Showing posts with label dividend news. Show all posts
Showing posts with label dividend news. Show all posts

Monday, March 16, 2009

Slow Week for Dividend Increases

The past week was one of the slowest for dividend increases for many months. In the meantime the number of dividend cuts keeps increasing. Just last week Cedar Fair LP (FUN), a dividend achiever which owns and operates 11 amusement and water parks in the United States and Canada, cut its quarterly distribution in half to $0.25/share. This ended the Sandusky Ohio based company’s streak of 20 years of consistent dividend increases.

Other dividend cuts were mainly in the financial sector, where Capital One Financial (COF) cut its dividends by 88% and Synovus (SNV) cut its already lowered dividend by 83%.

W.P. Carey & Co (WPC), which is an investment management company, increased its quarterly dividends to $0.496 from $0.494 paid in 4Q 2008. This represents a 2.90% increase over the dividend paid in 1Q 2008. W.P. Carey & Co has consistently increased its dividends at least once per year since 1999. This limited liability company currently yields 9.40%.

Equity Lifestyles Properties Inc. (ELS), which is a publicly owned real estate investment trust (REIT), increased its quarterly dividend payment by 25% to $0.25 from $0.20/share. The company cut its dividends in 2004, after which it has kept increasing them. The new payment is still about half ELS’s dividends in 2003 however. This REIT currently yields only 2.60%.

Full Disclosure: None

Relevant Articles:

- Why do I like Dividend Achievers
- Another day, another dividend cut
- Telling the truth or being positive?
- Many Dividend Stocks Keep Raising Their Payments


Saturday, March 7, 2009

Seven Solid Dividend Increases bucking the trend of dividend cuts

Last week marked one of the worst times for dividend investors as several prominent companies cut their dividends significantly. The last bastion of companies standing, which were paying dividends such as US Bancorp and Wells Fargo, disappointed their shareholders with dividend cuts. In addition to that markets fell to fresh 12-year lows.

However there were several notable dividend increases from a few solid investor focused stocks. Companies that still continue raising their dividends show that they have enough cash flows to not only operate successfully but also appear relatively immune to overall disruptions in the economy.

Wal-Mart (WMT), which operates the largest chain of retail stores in various formats worldwide, announced that its Board has approved a 15% increase in its quarterly dividend to $0.2725 per share. CEO Mike Duke said, "The strength of our operations and the resulting strong financial position allow us to increase our dividend payout to shareholders again this year. Our free cash flow remains strong enough to fund Wal-Mart's growth around the world, make strategic acquisitions and fund returns to shareholders through dividends and share repurchases."
Wal-Mart is a dividend aristocrat, which has consistently increased its dividends for thirty-five consecutive years. The stock currently yields 1.90%. Check out my analysis of Wal-Mart.

WGL Holdings (WGL), which engages in the delivery and sale of natural gas, and provides energy-related products and services, announced that its Board has approved an increase in its quarterly dividend from $0.355 to $0.3675 per common share. WGL Holdings is a dividend champion, which has consistently increased its dividends for thirty-three consecutive years. The stock currently yields 4.70%.

Qualcomm (QCOM), which designs, manufactures, and markets digital wireless telecommunications products and services based on its code division multiple access (CDMA) technology and other technologies, announced that its Board has approved a 6% increase in its quarterly dividend from $0.16 to $0.17 per common share. Qualcomm has consistently increased its dividends for six consecutive years. The stock currently yields 1.90%.

General Dynamics (GD), which provides business aviation; combat vehicles, weapons systems, and munitions; shipbuilding design and construction; and information systems, technologies, and services, announced that its Board has approved an 8.60% increase in its quarterly dividend from $0.35 to $0.38 per share. General Dynamics has consistently increased its dividends for fifteen consecutive years. The stock currently yields 3.20%.

Piedmont Natural Gas (PNY), which engages in the distribution of natural gas to residential, commercial, industrial, and power generation customers, announced that its Board has approved a 3.80% increase in its quarterly dividend from $0.26 to $0.27 per share. Piedmont Natural Gas is a dividend champion, which has consistently increased its dividends for thirty-one consecutive years. The stock currently yields 4.30%.

Essex Property Trust (ESS), which engages in the ownership, operation, management, acquisition, development, and redevelopment of apartment communities, announced that its Board has approved a small increase in its quarterly dividend from $1.02 to $1.03 per share. Essex Property Trust is a dividend achiever, which has consistently increased its dividends for fourteen consecutive years. This real estate investment trust currently yields 7.50%.

Canadian Natural Resources Limited (CNQ), which engages in the acquisition, exploration, development, production, marketing, and sale of crude oil, natural gas liquids, natural gas, and bitumen, announced that its Board has approved 5% increase in its quarterly dividend from $0.10 to $0.105 per share. Canadian Natural Resources Limited is an international dividend achiever, which has consistently increased its dividends since 2001. The stock currently yields 1.00%.

The latest list of solid dividend raisers proves that income investors should seek to invest in companies with business models that are not cyclical. Companies which have a moat in a certain geographical area, industry or product should do fine irrespective of the overall gyrations of the economy and the stock market. It is companies like these that could generate increasing streams of income, which dividend growth investors are after.

Full Disclosure: Long WMT

Relevant Articles:

- Wal-Mart Dividend Analysis
- Dividend Aristocrats List for 2009
- The Dividend Edge
- Best Dividends Stocks for the Long Run

Monday, March 2, 2009

Many Dividend Stocks Keep Raising Their Payments

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

Relevant Articles:

- Dividend Aristocrats List for 2009
- CB Dividend Analysis
- Kimberly-Clark (KMB) Dividend Analysis
- The friendliest states for dividend investors

Monday, February 23, 2009

Dividend Aristocrats Strike Back

In a week that saw major US indexes fall to fresh multi year lows, there is a group of investors who still remain optimistic. No, this is not a scam touting penny stocks that would bring instant riches. It’s also not a post about some computerized technical analysis program that will turn stones into diamonds.
The strategy is called dividend growth investing, and it is the fundamental way of picking shareholder friendly stocks, which reward their owners with an increasing stream of dividend income. Some of the best dividend stocks are included in the Dividend Aristocrats index, which has outperformed the S&P 500 over the past 5, 3 and one years. Despite some setbacks in 2009 like the cuts from Pfizer (PFE) and State Street (STT), the number of solid companies increasing dividends keeps rising.

The Sherwin-Williams Company (SHW), which engages in the development, manufacture, distribution, and sale of paints, coatings, and related products, boosted its dividends for the thirty first consecutive year. The new dividend increase was rather modest, from 0.35 to 0.355/share and much smaller than the ten year average. Given the tough housing market however, I consider this dividend increase at a time when CEO’s are cutting dividends to preserve cash for projects that won’t yield much, a big dedication to long-term shareholders. The stock currently yields 3.10%. Check out my analysis of SHW.

