Monday, March 23, 2009
(Cont'd from above)...

A dividend boost is just about the most important sign that a companies management can give you about the current strength of its business… most companies know nothing… but a company that can raise its dividend is a company that still has a steady, reliable growth path.. that is what we want in a stock… but they can be hard to find… that is why we look for clues… we do a little ratieoscillation, ala Edgar Allen Poe… and in this case it is the Purloin Letter, it is hidden in plain sight… plain sight is the companies ability to raise its dividend.

Now, before the market broke down, reinvested dividends counted for 40% of your return from owning stocks for the last 80 years… so obviously it is more important than people think… if you are looking for a sign… something that tells you a stock is good to own… a raised dividend is probably about as good as it gets… our first stock in this series, with the help of Dave Pelletier, who runs the Dividend Stock Advisor Newsletter at TheStreet.com where I am chairman… Dave Pelletier says, he is the go to source for which dividends are going higher and which ones are going to be cut… but he gave us, with some help of my own homework of screening over the weekend a whole portfolio of dividend raisers…

And the first one that I would take a look at and do the homework on is Air Products & Chemicals Inc. (APD) for all of you home gamers.

You are probably familiar with APD, we have had the CEO on and we have talked about it a lot… this is a company that sells all kinds of gases… and for them, the recession has been silent but deadly.. .with the stock down from its 52 week high from $106 to $55... tell me how much I like stocks that have been cut in half… last Thursday March 19th, Air Products boosted its quarterly dividend by a penny… to .45 cents… okay, not a big increase, I don’t care… a boost is a boost is a boost… and this is a company that has jacked up its dividend for 27 consecutive years… the must own date if you want to collect the next dividend… you are never going to hear this term anywhere else… because as we are trying to demystify the market, it is just about everyone else’s interest to make the market as hard as possible to understand… the must own date is the last day where you can buy the stock and still collect the dividend…

Important news flash… that is March 27th… this Friday… you have to own it by this Friday...

Air Products yields 3.2% at these levels… okay, so it is not a superdity duper high yield… it is not notoriously B.I.G. … that is not what we are looking for in this series… don’t get me wrong… dividends are a great source of income… reinvesting big dividends is a fantastic long term strategy… but we care right now about the dividends of Air Products because the company had the ability to raise it… and in this murky market where everything can seem scary or obscure… we got the clear signal that the company is in good shape and not in bad shape… and no need to break out the clove oil with this one… it is Marathon man like as Air Products earnings cover the dividend 2.2 times over.

Why else to like Air Products?…

There are some subtle signs that the companies February sales were actually pretty decent… this is an industrial company… that is not bad… the companies February were down 24%, and down 22% in January… but you know what, we got a currency problem here… yes, and natural gas passed thru its nose… if you exclude them, underlying sales were down 15% in January… and get this, only down 9% in February… that feels like Darden Restaurants (DRI) to me… I know that is a restaurant chain, Olive Garden, Red Lobster, but I am thinking about what company did better in February than January… it is this… business is still deteriorating… it is just declining at a substantially slower rate… that is what we look for at the bottom… it is a sign that the bottom might not be far off… and I am a believer… I am less worried about this stock today now that Airgas, a competitor, pre- announced a terrible shortfall this morning… investors used that decline to buy Airgas, just like they did for FedEx Corporation (FDX) last week… Peter McClaughlin runs Airgas, and he does a fabulous job, we love him on Mad Money, he is navigating this difficult period well.

Air Products also has an electronics business that makes about a fifth of its sales… the segment has been a real dog for a long time… but it looks as though things could finally be getting better… the company supplies semi-conductor companies… and you know we have gotten much more positive on those… witness the Xilinx Inc. (XLNX), and the Taiwan Semiconductor (TSM), and I have got some others later in the week… APD also supplies the liquid crystal display industry… that is Corning Inc. (GLW), remember Corning increased its guidance last week… its also higher utilization rates at glass panel manufacturers, these are signs that things are getting better in this LCD game… which is a big market.

Maybe the best thing about Air Products is that it is a weak dollar play… and we celebrate the weak dollar around here… around 53% of the companies sales come from outside of the US… it has been slapped around by the strength of our currency… but now that the greenback is weakening, Air Products will be able to translate its sales into foreign currencies into more dollars… at Air Products the dividend hike is the clue that leads us to look further and see the signs that the gas business could be stabilizing… why bother to raise the dividend if they are not… and you get the extra kick from the weak dollar.

Here is the bottom line…

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