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3 Worst Performing Dividend Kings in 2021

3 Worst Performing Dividend King Stocks in 2021

The year 2021 has been a good one for stocks in the face of the pandemic and high levels of inflation. The COVID-19 pandemic continues, but rising vaccination rates have been favorable. Inflation is the highest in roughly four decades, and the US Federal Reserve is pivoting to remove monetary stimulus at a faster rate. This change is affecting stock prices, especially high-flying tech stocks. The Dividend Kings 2021 are still having an excellent year, though, and should finish the year strongly. Everyone likes to discuss the winners, but it is also instructive to look at the losers for the year. In many cases, poorly performing stocks are experiencing temporary difficulties and maybe a good value. This article discusses the three worst performing Dividend King stocks to date in 2021.

3 Worst Performing Dividend Kings in 2021
3 Worst Performing Dividend King Stocks in 2021

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Market Overview

Tech stocks market returns continued their momentum from 2020 with another good year. However, fears of rising interest rates in response to inflation have tempered gains over the past few weeks. The tech-heavy NASDAQ-100 is up another ~16.8% year-to-date (as of December 15, 2021). This performance is worse than last year when the NASDAQ-100 was up about 48.1% at this point and had a great year.

The Dow Jones Industrial Average (DJIA) is up ~17.4% YTD, more than double and almost three times its performance last year at this point. Again, mega-cap stocks are driving the Dow’s performance.

The S&P 500 Index is the best performing of the three major indices and about 27.1% YTD. This performance is better than last year in mid-to-late December when the S&P 500 Index was up ~17.5%. The S&P 500 is a core part of their lazy retirement portfolio for many people. Total returns in the S&P 500 continue to be fueled by mega-cap tech stocks.

The Dividend Kings 2020 had an excellent year after a weaker 2019 when the group returned only about 3.1% by the end of the year. This year the Dividend Kings are up ~20.8%, as seen in the chart from in StockRover*, which is an excellent return and better than the NASDAQ-100, DJIA, and the Russell 2000 (+13.1%). The Dividend Kings 2021 performed exceptionally well until about mid-June when the S&P 500 overtook it.

Dividend Kings 2021 Performance
Source: StockRover*

Last Year’s Worst Performers

The three worst-performing Dividend Kings in 2020 were Black Hills (BKH), Federal Realty Trust (FRT), and Northwest Natural Holdings (NWN). However, one of the three was amongst the top performers, and all three had positive returns. Federal Realty Trust is up +56.2%, Black Hills is up +18.6%, and Northwest Natural is up +10.4%.

The Dividend Kings Added Three This Year

There were 31 Dividend Kings at the end of 2020. However, the total number grew by three this year to 34. Additions to the list include Universal Corp (UVV), Grainger (GWW), Leggett & Platt (LEG), MSA Safety (MSA), PPG Industries (PPG), and Illinois Tool Works (ITW). 

A change in how we account for years of dividend increases removed Tootsie Roll (TR), Altria (MO), and Farmers & Merchants Bancorp (FMBC) from the List of Dividend Kings in 2020.

3 Worst Performing Dividend King Stocks in 2021

So, after accounting for these changes, the three worst-performing Dividend King Stocks in 2021 were: Lancaster Colony (LANC) at (-11.0%), Leggett & Platt (LEG) at (-2.3%), and MSA Safety (MSA) at (-1.4%) as of this writing based on my watch list in StockRover*.

Dividend Kings 2021 Returns
Source: StockRover*

Lancaster Colony had positive returns in 2020 but is struggling this year. The other two stocks, MSA Safety and Leggett & Platt, only reached the Dividend Kings list in 2021 and were not on the list in 2020. The three stocks are not in the same industry or sector. Furthermore, none of the three stocks are down too much this year. However, they are performing poorly on a relative basis, and the dividend yield of one is 4%+, making it off interest.

I summarize the challenges each one had in 2021 and the positives as the basis for further research.

Lancaster Colony is Struggling

Lancaster Colony is a food producer with leading brands in niche categories. For example, the company focuses on breads, dressings, dips, and croutons. Competition in these categories tends to be lower. Investors may think that the COVID-19 pandemic should provide a tailwind considering the market focus. However, the company is exposed to retail (57% of total sales) and food service (43% of total sales) markets. The foodservice segment is dependent on sales to restaurants, which are volatile during the pandemic. Currently, Lancaster Colony is experiencing higher cost inputs resulting in lower margins. This fact has led to earnings misses in five out of the past seven quarters.