Integrys Energy Group (TEG), which operates as a regulated electric and natural gas utility company in the United States and Canada, increased its quarterly dividends payment to $0.68/share, which marked the fifty first consecutive year of increased payouts. This utility company currently yields 7.00%.

Coca Cola (KO), which engages in the manufacture, distribution, and marketing of nonalcoholic beverage concentrates and syrups worldwide, raised its quarterly dividend by 8% from $0.38 to $0.41 per common share. The company behind one of the worlds best known consumer brands has rewarded its shareholders with an uninterrupted streak of increased dividends for 47 years. One of Coke’s most prominent shareholders includes Warren Buffett, who owns 200 million shares his favorite soft drinks manufacturer. The stock currently yields 3.50%. Check out my analysis of Coke and Pepsi.

Abbott (ABT), which engages in the development, manufacture, and sale of health care products worldwide, increased the company's quarterly common dividend 11% to $0.40 per share. This marked the company’s 37th year of consecutive dividend increases. The stock currently yields 2.60%. Check out my analysis of ABT.

Albemarle Corporation (ALB) raised its quarterly dividend payments by 4.20% to $0.125/share. The company is a dividend achiever, which has increased its dividends for 14 consecutive years. The stock currently yields 2.40%.

ITT Corporation (ITT) raised its quarterly dividends by 22% to $0.2125/share. The stock currently yields 1.70%.

The Andersons, Inc. (ANDE) raised its quarterly dividends by 3% to 0.0875/share. The stock currently yields 2.40%.

Rogers Communications (RCI) increased the annual dividend rate from $1.00 to $1.16 per share. The stock currently yields 4.70%.

Comcast (CMCSA) raised their dividend 8% to $0.0675 per share quarterly. The stock currently yields 2.10%.

XTO Energy (XTO) increased its quarterly cash dividend by 4.20% to 12.5 cents per share. the stock currently yields 1.605.

Public Service Enterprise Group (PEG) announced a 3.1% increase in its quarterly dividend from $0.3225 to $0.3325 per share. This utility stock currently yields 4.50%.

Tim Hortons Inc.(THI) boosted its quarterly dividend by 11.1% to $0.10. The stock currently yields 1.30%.

Full Disclosure: Long SHW and KO

Relevant Articles:

- Dividend Aristocrats List for 2009
-Cola Wars - Coke versus Pepsi
- Why do I like Dividend Aristocrats?
- Taking Stock in Coca-Cola (KO):

Monday, February 16, 2009

America’s Finest Companies Keep Raising their Dividends

Dividends have historically provided 40% of average annual total return performance to investors. Some researchers have found that it was re-invested dividends that contribute to the majority of total long-term returns for investors. Jeremy Siegel is one of those researchers who has found that the compounding effect of re-investing dividends has accounted for 97% of total returns in the US stock market since 1871. Add in dividend growth as an additional compounding component, and investors could achieve very decent total returns over time. While most investors are running away scared from dividend stocks, fearing that more cuts lie ahead, the true dividend investors keep getting their checks in the mail. They know that by investing in non-cyclical names, there is a smaller chance of dividend cuts. Furthermore, by spreading their bets among as many dividend stocks across all sectors and industries as possible, dividend cuts do not affect their lifestyle that much.
Several companies rewarded their long-term shareholders with news of dividend increases last week.

Robert Half International (RHI) announced that its Board has approved a one-cent increase in its quarterly dividend from $0.11 to $0.12 per share. Robert Half International has consistently increased its dividends since 2004. The stock currently yields 2.70%.

Progress Energy (PGN) announced that its Board has approved an increase in its quarterly dividend from $0.615 to $0.62 per common share. Progress Energy is a dividend achiever, which has consistently increased its dividends for twenty one consecutive years. The 4stock currently yields 6.70%.

Diebold (DBD) announced that its Board has approved a 4% increase in its quarterly dividend from $0.25 to $0.26 per common share. Dieboldis a dividend champion which has consistently increased its dividends for fifty-six consecutive years. The stock currently yields 4.00%.

Sigma-Aldrich (SIAL) announced an 11.50% increase in its quarterly dividend from $0.13 to $0.145 per common share. Sigma-Aldrich is a dividend aristocrat, which has consistently increased its dividends for thirty-three consecutive years. The stock currently yields 1.40%.

3M (MMM) announced that its Board has approved a 2% increase in its quarterly dividend from $0.50 to $0.51 per common share. 3M is a dividend aristocrat, which has consistently increased its dividends for fifty-one consecutive years. The stock currently yields 4.00%.

Northeast Utilities (NU) announced that its Board has approved an 11.70% increase in its quarterly dividend from $0.2125 to $0.2375 per share. Northeast Utilities has consistently increased its dividends since 2001. The stock currently yields 4.00%.

Honeywell (HON) announced an increase in its quarterly dividend from $0.275 to $0.30 per share. Honeywell has consistently increased its dividends since 2005. The stock currently yields 3.40%.

FPL Group, Inc (FPL) announced a 6.20% increase in its quarterly dividend from $0.445 to $0.4725 per share. FPL Group, Inc is a dividend achiever has consisently increased its dividends since 1995. The stock currently yields 3.50%.

Full Disclosure: Long MMM

Relevant Articles:

- Why do I like Dividend Aristocrats?
- Dividend Aristocrats List for 2009
- My Dividend Growth Plan - Diversification
- Dividend Conspiracies

Tuesday, February 10, 2009

Seven Notable Dividend Increases in the news

The markets remained nervous last week as several companies such as State Street, Macy’s and Motorola cut or eliminated their dividend payments. Of those three, seasoned dividend investors should only be concerned with State Street’s dividend cut. During economic downturns it is normal for cyclical industries to cut or eliminate their dividends. Companies with strong competitive advantages, as well as solid consumer brands should keep and even increase their dividends. The companies whose dividend cuts are concerning are the ones which have raised them for more than 10 or 25 years, which represent the so called dividend achievers and dividend aristocrats. This week brought two raises by dividend aristocrats as well as three notable raises from dividend achievers.

General Electric kept reassuring investors that it had sufficient cash flows to pay its dividend and that its AAA rating won’t be lost anytime soon. Over the past few months, anytime GE reassures investors about the stability of its current dividend payment, the news hits the wires and the trading in the common shares gets pretty volatile. The diversified global infrastructure, finance and media company has taken steps to strengthen its cash flow situation by raising almost two thirds of its required long-term funding for 2009, and reducing GE Capital Services commercial paper by 28 billion to 60 billion today.

