Few investors remember the words of famous value investors Graham and Dodd who wrote that “The prime purpose of a business corporation is to pay dividends to its owners.” Returning money to shareholders prevents managers from wasting it on investments that may not prove profitable for the company. Furthermore according a study by Elroy Dimson, Paul Marsh and Mike Staunton at the London Business School found that investors who put $1 in U.S. stocks at the start of the century were paid back $582 with reinvested dividends, adjusted for inflation. Price increases alone would have given an investor just $6 after that span, less than the $9.90 from holding long-term government debt, according to the study.
Dividend Investors have been under fire recently, with a barrage of negative news hitting the wires almost daily now. Friday was especially bad for many dividend investors, when General Electric (GE) announced a dividend cut from $0.31 to $0.10 share. It has been widely speculated that this industrial conglomerate will cut its dividends since early October 2008. Despite the reassurance from the CEO that this won’t happen, dividend investors were disappointed with a dividend cut. This was the fourth dividend cut in the dividend aristocrats index so far in 2009, versus 14 which have increased their dividends.
With dividend payments on the S&P 500 expected to fall by 18% in 2009, it all seems as if dividend investing is a strategy destined to fail in the current market environment. Despite all the gloom and doom, several companies still rewarded their shareholders with an increase in their annual dividend payments. Most notable is the fact that among the main raisers this week there are two dividend aristocrats, one dividend champion and one international dividend achiever.
Colgate-Palmolive (CL), which engages in the manufacture and marketing of consumer products worldwide, announced that its Board has approved a 10% increase in its quarterly dividend from $0.40 to $0.44 per common share. Colgate-Palmolive is a dividend champion, which has consistently increased its dividends for forty-six consecutive years. The stock currently yields 2.70%.
Chubb (CB), which provides property and casualty insurance to businesses and individuals, announced that its Board has approved a 6.10% increase in its quarterly dividend from $0.33 to $0.35 per common share. Chubb is a dividend aristocrat, which has consistently increased its dividends for forty-four consecutive years. The stock currently yields 3.30%. Check out my analysis of Chubb (CB).
Kimberly-Clark Corporation (KMB), which engages in the manufacture and marketing of health and hygiene products worldwide, announced that its Board has approved a 3.40% increase in its quarterly dividend from $0.58 to $0.60 per share. Kimberly-Clark Corporation is a dividend aristocrat, which has consistently increased its dividends for thirty seven consecutive years. The stock currently yields 5.00%. Check out my analysis of Kimberly-Clark Corporation (KMB).
Thomson Reuters (TRI), which provides intelligent information for businesses and professionals in the financial, legal, tax and accounting, scientific, healthcare, and media markets worldwide, announced that its Board has approved a an increase in its quarterly dividend from $0.27 to $0.28 per share. Thomson Reuters is an international dividend achiever, which has consistently increased its dividends for over 6 consecutive years. The stock currently yields 4.50%.
Westar Energy (WR), an electric utility, provides electric generation, transmission, and distribution services in Kansas, announced that its Board has approved a 3.40 % increase in its quarterly dividend from $0.29 to $0.30 a share. Westar Energy has only increased its dividends since 2003. The stock currently yields 6.90%.
PG&E Corporation (PCG), a public utility company that engages in electricity and natural gas distribution primarily in northern and central California, announced that its Board has approved a 7.7% increase in its quarterly dividend from $0.39 to $0.42 per share. PG&E Corporation started consistently increasing its dividends in 2005. The stock currently yields 4.50%.
PepsiAmericas (PAS), which is the world's second-largest manufacturer of Pepsi products, announced that its Board has approved an increase in its quarterly dividend from $0.135 to $0.14 per share. PepsiAmericas has consistently increased its dividends since 2004. The stock currently yields 3.20%.
PPL Corporation (PPL), which an energy and utility holding company,, announced that its Board has approved a 3.00% increase in its quarterly dividend from $0.335 to $0.345 per share. PPL Corporation has only increased its dividends with some consistency since 2002. The stock currently yields 4.60%.
Full Disclosure: Long KMB
- Dividend Aristocrats List for 2009
- CB Dividend Analysis
- Kimberly-Clark (KMB) Dividend Analysis
- The friendliest states for dividend investors
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