8 sweetheart CEOs sharing the cash love

Investors adore the business leaders on this list. They've accomplished an amazing feat.

By Minyanville.com Feb 15, 2013 1:04PM
CEO Photodisc Getty ImagesBy Oliver Pursche

If you believe leadership matters, here's a group of guys to bet on:
  • Thomas Linebarger, Cummins Inc. (CMI)
  • Donald Washkewicz, Parker Hannifin Corp. (PH)
  • Hugh Grant, Monsanto Co. (MON)
  • Samual Allen, Deere & Co. (DE)
  • Douglas Oberhelman, Caterpillar Inc. (CAT)
  • Rex Tillerson, Exxon Mobil Corp. (XOM)
  • Robert Iger, Walt Disney (DIS)
  • Joe Watson, Chevron Corp. (CVX)
I believe these chief executives are the top CEOs in the country because they've been able to accomplish an amazing feat during a slow to no growth period in the stock market and the U.S. economy. Specifically, they've presided over a material increase in the cash they return to shareholders, while materially decreasing the amount of profits that are allocated to dividends.

To put this into perspective, and bring it up (or down) to a level everyone can understand, it's like this: While many of your friends are unemployed or underemployed, you manage to deliver to your spouse a significant bump in his or her annual allowance while simultaneously increasing the savings rate of the household at large.

Do that, my friend, and see just what's waiting for you next Valentine's Day.

I arrived at this list of CEOs and companies by looking at the dividend payout ratio (DRP) over the last 10 years for all of the stocks in the S&P 500 ($SPX.X), as well as the index itself. The dividend payout ratio is the percent of earnings of a company allocated to cash dividends. It's defined as: dividends per share ÷ earnings per share. For you academics out there, the DPR is: cash common dividends ÷ (income before extraordinary items-minority Interest - cash preferred dividend) x 100.

Then I looked at the compound annual growth rate in the dividend for all the stocks in the S&P 500 over the last 10 years.

What I was looking for, specifically, were the companies where the dividend was growing at a healthy rate, while the amount of profits allocated to the dividend was shrinking at a healthy rate. At first brush, here's what I found:

* Helmerich & Payne excludes an October 2002 special dividend of $4.59, inclusive of the regular dividend.
** Marathon Oil Corp. excludes a July 2011 special dividend of $20.70, inclusive of the regular dividend.

All of these companies allocated less and less profits to dividends, yet managed to grow their annual dividend at least 5% compounded annually. But I wanted to raise the bar a little higher, so I decided to include only companies and CEOs that were able to reduce the DPR and increase their cash payout in double-digit numbers.
chart 2Click to Minyanville for larger image.

Gentlemen, my hat goes off to you.

By comparison, it's worth noting how the S&P 500 performed at large with respect to these two performance ratios. Specifically, as the chart below demonstrates, for the S&P 500, over the last 10 years, the payout ratio increased at about 1% annually, while the CAGR in cash dividends for the S&P 500 index was 6.86%.


Source: Bloomberg

Regrettably, I fear there are probably more than a few unsung heroes out there. Specifically, among the financial databases my firm subscribes to, we found complete 10-year dividend data on just 133 of the 500 companies that comprise the S&P 500. I left companies with incomplete data out of my analysis, as they should have been for missing dividend payments. However, some of the missing data, no doubt, stems from mergers, acquisitions and divestitures, which means that some sweetheart CEOs will have to manage with love unrequited.

Sources:
Dividend data: divdata.com, Value Line Publishing, LLC.
Payout ratio formula: Bloomberg.
Current dividend yields: Capital IQ.

More from Minyanville
9Comments
Feb 17, 2013 12:32PM
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Cummins? Really ? You've got to be kidding me! The company is still in the "STONE AGES" Nothing new to really present to the modern world. They still give me the feeling of taking me for a ride. If they cant modernize the way they operate, how can they keep up with the 21st  century? Think about it . Same product on the market, same old tragic ways of so called "Consumer Product" if they continue this way of business, they WILL BE left by the wayside and fall to the world! Enjoy!
Feb 17, 2013 9:11PM
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Fat...what are you saying? You "slide" quite a bit and most know that, here.  Providing this and that...and, you are "super" rich?   I will call you out as having nothing other than a computer to profess this and that.  Get a man or a woman as suits you...you are a phony.  Our economy stinks total and done.  I will say that we are above 20% unemployed or underemployed. I believe it  is 25% and more even than that .... no bs.  You are not going to change the "welfare" ingrained.  I am not talking those that have worked and paid into...you have two lost generations..they know nothing else, done.

 

Feb 17, 2013 8:40AM
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Really? Rex Tillerson is a man we all want walking in Death Valley in July 52 miles from anywhere and only a full can of gasoline (no water) to lug. Choose your poison, Rex, but choose and do it as soon as possible. The walk will give him time to consider what his arrogant ignorant ego caused in America. How many alternative initiatives has Rex and his goons put the kibosh to? We hear lots of grabage can investors ranting about Solyndra and Wind Turbines and High-Speed Rail projects, but none seem to mind that gasoline stopped fueling progress and took us all hostage when Dubya came into the spotlight. Anyone remember? We were "running out" out oil, but we are still making high performance street vehicles, idolizing NASCAR and condemning mass transit. If you are "looking up" to the likes of Arrogant Rex here, it's because you hate America. He does. The only merit to the lists in this article is-- it identifies old worn-out platform oligarchies that needed to go and instead got a corrupt pro to keep the stock price stoked and America choked.  
Feb 17, 2013 2:34PM
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What? Jamie Dimon didn't make the list? Oops?
Feb 17, 2013 9:03AM
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As the midwest dries up, so will Monsanto and Deere. Farmers will sell out to Exxon and fracking will replace farming.
Feb 17, 2013 11:02AM
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Monsanto - really - they will destroy anything in their path
Feb 18, 2013 1:50PM
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Things I like....Peanut butter and Jelly..

Twinkies..

Good Whiskey...

Steaks and Burgers.

Kids and G-Kids(even better).

Investing in Good Companies....On Wall St.

And going to Casinoes occassionally.

Along with a Good woman..

A place to live...But don't need a Mansion....Would have to hire a Maid.

I consider myself very lucky..On most counts.

Feb 18, 2013 3:33PM
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I spent about a year one place,once upon a time...Couldn't get a Peanut butter and Jelly Sandwich.

 

Couldn't get a 15 cent McDonald's burger either...

Had to put pills or tablets in our drinking water, to treat it.

 

Have appreciated PBJs and Burgers ever since..

And outside of coffee, good,clean water is the only thing I drink with meals.

Feb 18, 2013 3:43PM
avatar

Outside of Chevron, paying around 3.10%; None of the others, do pay that much.

Most could afford to pay at least a 1/2 % more...I'm sure the CEOs wouldn't suffer?

Much more pleasing to Shareholders..

BUT...

I can offer some applause for them increasing the DIVS..

Plus, for employing LARGE number's of people.

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