Avon Products (AVP), which engages in the manufacture and marketing of beauty and related products worldwide, announced that its Board has approved a 5% increase in its quarterly dividend from $0.20 to $0.21 per common share. Avon Products is a dividend achiever, which has consistently increased its dividends for twenty consecutive years. The stock currently yields 3.70%.

Ross Stores (ROST), which operates two chains of off-price retail apparel and home accessories stores in the United States, announced that its Board has approved a 16% increase in its quarterly dividend to $0.11 per common share. Ross Stores is a dividend achiever, which has consistently increased its dividends for over fifteen consecutive years. Since 1994 this retailer has managed to double its dividend payments every three and a half years on average. The stock currently yields 1.40%.

Pitney Bowes (PBI) which provides mail processing equipment and integrated mail solutions in the United States and internationally, announced that its Board has approved a 4% increase in its annual dividend from $1.40 to $1.44 per common share. Pitney Bowes is a dividend aristocrat, which has consistently increased its dividends for twenty-seven consecutive years. The stock currently yields 6.00%.

Archer Daniels Midland (ADM), which procures, transports, stores, processes, and merchandises agricultural commodities and products, announced that its Board has approved a one cent boost in its quarterly dividend to $0.14 per share. Archer Daniels Midland is a dividend aristocrat, which has consistently increased its dividends for thirty-four consecutive years. The stock currently yields 2.00%. Check out my analysis of ADM here.

HCP (HCP), a real estate investment trust that invests in health care-related properties and provides mortgage financing on health care facilities, announced that its Board has approved an increase in its quarterly dividend from $0.455 to $0.46 per share. HCP is a dividend achiever, which has consistently increased its dividends for over twenty consecutive years. The stock currently yields 7.40%.

J.B. Hunt Transport Services, (JBHT) announced that its Board has approved a 10% increase in its quarterly dividend from $0.10 to $0.11 per share. J.B. Hunt Transport Services has consistently increased its dividends since 2004. The stock currently yields 1.70%.

L-3 Communications (LLL) announced that its Board has approved a 17% increase in its quarterly dividend from $0.30 to $0.35 per common share. L-3 Communications has consistently increased its dividends since 2004. The stock currently yields 2.70%. L3 Communications provides command, control, communications, intelligence, surveillance, and reconnaissance (C3ISR) systems; and aircraft modernization and maintenance, and government services primarily in the United States.

Full Disclosure: Long ADM and GE

Relevant Posts:

- Archer Daniels Midland (ADM) Dividend Stock Analysis
- Dividend Aristocrats List for 2009
- My take on State Street’s dividend cut
- Bad Start of the Week for Retail Investors

Monday, February 2, 2009

Dividend Stocks proving that not all dividends are at risk

2008 was the year that brought a ton of dividend cuts in the financial sector. Banks like Comerica, Bank of America, Citigroup, Regions Financial and First Third Bank cut dividends several times, which jeopardized the incomes of many retirees. 2009 so far brought a second round of dividend cuts from Bank of America and Comerica. Even pharmaceuticals giant Pfizer had to cut its dividend in half after announcing its acquisition of rival Wyeth. Investors are constantly bombarded with news about dividend cuts including the fact that 4Q 2008 was the worst quarter for dividends since S&P began compiling the data in 1956. One would think that a tough credit environment, bank failures, and news of big corporations laying off thousands of employees every day most companies would conserve cash in preparation for the second round of the financial Armageddon that pundits forecast. Not all companies are cutting dividends however. Stocks like Wells Fargo and General Electric have recently reaffirmed that they will maintain dividend payments. Even better, many companies are also raising payouts to shareholders.

Novartis (NVS) announced that its Board has approved a 25% increase in its annual dividend to 2.00 swiss franks or about $1.71. Novartis is an international dividend achiever, which has consistently increased its dividends since 1997. The stock currently yields 3.60%.

McGraw-Hill (MHP) announced that its Board has approved a 2.3% increase in its quarterly dividend from $0.22 to $0.225 per common share. The company also announced that in an effort to maintain liquidity, it would delay making any additional share repurchases in 2009. McGraw-Hill is a dividend aristocrat, which has consistently increased its dividends for thirty-six consecutive years. The stock currently yields 4.10%.

Praxair (PX) announced that its Board has approved an increase in its quarterly dividend from $0.375 to $0.40 per common share. Praxair Inc. is a dividend achiever which has consistently increased its dividends for sixteen consecutive years. The stock currently yields 2.60%.

Norfolk Southern (NSC) announced that its Board has approved a 6.25% increase in its quarterly dividend from $0.32 to $0.34 per common share. Norfolk Southern is a dividend achiever which has consistently increased its dividends for seven consecutive years. The stock currently yields 3.50%.

Consolidated Edison (ED) announced that its Board has approved an increase in its quarterly dividend from $0.585 to $0.59 per common share. Consolidated Edison is a dividend aristocrat, which has consistently increased its dividends for thirty-five consecutive years. The stock currently yields 5.80%.

Kinder Morgan Energy (KMP) announced that its Board has approved an increase in its quarterly dividend from $1.02 to $1.05 per unit. This represents a 14% increase over the distribution paid in 4Q 2007. Kinder Morgan Energy is a dividend achiever which has consistently increased its dividends for twelve consecutive years. The partnership units currently yield 8.50%.

California Water Service Group (CWT) announced that its Board has approved a 1.7% increase in its quarterly dividend from $0.29 to $0.295 per common share. California Water Service Group is a dividend champion, which has consistently increased its dividends for forty-two consecutive years. The stock currently yields 2.70%.

D&B (DNB) boosted its quarterly dividend from $0.30 to $0.34 per common share. The stock currently yields 1.80%.

Energen Corporation (EGN) announced that its Board has approved a 4.20% increase in its quarterly dividend from $0.12 to $0.125 per common share. Energen Corporation is a dividend champion which has consistently increased its dividends for twenty six consecutive years. The stock currently yields 1.70%.

TFS Financial Corporation (TFSL) announced that its Board has approved a 40% increase in its quarterly dividend from $0.05 to $0.07 per common share. The stock currently yields 2.20%.

The companies that definitely raised my interest for further research include Novartis, Norfolk Southers, Con Edison, Kinder Morgan, Praxair and McGraw-Hill.

