Scott Clayton, MBA, is senior analyst for TSI Network and associate editor of TSI Dividend Advisor.
What are we looking for?
Sustainable dividends from stocks spurred by a recent change in the C-suite.
The screen
Shares of Starbucks Corp. SBUX-Q jumped 21 per cent this week on the news it has snagged the successful chief executive officer of Chipotle Mexican Grill Inc. Still, the appointment of Brian Niccol, as the coffee giant’s chairman and CEO starting Sept. 9, is just one of several recent top-executive changes across various industries. The best of those hires should lift prospects for their companies and sustain market expectations beyond any short-term boost to share price.
In Starbucks’ case, our analysts at TSI Network expect Mr. Niccol to address declining sales in key markets such as the U.S. and China. Success there should shore up the company’s dividend and promote its future growth.
We started this search with an extensive list of dividend-paying stocks before singling out those with new CEOs appointed this year on the basis of their proven track records and deep market knowledge. We then applied our Dividend Sustainability rating system, which awards points to a stock based on key factors:
- One point for five years of continuous dividend payments – two points for more than five;
- Two points if it has raised the payment in the past five years;
- One point for management’s commitment to dividends;
- One point for operating in non-cyclical industries;
- One point for limited exposure to foreign currency rates and freedom from political interference;
- Two points for a strong balance sheet, including manageable debt and adequate cash;
- Two points for a long-term record of positive earnings and cash flow to cover dividends;
- One point if the company is an industry leader.
Companies with 10 to 12 points have the most-secure dividends, or the highest sustainability. Those with seven to nine points have above-average sustainability; average sustainability, four to six points; and below-average sustainability, one to three points.
More about TSI Network
TSI Network is the online home of The Successful Investor Inc. – the group of widely followed Canadian investment newsletters by editor and publisher Pat McKeough. They include our award-winning flagship newsletter, The Successful Investor, and the TSI Dividend Advisor. TSI Network is also affiliated with Successful Investor Wealth Management.
What we found
Our TSI Dividend Sustainability Rating System generated six stocks:
The change in the C-suite should only enhance the long-term dividend outlook for Seattle-based Starbucks Corp., now in 86 countries.
DuPont de Nemours Inc. DD-N, headquartered in Wilmington, Del., is a global manufacturer of specialty materials, chemicals, agricultural products and more. On June 1, it appointed Lori D. Koch as its new chief executive.
North Chicago-based AbbVie Inc. ABBV-N makes biopharmaceuticals, with a comprehensive product portfolio that has leadership positions across immunology, oncology, aesthetics, neuroscience and eye care. Robert Michael became the company’s second-ever CEO on July 1.
Agilent Technologies Inc. A-N, based in Santa Clara, Calif., makes specialized testing equipment for medical research laboratories and industrial clients. The firm’s new CEO, Padraig McDonnell, took up the job on May 1.
Headquartered in New York, S&P Global Inc. SPGI-N is a global information provider to financial and business information markets through its brands Standard & Poor’s, Dow Jones and others. In June, it named Martina L. Cheung as its new chief executive, effective Nov. 1 of this year. (Note: S&P’s meagre dividend yield reflects its recent share price gains.)
And finally, Bentley Systems Inc. BSY-Q, headquartered in Exton, Pa., is a software developer for the construction industry. On July 1, Nicholas Cumins succeeded CEO Greg Bentley. Mr. Bentley, the eldest of the five brothers who founded the company in 1984, became executive chair of the board.
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