3 Dividend Champions You’ve Never Heard Of
Flying under the radar of many investors, these stocks 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 3 Dividend Champions fly under the radar of many investors. 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.
This Champion Is Cleaning Up
Tennant Company TNC is a machinery company that produces cleaning products and offers cleaning solutions to its customers. In the U.S., the company holds the market leadership position in its industry, but the company also sells its products in more than 100 additional countries around the globe. Tennant was founded in 1870.
Tennant reported its third-quarter results on October 31. The company generated revenues of $316 million during the quarter, which was 4% more than the top-line number from the previous year’s quarter. This was slightly better than the recent trend, as revenue had grown less on a year-over-year basis during the previous quarter. Revenues were lower compared to what the analyst community had forecasted, however.
Tennant generated adjusted earnings per share of $1.39 during the third quarter, which was less than what the analyst community had forecasted, and which was down 10% compared to the previous year. Management is forecasting that adjusted EPS will fall into a range of $6.15 to $6.55 in 2024.
The company has plans to grow its sales inorganically, especially in the Asia/Pacific region, where it benefits from above-average market growth rates. The takeover of Chinese cleaning equipment company Gaomei improved Tennant’s sales outlook in the Chinese market, as well as in other Asian markets. Investments in the business in Asia will increasingly pay off and should deliver solid earnings growth for Tennant in the coming years.
Tennant is the leader in the U.S. cleaning machines market. This serves as a competitive advantage, as its market leadership allows for better economics of scale and a superior sales network compared to its peers.
The company has increased its dividend for 54 years.
TNC currently yields 1.5%.
A Financial Champion
Tompkins Financial 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 third-quarter results on October 25, and results were better than expected on both the top and bottom lines, and by some margin for both. Earnings per share came to $1.30, which was nine cents ahead of estimates. Revenue was $76.6 million, which was about $1 million ahead of expectations. Net interest margin was 2.79%, which was up six basis points from the second quarter, and up four basis points from the year-ago period.
Total average cost of funds was up five basis points from Q2, and down 10 basis points from the year-ago period. Total fee-based services revenues were up about 3.2% from the year-ago period, but only by about $648,000 given its small size in terms of total revenue. Noninterest expenses were flat compared with the year-ago period, as well as to the second quarter of this year.
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 Financial has raised its dividend for 38 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 currently yields 3.7%.
An Energy Champion
NACCO Industries 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 Industries is the largest lignite coal producer in the U.S. and ranks among the top 10 of all coal producers.
NACCO Industries 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 November 1, NACCO Industries reported third-quarter results for the period ending September 30, 2024. For the quarter, revenue decreased 4.5% to $46.5 million while earnings per share of $2.14 compared favorably to -$0.51 in the prior year.
Coal revenue was lower by 5.1% to $17.7 million while total tons delivered improved 1.3%. Unconsolidated coal deliveries grew 4.5% to 5.8 million tons while consolidated coal deliveries declined 24.5% to 474K tons. Deliveries from the North American Mining segment were down by 22% to 12 million tons while revenue grew 49% to $32.3 million. Mineral Management revenue grew 54% to $8.8 million due to significantly higher volumes.
Adjusting for its spinoff history, NACCO Industries 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 Industries 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 2, 2023 with the production of lithium expected to begin in 2027 or 2028.
NC currently yields 3.0%.
At the time of publication, Ciura had no positions in any stocks mentioned.