Full Disclosure: At the time of this writing I owned KMR, ED, and MHP

Relevant Articles:

- Dividend Conspiracies
- Why do I like Dividend Aristocrats?
- Why do I like Dividend Achievers
- Dividend Aristocrats List for 2009

Monday, January 26, 2009

Busy Week for Dividend Increases

As more and more large cap companies unveiled their results, there were many dividend announcements as well. Other large cap companies such as Intel, Microsoft, IBM and Google released quarterly results and provided guidance for future quarters. Other companies such as Bank of America set a negative tone with their most recent dividend cut, while others like General Electric provided reassurance that their dividend and triple A rating are safe and will be maintained. Despite the negative news several notable dividend increases occurred over the past week. This has been the most dividend increases I have seen since I began reviewing weekly changes in dividend policies for US publicly traded entities in 2008.

Polaris Industries Inc. (PII) announced that its Board has approved a 3% increase in its quarterly dividend to $0.39 per common share. Polaris Industries Inc. is a dividend achiever, which has consistently increased its dividends for 14 years. The stock currently yields 6.40%.

Pall Corporation (PLL) announced that its Board has approved an 11.50% increase in its quarterly dividend to $0.145 per common share. Pall Corporationis has consistently increased its dividends since 2005. The stock currently yields 2.00%.

Canadian National Railway (CNI) announced that its Board has approved a 10% increase in its quarterly dividend. Canadian National Railway is an international dividend achiever, which has consistently increased its dividends for 13 consecutive years. The stock currently yields 2.30%. The company has managed to double its dividends every four to five years since 1996.

Westamerica Bancorporation (WABC) announced that its Board has approved an increase in its quarterly dividends from $0.35 to $0.36 per common share. Westamerica Bancorporation is a dividend achiever, which has consistently increased its dividends for 17 years. The stock currently yields 3.10%.

ALLETE, Inc. (ALE), which engages in the generation, transmission, distribution, and marketing of electrical power, announced that its Board has approved a 2.3% increase in its quarterly dividends to $0.44 per common share. The stock currently yields 5.70%.

Natural Resource Partners L.P. (NRP), which engages in the ownership and management of coal properties, announced that its Board has approved an increase in its quarterly dividends to $0.535 per common share. Natural Resource Partners L.P. has consistently increased its dividends almost every quarter since going public in 2003. The units currently yield 10.20%. Over the past 5 years the partnership has managed to double its dividends.

Comm Bancorp, Inc. (CCBP) announced that its Board has approved an increase in its quarterly dividends from $0.27 to $0.28 per common share. Comm Bancorp, Inc. has consistently increased its dividends since 2005. The stock currently yields 2.90%.

Hudson City Bancorp, Inc. (HCBK) announced that its Board has approved an increase in its quarterly dividends to $0.14 per common share. Hudson City Bancorp, Inc. has consistently increased its dividends since 2000. The stock currently yields 4.00%.

Wesco Financial Corporation (WSC), which engages in insurance, furniture rental, and steel service center businesses, announced that its Board has approved a 2% increase in its quarterly dividends from $0.385 to $0.395 per common share. Wesco Financial Corporation is a dividend champion and an achiever, which has consistently increased its dividends for 37 years. The stock currently yields 0.50%.

Genuine Parts Company (GPC), which is engaged in the distribution of automotive replacement parts, industrial replacement parts, office products and electrical/electronic materials, announced that its Board has approved a 3% increase in its quarterly dividendsto $0.40 per common share. Genuine Parts Company is a dividend champion and an achiever, which has consistently increased its dividends for 53 years. The stock currently yields 4.80%.

Magellan Midstream Holdings, L.P. (MGG), which owns and controls Magellan GP, LLC, the general partner of Magellan Midstream Partners, L.P. (MMP), announced that its Board has approved an increase in its quarterly dividends to $0.359 per common share. Magellan Midstream Holdings, L.P. has consistently increased its dividends since it went public in 2006. This MLP currently yields 9.10%.

CMS Energy (CMS), which operates in energy businesses primarily in Michigan, announced that its Board has approved a 40% increase in its quarterly dividends to $0.125 per common share. CMS Energy had suspended its dividend in 2002 and initiated a reduced payment in 2007. The stock currently yields 3.00%.

Healthcare Services Group, Inc. (HCSG) announced that its Board has approved an increase in its quarterly dividends from $0.16 to $0.17 per common share. Healthcare Services Group, Inc. has consistently increased its dividends since 2003. The stock currently yields 2.00%.

The four stocks that grabbed my attention for further research include Polaris Industries, Canadian National Railway, Westamerica Bancorporation and Genuine Parts Company.

Full Disclosure: Long GE

Relevant Articles:

- Bank of America (BAC) might have to cut dividends
- Dividend Stocks in the news includes General Electric.
- TARP is bad for dividend investors
- Is GE’s dividend safe?

Monday, January 19, 2009

Six Dividend Stocks Raising the bar

The stock market averages keep responding in a way that shows investors are expecting the worst in terms of profitability for most major US and Global corporations. Some pundits are getting bullish, while others are getting increasingly bearish. The odds of both camps being correct are slim to none. With this confusing information, what are investors supposed to do?
My main recommendation for buy and hold investors is to ignore all the day to day chatter and forecasts, since noone can predict enough market movements in order to make money. The best course of action to take is to assume a long-term strategy of buying stocks that keep increasing their dividends even during the current uncertain economic and market conditions.

CVS Caremark Corporation (CVS) announced that its Board has approved a 10.5% increase in its quarterly dividends to $0.07625 per common share. CVS Caremark Corporation has consistently increased its dividends since 2003. The stock currently yields 1.10%.

Cintas Corporation (CTAS) announced that its Board has approved a 2% increase in its annual dividends from $0.46 to $0.47 per common share. Cintas Corporation is a dividend achiever, which has consistently increased its dividends for 25 years. The stock currently yields 2.00%. Over the past 8 years the company has managed to double its dividends.

Enterprise GP Holdings L.P., (EPE), which is engaged in the ownership of general and limited partner interests of publicly traded partnerships engaged in the midstream energy industry and related businesses, announced that its Board has approved an increase in its quarterly dividend to $0.47 per unit. Enterprise GP Holdings L.P. has consistently paid and increased its dividends every single quarter since 2005. The partnership shares currently yield 9.20%.

Linear Technology (LLTC) announced that its Board has approved an increase in its quarterly dividend from $0.21 to $0.22 per common share in an effort to return value to shareholders. Linear Technology is a dividend achiever, which has consistently increased its dividends since 1992. The dividend growth has been astounding, as LLTC has managed to double its dividend payments to shareholders every three years on average for the past 16 years. The stock currently yields 3.80%.

Monsanto Company (MON), announced that its Board has approved a 10% increase in its quarterly dividend from $0.24 to $0.265 per common share. Monsanto Company has consistently increased its dividends since 2001. In fact the new dividend payment represents a 489% increase in comparison to the first dividend payments in 2001 of $0.045/share. The stock currently yields 1.20%.