Despite the near-term challenge, Lancaster Colony should be on the radar for most investors. The company portfolios of brands include well-known ones such as Marzetti, New York Brand Bakery, Sister Schubert, Cardini’s, and Chatham Village. Marzetti is a market-leading brand with about 22.9% of the frozen dressing market and roughly 82.0% of the dip market. New York Brand Bakery has ~41.2% of the frozen garlic bread market, Sister Schubert has around 51.6% of the frozen roll market, and several brands combine for about 35.2% of the crouton market.

Source: Lancaster Colony Investor Brief

This brand dominance and long-term organic growth and success, and M&A make the company interesting for dividend growth investors. Furthermore, Lancaster Colony has consecutively raised the dividend for 59 years. The growth rate in the past decade is ~8.8%; it is ~8.7% in the past 5-years and approximately 8.2% in the past 3-years. This consistency is remarkably supported by a reasonable payout ratio of about 57%.

The current dividend yield is about 2.01%, which is not high. However, the dividend yield is greater than the 5-year average and the S&P 500’s average dividend yield. This fact suggests that the stock is undervalued, but the forward price-to-earnings ratio is ~27.0, a high value. Interestingly, the stock has had an elevated multiple of roughly 30X since 2017. Hence, the current valuation is lower than usual. Lancaster Colony is a stock I have been interested in for many years, but it was always too expensive. Now maybe a good time to take a nibble and buy a few shares.

Source: Portfolio Insight*

Leggett & Platt is Undervalued

Leggett & Platt is an unlikely Dividend King. The stock is volatile, with a 5-year beta of about 1.45. In addition, the company has performed poorly at times during recessions since revenue and earnings per share are sensitive to the economic cycle. Nonetheless, Leggett & Platt raised the dividend for 50 years in a row this year and has not cut or suspended the dividend despite the payout ratio rising above 100% at times.

The COVID-19 pandemic and now inflation has impacted Leggett & Platt’s performance. COVID-19 and inflation have resulted in supply chain disruptions and higher input costs. It is no surprise about the reasons Leggett & Platt has been affected since the company is a diversified conglomerate making engineered parts for bedding, furniture, flooring, textiles, automotive, and other manufacturers. All these industries were adversely affected by COVID-19 and now inflation. The effect is that margins are compressed, and profitability is impacted.

Source: Leggett & Platt Investor Brief

Investors should be interested in Leggett & Platt for three reasons. First, the company consistently raises the dividend and has done so during difficult times. Second, the forward dividend yield is about 4.1%, the second-highest of the Dividend Kings. This value is also above the past 5-year average. Lastly, the stock is undervalued, trading at a forward P/E ratio of about 15.1X. This valuation is lower than the average range of 18.0 – 21.0 in the past decade. Furthermore, the stock price is below the 50-day and 200-day exponential moving average (EMA), as seen in a screenshot from  Stock Rover*.

Source: Stock Rover*

Leggett & Platt is a good choice for investors seeking to add income and dividend growth from a Dividend King. However, I am passing for now due to the volatility and low dividend growth rate of about 4% in the past decade. My personal preference is to buy stocks with higher growth rates.

MSA Safety is Overvalued

MSA Safety is another new Dividend King this year. The company is performing poorly relative to the other Dividend Kings and the broader market indices. The company is probably unknown to most investors, but it is a global market leader in firefighter, industrial, mine, energy, construction, and utility safety. MSA Safety continues to grow organically and through acquisitions.

Source: MSA Safety Investor Relations

The pandemic and the start-and-stop recovery negatively affected MSA Safety. Many industrial businesses temporarily closed during the pandemic due to low demand and restrictions. In addition, the energy industry experienced an unprecedented slowdown. That said, 2021 is proving to be a better year.

However, the problem with investing in MSA Safety now is the stock is overvalued by multiple metrics. Compared to the 5-year trailing history and the S&P 500’s average, the forward dividend yield is low. Additionally, the P/E ratio is elevated at about 34.8 compared to the long-term average of roughly 21X. The bottom line is that despite the relative underperformance, MSA Safety is not a place to invest right now, and I am passing on it.

Source: Portfolio Insight*

Prior Year 3 Worst Performing Dividend Kings

3 Worst Performing Dividend King Stocks in 2020


Here are my recommendations:

If you are unsure on how to invest in dividend stocks or are just getting started with dividend investing. Take a look at my Review of the Simply Investing Report. I also provide a Review of the Simply Investing Course. Note that I am an affiliate of Simply Investing.

If you are interested in an excellent resource for DIY dividend growth investors. I suggest reading my Review of The Sure Dividend NewsletterNote that I am an affiliate of Sure Dividend.

If you want a leading investment research and portfolio management platform with all the fundamental metrics, screens, and analysis tools that you need. Read my Review of Stock RoverNote that I am an affiliate of Stock Rover.

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