIS General Mills $ - GIS General Mills $ 6,660

PM Philip Morris $ - PM Philip Morris $ 2,367

MCD McDonald’s $ - MCD McDonald’s $ 2,818

K Kellogg $ - K Kellogg $ 6,243

- If you had portfolio 1, you would buy ExxonMobil, the top ranked stock you own least.

- If you had portfolio 2, you would buy Philip Morris, the top ranked stock you own least.

If you have an existing portfolio, switch over to the Sure Dividend strategy over a period

of 20 months. Each month, take 1/20 of your initial portfolio value, and buy the top

ranked stock you own the least (as per the examples above).

When you sell a stock, use the proceeds to purchase the top ranked stock you own the

least. Reinvest dividends in the same manner.

This simple investing process will build a diversified portfolio of high quality dividend

stocks over a period of less than 2 years. Further, higher ranked stocks will receive

proportionately more investment dollars as they will stay on the rankings longer. You

will build up large positions in the highest quality stocks over your investing career.

Alternatively, the Top 10 list is also useful as an idea generation tool for those with a

different portfolio allocation plan.


List of Past Recommendations

The stocks below are all of the previous recommendations of Sure Dividend using

The 8 Rules of Dividend Investing. The date each stock was first recommended is

also shown below.

Name Ticker Current Rank Status 1st Rec. Date Clorox CLX 65 Hold April 2014

Target TGT 72 Hold April 2014

AFLAC AFL 14 Hold April 2014

Chubb CB 16 Hold April 2014

Kimberly-Clark KMB 17 Hold April 2014

Genuine Parts Co. GPC 52 Hold May 2014

3M MMM 45 Hold May 2014

AT&T T 25 Hold June 2014

Becton, Dickinson BDX 18 Hold June 2014

Abbott Labs ABT 12 Hold July 2014

EcoLab ECL 29 Hold October 2014

J.M. Smucker SJM 11 Hold November 2014

When a stock comes up as a sell, it will be highlighted here as well as in the opening

thoughts segment of the newsletter. So far, no stock recommendations have come up

as a sell using The 8 Rules of Dividend Investing.

Disclaimer Nothing presented herein is, or is intended to constitute, specific investment advice. Nothing in this newsletter should be construed as a

recommendation to follow any investment strategy or allocation. Any forward looking statements or forecasts are based on assumptions and

actual results are expected to vary from any such statements or forecasts. No reliance should be placed on any such statements or forecasts when making any investment decision. While Sure Dividend has used reasonable efforts to obtain information from reliable sources, we make no

representations or warranties as to the accuracy, reliability or completeness of third-party information presented herein. No guarantee of

investment performance is being provided and no inference to the contrary should be made. There is a risk of loss from an investment in securities. Past performance is not a guarantee of future performance.

Ending Thoughts Thanks for taking the time to read the January 2015 Sure Dividend newsletter. The

S&P 500 was nearly flat this month, despite lots of uncertainty surrounding global

markets. We currently have extremely low oil prices and interest rates, coupled with

fears of terrorism and a faltering Russian economy (brought about by low oil prices

and economic sanctions). Despite the constant turmoil around us, those who invest

with a plan will do better than those who take no time to plan.

“Life is full of uncertainties. Future investment earnings and interest and inflation

rates are not known to anybody. However, I can guarantee you one thing. Those who

put an investment program in place will have a lot more money when they come to

retire than those who never get around to it”

- Noel Whittaker

I strongly believe investing in high quality businesses with a long history of rewarding

shareholders through rising dividends will compound your wealth over time. The

sooner you create and implement your investing plan, the sooner you will see results.

Investing takes time to build real value; there are no short-cuts or quick fixes.

Businesses in slow changing industries that possess strong competitive advantages are

much more likely to grow year after year, saving investors the frictional costs and

stress of constantly switching stocks. This month’s newsletter closes with one of

Warren Buffett’s better quotes on patience and the value of thinking ahead:

“Someone’s sitting in the shade today

because someone planted a tree a long time ago”

- Warren Buffett

Thanks again,

Ben Reynolds

sure dividend€¦ · next dividend record date: early march, 2015 next earnings release: february...

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