Family Dollar Stores, Inc. (FDO) announced that its Board has approved a 8% increase in its quarterly dividend from $0.125 to $0.135 per common share. Family Dollar Stores, Inc.is a dividend aristocrat that has consistently increased its dividends for thirty-three consecutive years. The stock currently yields 1.80%.

LLTC looks like a promising dividend growth stock in order to gain some technology exposure in my dividend stock portfolio. I will add it to my list for further research. FDO looks promising in the current economic environment, however due to its low yield I would only consider initiating a position there on dips below $18.

Full Disclosure: Long FDO

Tuesday, January 13, 2009

Bank of America (BAC) might have to cut dividends again

Yesterday a bearish report from Citi Investment Research analyst Keith Horowitz sent Bank of America shares 12% lower. The analyst announced that he was expecting further deterioration in Bank of America’s earnings, by cutting his projection for 2009 EPS to just $0.25/share. Given this information, the current quarterly dividend of $0.32/share might not be sustainable.

The analyst expects that Bank of America might have to cut its dividend again, which could happen as early as January 20, when the company reports its latest quarterly results.

As a long-term investor, I typically ignore articles like that, since I seriously doubt that anyone in the investment banking community has any sustainable forecasting abilities. Instead I try to focus on something that is not as volatile as stock prices – I focus on a diversified list of companies from a variety of industries that have consistently grown their dividends over time. Nobody knows where the market is going to be in one year, five years or a decade. If you are able however to pick the best dividend stocks for the long run, you will be able to generate enough dividend income from your portfolio that would cushion any unsustainably severe bear market declines.

In the case of Bank of America however, I won’t be surprised if the company does indeed cut its dividends as it faces further writedowns, frozen credit markets and TARP restrictions. Several once prominent banks have cut their dividends twice since early 2008. Investors who were hoping that the worst is over suffered significant declines in their passive incomes again and again. Some fresh examples of this include FITB, C and KEY.

In summary I believe that the issue of Bank of America’s dividends is not if it will cut, but when it will do so. Historically, one of the main reasons why companies have lost their dividend aristocrats status between 1989 and 2004 is dividend freezes or cuts related to merging two different companies or restructuring ongoing operations. In the case of BAC, the company has purchased Countrywide and Merryl Lynch, which definitely will pose huge integration issues. These integration issues might make the company’s business less transparent, which could also mean that BAC might not be a good value even at $11/share.

Relevant Articles:
- Bank of America (BAC) Dividend Analysis
- Why do I like Dividend Aristocrats?
- Historical changes of the S&P Dividend Aristocrats
- Dividend Aristocrats List for 2009

Sunday, January 11, 2009

Dividend Stocks in the news includes General Electric

The past two weeks have been pretty uneventful in terms of dividend increases, mainly due to the Christmas and New Year’s holidays. Once the majority of market participants returned to their trading desks, it was again business as usual. The markets did end the week 4.20% lower, which left the largest ETF by assets that tracks S&P 500, the SPY, down 1.2% on the year. The increase in unemployment to 16 year highs didn’t help either.

The negative tone for the week was set on Monday when a Sterne Agee analyst Nick Heymann speculated that General Electric (GE) likely faces a serious decision - sustain the dividend or the AAA rating. General Electric has confirmed on a number of occasions that it’s dividend of $1.24/share is safe throughout 2009. Despite the reassurance from GE however, there still is an increased chance that GE dividends might not be safe. Check out my analysis of GE from this link.

There were several other companies that announced increases in their payments to shareholders last week.

Genesis Energy, L.P. (GEL), which engages in the pipeline transportation of crude oil, natural gas, and carbon dioxide (Co2); gathering and marketing of crude oil; wholesale marketing of Co2; and processing of syngas , announced that its Board has approved an increase in its quarterly dividend from $0.3225 to $0.33 per unit. Genesis Energy, L.P. has consistently increased its dividends since 2003. The stock currently yields 11.90%.

Robbins & Myers, Inc. (RBN), which is a supplier of systems for critical applications in global energy, industrial, chemical and pharmaceutical markets , announced that its Board has approved an 11% increase in its quarterly dividend from $0.0375 to $0.04 per common share. Robbins & Myers, Inc. has consistently increased its dividends since 2006. The stock currently yields 0.80%.

Pentair, Inc. (PNR), announced that its Board has approved a 6% increase in its quarterly dividend from $0.17 to $0.18 per common share. Pentair, Inc. is a dividend achiever which has consistently increased its dividends for almost two decades. The stock currently yields 2.70%.

American Financial Group, Inc. (AFG), announced that its Board has approved a 4% increase in its quarterly dividend to $0.13 per common share. American Financial Group, Inc. Inc. is a dividend achiever which has consistently increased its dividends since 2005. The stock currently yields 2.30%.

Of the stocks below Pentair shows some promise for my dividend growth strategy. PNR could be an interesting dividend play on dips below $24. I like the fact that the company has managed to double its dividends almost every seven years on average.

Full Disclosure: Long GE

- Is GE’s dividend safe?
- Why do I like Dividend Achievers
- Analysis of General Electric
- When to sell my dividend stocks?

Monday, December 29, 2008

Dominion Resoures and Realty Income Increasing their payouts

Dominion (D), which provides electricity, natural gas, and related services to customers , announced that its Board has approved an 11% increase in its quarterly dividend from $0.46 to $0.47 per common share. Dominion Corporation has consistently increased its dividends since 2005. The stock currently yields 4.50%.

Realty Income (O), the monthly dividend real estate company dedicated to providing shareholders with dependable income, announced that its Board has approved an increase in its monthly dividend from $0.141125 to $0.14175 per common share. Realty Income is a dividend achiever which has increased its dividends several times per year since 1994. The stock currently yields 6.90%. You could check my analysis of the stock from this link. To date the Company has declared 462 consecutive common stock monthly dividends throughout its 39-year operating history and increased the dividend 52 times since Realty Income's listing on the New York Stock Exchange in 1994.

Full Disclosure: Long Realty Income (O)

Relevant Articles:

- Realty Income (O) Dividend Analisys
- Why do I like Dividend Achievers
- My Dividend Growth Plan - Diversification
- National Retail Properties (NNN) Dividend Stock Analysis.

Wednesday, December 24, 2008

Dividend Aristocrats in danger

There were several dividend aristocrats that recently announced no increase in their payments to shareholders.

Pfizer (PFE), which is one of the leading pharmaceutical companies in the world, announced no increase in its annual dividends for the first time in 41 years. In the past decade, the company was used to increasing its dividend payments to shareholders every December. It comes as no surprise to me that PFE is not raising its dividends. The company needs to increase its drug pipeline either through research or acquisitions as most of its drugs will be facing serious generic competition after they go off patent in 2011. Furthermore, the rising payout and stagnating earnings show danger to the dividend growth investor. In order to maintain its dividend aristocrat status, Pfizer has to increase its dividends by November 2009.

