Monday, December 21, 2009

AT&T Raises Distributions by 2.4%

Several companies raised distributions last week. I have included my take on most of them below:

AT&T (T), which is one of the top telecommunications companies in the US, increased its quarterly dividend by 2.40% to 42 cents per share. AT&T is a dividend champion, which has increased its quarterly dividend in each of the past twenty-six consecutive years. The stock currently yields 6.00%. (analysis)

“Our 26th consecutive annual dividend increase underscores the Board’s continued commitment to stockholders and confidence in our strong financial position,” said Randall Stephenson, AT&T chairman and chief executive officer." (AT&T press release)

This was the slowest dividend increase for the telecom company in 8 years. The reason could be because it has a very high payout ratio of 83%, which leaves little room for further dividend increases, without a substantial increase in earnings per share. I do own some AT&T stock, as part of my dividend grouping strategy.

Pfizer Inc. (PFE), which engages in the discovery, development, manufacture, and marketing of prescription medicines for humans and animals worldwide, increased its quarterly dividend by 12.5% to 18 cents per share. The stock currently yields 3.90%. The company cut its dividend in early 2009 after announcing its intent to acquire rival Wyeth in a 68 billion deal. Although the dividend appears to be well covered today, the business model which had previously allowed Pfizer to raise dividends for 41 years appears to be broken. Over the past decade the company has acquired new drugs through acquiring rivals and not organically through R&D. Without solid underlying strength in fundamentals, which would propel future earnings growth, the possibility for a long-term sustained dividend growth is low.

Dominion Resources (D), which engages in the generation, transmission, and distribution of electricity. The company generates electricity through coal, nuclear, gas, and oil resources, increased its quarterly dividend by 4.60% to 45.75 cents per share. This is the seventh consecutive year in which Dominion Resources has raised its quarterly dividend. Dominion Resources (D) does look like an interesting utility company, with one of the lowest payout ratios in the industry plus some solid earnings and dividend growth. The only issue is that the company does not have a long history of raising distributions. The stock currently yields 4.50%.

Hatteras Financial Corp (HTS) invests in adjustable-rate and hybrid adjustable-rate single-family residential mortgage pass-through securities guaranteed or issued by the United States Government agency, or by the United States Government-sponsored entity. The company announced its fourth consecutive distribution increase to $1.20/share. The new dividend is 4.3% higher than its Q3 dividend, and 20% higher than the distribution from this time last year. The stock currently yields 15.80%. While the yield might be tempting it is important to understand that the company makes money by borrowing money using short-term rates and then investing it in long-term government agency bonds, while earning a return in the process. This exposes the company to fluctuations in interest rates. If the FED starts raising rates in 2010, companies like HTS might be negatively affected in the process.

Waste Management, Inc. (WM), which offers collection, transfer, recycling, disposal, and waste-to-energy services, increased its quarterly dividend by 8.60% to 31.5 cents per share. This marks the sixth consecutive year that the Company has increased its quarterly dividend. The stock currently yields 3.50%.

Urstadt Biddle Properties Inc. (UBA), which is a real estate investment trust (REIT), that engages in the acquisition, ownership, and management of commercial real estate properties in the United States, increased its quarterly dividend from 24 to 24.25 cents per share. Urstadt Biddle Properties Inc. is a dividend achiever, which has increased its quarterly dividend for ten years. The stock currently yields 6.20%.

BCE Inc. (BCE), which provides a suite of communication services to residential and business customers in Canada, increased its quarterly dividend by 7% to 43.5 cents per share. This is BCE's third increase to the annual common share dividend since the termination of its proposed privatization agreement in December 2008. The stock currently yields 5.90%.

Moody's (MCO) provides credit ratings and related research, data, and analytical tools; quantitative credit risk measures, risk scoring software, and credit portfolio management solutions; and securities pricing software and valuation models principally in the United States and Europe. The company boosted its quarterly payment by 5% to 10.5 cents per share. This is the first dividend increase for Moody's since the company froze its distributions in 2008. The stock currently yields 1.60%.

General Mills (GIS), which engages in the manufacture and marketing of branded consumer foods worldwide, increased its quarterly dividend by 4.2% to 49 cents per share. General Mills has increased its quarterly dividend in each of the past six consecutive years. The stock currently yields 2.80%.

Full Disclosure: Long AT&T

Relevant Articles:

- AT&T (T) Dividend Stock Analysis
- Is Pfizer (PFE) a value trap for investors?
- Dividend Grouping for Dividend Income
- Twelve Recent Dividend Increasers

1 comment:

  1. Regarding General Mills (GIS), it's useful to remember that the recent div increase was the second one announced in 2009. The div was increased from 43c to 47c as of the July payment, and now 47c to 49c as of the upcoming January payment. That's almost a 14% increase.

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