Another stock that announced no increase in its dividends was State Street (STT), which received 5 billion from the Treasury several months ago. The company broke a 27 year streak of two dividend increases per year. In order to maintain its dividend aristocrat status, State Street has to increase its dividends by the end of 2010. As a holder of STT, I am planning to be a seller at $51, which is my breakeven price as I fear that TARP might limit dividend payments for financial companies which received funds from the Treasury.

Progressive (PGR), which is a dividend aristocrat as well, announced that it won’t be paying a dividend in 2008, which terminates its status of a consistent dividend performer.

As a dividend growth investor an unchanged dividend is not necessarily bearish news. Most companies don’t raise their dividends every year, but still could achieve a decent dividend growth rate. If I could exit the position at least at breakeven however, I would most probably invest in companies which could support an increasing dividend payments even during cyclical downturns.

Relevant Articles:

- Why do I like Dividend Aristocrats?
- State Street Corporation (STT) Dividend Stock Analysis.

Monday, December 22, 2008

Dividend Stocks in the news

Last week saw even more notable dividend increases as companies from many sectors showed confidence not only in their ability to generate increasing profits, but also to share the wealth with their owners.

BB&T Corporation (BBT), which is a financial holding company, announced that its Board has approved a 2.20% increase in its quarterly dividend from $0.46 to $0.47 per common share. BB&T Corporation is a dividend aristocrat which has consistently increased its dividends for 38 consecutive years. The stock currently yields 6.30%. Check out my analysis of BBT from this link.


Eli Lilly (LLY), which engages in the discovery, development, manufacture, and sale of pharmaceutical products, announced that its Board has approved a 4.3% increase in its quarterly dividend from $0.47 to $0.49 per common share. Eli Lilly is a dividend aristocrat which has consistently increased for 42 consecutive years.. The stock currently yields 5.30%.

Waste Management, Inc. (WMI), which provides integrated waste services in the United States and internationally, announced that its Board has approved a 7.40% increase in its quarterly dividend from $0.27 to $0.29 per common share. Waste Management, Inc. has consistently increased its dividends since 2004. The stock currently yields 3.40%.


Boeing (BA), which engages in the design, development, manufacture, sale, and support of commercial jetliners, military aircraft, satellites, missile defense, human space flight, and launch systems and services worldwide, announced that its Board has approved a 5% increase in its quarterly dividend from $0.40 to $0.42 per common share. Boeinghas consistently increased its dividends since 2004. The stock currently yields 4.10%.

None of the stocks that raised their dividends fit my entry criteria at this time. I would add LLY and BBT to my screen in case their payouts become more reasonable.

Relevant Articles:

- Why do I like Dividend Aristocrats?
- BB&T Corporation (BBT) Stock Dividend Analysis
- Why should companies pay out dividends?
- Is GE’s dividend safe?

Sunday, December 14, 2008

Nine notable dividend increases

Several large companies announced dividend increases over the past week. One of the most notable bullish calls came from the telecom sectors as AT&T (T) showed confidence in its business model by increasing its dividend payment to shareholders for the twenty fifth consecutive years. Despite the tough macroeconomic conditions AT&T (T) is still committed to raising its quarterly dividend. The board announced a 2.5% increase of the quarterly payment to to $0.41/share. The stock currently yields 5.70%. One thing that still concerns me with AT&T however is the high current dividend payout ratio. You could check my analysis of AT&T from this link.

BCE, the Canadian telecom company whose privatization agreement failed this month reinstated its quarterly dividend payment of 0.365/share and approved a 40 million share buyback. Based off the reinstated payment to shareholders, the company yields 8.60%, Based off the 2007 earnings per share, the dividend seems adequately covered.

Nucor Corporation (NUE), which is manufactures and distributes coatings, paints, and related products, announced that its Board has approved a 9.40% increase in its quarterly dividend to $0.35 per common share. Nucor Corporationis a dividend aristocrat which has increased its dividends for over thirty four years. The stock currently yields 3.20%. I am considering adding to my position there on dips below $35. You could check out my analysis of NUE here.

Franklin Resources (BEN), which is an investment management company, announced that its Board has approved a 5% increase in its quarterly dividend to $0.21 per common share. Franklin Resources is a dividend champion which has increased its dividends for over twenty seven years. The stock currently yields 1.30%.

Honeywell (HON), which is a diversified technology and manufacturing company, announced that its Board has approved a 5% increase in its quarterly dividend to $0.21 per common share. Honeywell has regularly increased its dividends since 2005. The stock currently yields 3.80%.

Edison International (EIX), which is engages in the supply of electric energy in California, announced that its Board has approved an increase in its quarterly dividend to $0.31 per common share. Edison International has cut its dividends twice for the past twenty years – in 1994 and in 2004. The stock currently yields 3.80%.

Harsco Corporation (HSC), which is provides industrial services and engineered products primarily to steel, construction, railways, and energy industries worldwide, announced that its Board has approved a 2.60% increase in its quarterly dividend to $0.20 per common share. Harsco Corporation is a dividend achiever which has increased its dividends for thirteen years. The stock currently yields 3.20%.

The Valspar Corporation (VAL), which is manufactures and distributes coatings, paints, and related products, announced that its Board has approved a 7.10% increase in its quarterly dividend to $0.15 per common share. Valspar Corporation is a dividend champion which has increased its dividends for over twenty seven years. The stock currently yields 3.40%. You could check my analysis of VAL from this link.

Progress Energy (PGN), which operates as an integrated energy company, announced that its Board has approved an increase in its quarterly dividend from $0.615 to $0.62 per common share. Progress Energy is a dividend achiever which has increased its dividends for over two decades years. The stock currently yields 6.30%.

DPL Inc. (DPL), which operates as a regional electric energy company in the United States, and related products, announced that its Board has approved a 3.60% increase in its quarterly dividend to $0.285 per share. DPL Inc. has regularly increased its dividends since 2004. The stock currently yields 5.20%.

Full Disclosure: I own shares of NUE

Relevant Articles:

- Nucor Corporation (NUE) Dividend Stock Analysis
- AT&T (T) Dividend Analysis
- Valspar Corporation (VAL) Dividend Analysis
- Is GE’s dividend safe?

Wednesday, December 10, 2008

Is GE’s dividend safe?

Last week General Electric reiterated for the second time that it will continue paying out a quarterly dividend of $0.31/share in 2009. GE is going thought a difficult transition, as it is trying to deleverage and decrease the profit contribution of its GE Capital unit from 50% to 40%. Furthermore the company is also trying to maintain its triple A rating and to keep its dividend safe.

With GE’s earnings expected to be around $0.50 in 4Q 2008, the earnings per share for 2008 in total comes out to $1.88-$1.90. If the dividend is maintained at $1.24, then the payout ratio will climb to its highest levels since 2005. The deleveraging factor of 6, is a result of the company lower outstanding commercial paper balance to $50 billion from $75billion. Furthermore GE now plans to issue about $45 billion in long-term debt next year, which is less than the $66 billion it has maturing. The company received $3billion in funding from Warren Buffett and $12.2 billion from sales of common stock.

Due to the decrease in leverage it seems that the new GE that will emerge after the financial crisis is over will be different. I doubt that the new GE will be able to grow its earnings in the double digits, assuming that its leverage is lower, which allows for less flexibility to fund projects that make profit for shareholders. Furthermore given the fact that the dividend costs about $13 billion annually, I see an increased chance of a dividend cut. Just because the company reaffirms that it won’t cut its dividends, doesn’t really mean that it won’t do it two months later. Citigroup(C) and Bank of America (BAC)were two noticeable companies, whose CEO’s claimed that their dividends were safe, only to reduce them several months after those statements.

If GE doesn’t cut its dividends keep holding shares of the company, without adding any new funds to the position would be a good move. If General Electric does cut its dividends however, the wise decision would be to allocate your funds in other opportunities.

Full Disclosure: Long GE

Relevant Articles:

- Which Bank will be next? Follow the dividend cuts
- Analysis of General Electric
- Bank of America (BAC) Dividend Analysis
- Should you sell after a dividend cut?

Tuesday, December 9, 2008

Dividend Cuts could be spreading to commodities companies

There were several dividend cuts last week, including a notable one from a commodities company. A report from Deutsche Bank analysts predicted dividend cuts in several mining companies, including Alcoa (AA), Southern Copper (PCU), Cliffs Natural Resources (CLF) and Companhia Vale do Rio Doce (RIO), which further depressed investor sentiment, and sent basic materials stocks lower. The negative dividend news concerning the materials sectors shouldn’t really affect overall dividend sentiment, as the dividend payments that these companies pay are typically not as consistent and smooth in terms of size of payment, due to the cyclical nature of the commodities business. With metals prices dropping significantly off of their record highs over the past few months it is no surprise that Deutsche Bank is expecting dividend cuts in the above mentioned companies.

On December 3, Freeport-McMoRan Copper & Gold Inc. announced a reduction in its copper production and sales, capital spending and expenditures. Furthermore the company announced that it was suspending its dividends. The stock lost 9% from the day of the announcement until the end of the week.

The other three notable dividend cuts included property trusts

Ramco-Gershenson Properties Trust (RPT) announced on December 3rd a 50% dividend cut in its quarterly payment to shareholders to $0.2313/share. The stock lost only 3% by the end of the week on the negative news.

Medical Properties Trust, Inc. (MPW) announced on December 4th that its Board has approved a 25.9% reduction in its quarterly dividend from $0.27 to $0.20 per common share. The stock closed over 8% higher on the day.

Post Properties (PPS) announced on December 2nd that its Board has reduced the quarterly dividend rate on its common stock to $0.20 per share from $0.45/share. The company also announced a stock buyback program which would allow it to repurchase up to $200 million worth of its common and preferred stock until December 2010. Investors reacted positively to this news, sending the stock over 15% higher by the end of the week.

The most interesting story I am seeing evolve over the past couple of weeks is that sectors which have experienced the most in dividend cuts over the past year, are buckling conventional wisdom when it comes to dividend cuts and rally on the news. In terms of investor sentiment this could mark a significant shift from bearish to bullish expectations for many stock holders. Whether this will hold of course will remain to be seen. The best ways for dividend growth investors to exit positions which have cut or eliminated their payments is when the stocks are going higher as opposed to lower.

Full Disclosure: None

Monday, December 8, 2008

Dividends Keep Getting Raised despite bleak economic picture

Last week marked yet another rollercoaster performance in the stock market, as major indices clocked in yet another weekly loss. Markets rebounded from their lows on Monday as they were reassured by General Electric (GE) that it will maintain its dividend payment in 2009, which boosted the stock by over $2 in one day. Several more dividend stocks rewarded their patient shareholders with a raise in their quarterly payments. Dividends are normally paid out of earnings and are often used to measure a company’s financial condition. Only the companies that are experiencing significant increases in free cash flow will be in a position to provide a growing stream of dividend payments to their stockholders.

Enbridge Inc (ENB), which engages in the transportation and distribution of crude oil and natural gas, announced that its Board has approved a 12% increase in its quarterly dividend from $0.33 to $0.37 per common share. Enbridge is an international dividend achiever which has increased its dividends for over twelve years. The stock currently yields 3.60%.

Stryker (SYK), which operates as a medical technology company, announced that its Board has approved a 21% increase in its annual dividend from $0.33 to $0.40 per common share. Stryker has increased its dividends for almost seventeen years. The stock currently yields 1.10%.

Wisconsin Energy Corporation (WEC), which provides electricity and natural gas services in Wisconsin and Michigan, announced that its Board has approved a 25% increase in its quarterly dividend from $0.27 to $0.3375 per common share. Wisconsin Energy Corporation has increased its dividends for almost six years in a row. The stock currently yields 2.60%.

AXIS Capital Holdings Limited (AXS), which is a Bermuda-based global provider of specialty lines insurance, announced that its Board has approved an 8% increase in its quarterly dividend to $0.20 per common share. This would mark the fifth consecutive annual increase in AXIS Capital Holdings’ dividends. The stock currently yields 3.00%.

Ecolab Inc. (ECL), which is engaged in cleaning, sanitizing, food safety and infection prevention products and services, announced that its Board has approved an 8% increase in its quarterly dividend to $0.14 per common share. Ecolab Inc. is a dividend achiever which has increased its dividends for over two decades. The stock currently yields 1.50%.

OGE Energy Corp. (OGE), which operates as an energy and energy services provider, announced that its Board has approved a 3% increase in its quarterly dividend from $0.3475 to $0.355 per common share. This marks the third consecutive dividend increase for OGE Energy Corp. since 2005. The stock currently yields 6.00%.

Lincoln Electric Holdings (LECO), which engages in the manufacture and resale of welding and cutting products worldwide, announced that its Board has approved an 8% increase in its quarterly dividend from $0.25 to $0.27 per common share. This represents the seventh consecutive dividend increase for Lincoln Electric Holdings since 2002. The stock currently yields 2.40%.

Graco Inc. (GGG), which provides fluid handling solutions to manufacturing, processing, construction, and maintenance sectors, announced that its Board has approved a 3% increase in its quarterly dividend from $0.185 to $0.19 per common share. Graco Inc has increased its dividends for almost nine years. The stock currently yields 3.70%.

Universal Health Realty Income Trust (UHT), one of the few real estate investment trusts to actually increase its dividends, announced that its Board of Trustees has approved an increase in its quarterly dividend from $0.585 to $0.59 per common share. Universal Health Realty Income Trust is a dividend achiever which has increased its dividends for over two decades. The stock currently yields 7.80%.

Relevant Articles:

- International Dividend Achievers for diversification
- Why do I like Dividend Achievers
- Analysis of General Electric
- Dividend Portfolio Investing for monthly income

Wednesday, December 3, 2008

Are Dividend Investors betting that the worst is over?

Last week was pretty weak in terms of major dividend cuts. The one notable sector where many high yield stocks were located, the tankers, keeps the wires busy with negative dividend news.
Frontline (FRO) declared a dividend payment of $0.50/share for the quarter, significantly down from the prior quarter’s payment of $3/share. This is the lowest dividend payment since March 2003. The current yield is still pretty decent at 6.77%. Investors didn’t like the dividend cut, sending the stock 10.50% lower on Friday.

Pulte Homes (PHM) announced on November 24 that it will discontinue its dividend payments for 2009 citing that this action is in line with the Company's objective of conserving cash as it continues to navigate through a very difficult business environment. The market liked the news, sending the stock over 21% higher by the end of the week.

CapLease, Inc.(LSE) announced November 26 that ts Board intends to reduce the Company's annual dividend beginning in 2009 in order to retain cash flow to further reduce leverage through accretive debt repurchases, strengthen the balance sheet and enhance long-term stockholder value. Investors pushed the stock down 8% on the day of the announcement. LSE did manage to bounce back however by 17% from its lows. The company projects that it will be paying out a quarterly dividend of 0.05/share in 2009 versus the current payment of 0.20/share.

Despite the negative dividend news, which are typically bearish for stocks, investors seem to be ignoring the cuts, and focusing on what’s next. Typically when investors stop paying attention to negative dividend news, it’s time to load up and enjoy the start of a new bull market.

Full Disclosure: None

Relevant Articles:

- When to sell your dividend stocks? Part 2
- When to sell your dividend stocks?
- Why should companies pay out dividends?
- Markets keep under reacting to dividend cuts

Tuesday, December 2, 2008

Dividend Capture Strategy – The illusion of getting something for nothing

Dividend Capture strategies are gaining popularity among speculators who don’t want to be too exposed to market risk, while also being able to pocket the dividends. My reader Ammar Husami asked me about my opinion on the subject. The dividend capture strategy is very different in comparison to my dividend growth strategy. Before we go any further, there are four important dividend dates that investors need to understand well.

Dividend Declaration Date – This is the date on which dividends are declared by the board of directors.

Ex-Dividend Date – The Ex-dividend date is usually two days before the record date. This is the first day that the stock trades without the right to receive a dividend. On this day the price of the stock will be reduced by the amount of the dividend. The reduction comes from the price of the last trade in the previous session. If you purchase a stock on the ex-dividend date, you won’t receive a dividend until it is declared for the next time period. In order to be able to get the dividend, you will have to purchase the stock before the ex-dividend date.

Record Date - Shareholders who are not registered as of this date will not receive the dividend. Registration in most countries is essentially automatic for shares purchased before the ex-dividend date.

Payment Date – This is the date on which the dividends are deposited directly in your investment account or sent in the mail.
The most important date of all is the ex-dividend date. If you purchase a stock one day before the ex-dividend date and sell it on the ex-dividend date, you will be entitled to receive the dividends.

Let’s view an example of this strategy. Below you could find a sample press release from General Electric (GE):

"August 22, 2008 9:15 AM EDT The Board of Directors of General Electric Company (NYSE: GE) authorized a regular quarterly dividend of $0.31 per outstanding share of the Company's common stock. The dividend is payable October 27, 2008 to shareowners of record at the close of business on September 22, 2008. The ex-dividend date is September 18, 2008.GE is a diversified global infrastructure, finance and media company that is built to meet essential world needs."

The declaration date is August 22, as this is when the press release went out. The record date is September 22, while the ex-dividend date is September 18. The dividend was paid on October 27, to all shareholders who owned GE stock at the close of business on September 17, 2008.

The dividend capture strategy claims that if you purchased the stock on the 17th of September and held it until the 18th; you would be eligible to receive the dividend. The problem with this strategy is that it assumes that markets are not efficient. Dividend Capture does seem appealing to investors who believe that they could get something for nothing, which in an efficient market is almost impossible as all news are immediately priced into the stock. In addition to that even if the trader does receive the dividend payment, there is no guarantee that the stock price won’t fall by more than the amount of the dividend declared.

The issue of taxes also comes to mind when determining whether to do the dividend capture or simply enjoy a simple buy and hold dividend strategy. If you simply owned GE shares and received a dividend from them every quarter, then the highest that you would get taxed at is 15%. In order for you to be eligible for the 15% tax on dividends when you do the dividend capture strategy, you have to hold the stock for at least 61 days. Furthermore, if you sell a stock after holding it for less than one year you will pay short-term capital gains taxes which could be up to 35% for the highest income brackets.

If we go back to the example with GE, the stock closed at 23.39 on Sep 17th. If you sold it on the close on Sep 18 at 24.79 you would have not only made a nice gain and be eligible to receive the dividend, but also would have avoided the volatility in the stock price.

The main issue is that traders with a short-term mindset who are trying to take advantage of the capture strategy could be exposing themselves to market fluctuations. This strategy could be profitable during bull markets as stock prices in general increase which would help the speculators in unloading their position at a profit; during bear markets when the volatility is very high, the risk of catching a big wave down is much higher.

As always, do your own research before trying any strategy that promises free lunch. In the meantime, I have selected several stocks to watch during their ex-dividend days in order to see if there’s any advantage that a dividend investor could achieve by knowing about the strategy of capturing dividends. The following stocks will be trading ex-dividend on December 3:

Bank of America, BAC, dividend amount $0.32, dividend yield 9.96%
Kimberly-Clark, KMB, dividend amount $.58, dividend yield 4.22%
Merck, MRK, dividend amount $0.38, dividend yield 6.12%
Mattel, MAT, dividend amount $0.75, dividend yield 5.96%
Pepsi Cola, PEP, dividend amount $0.425, dividend yield 3.17%
Pepsi Bottling , PBG, dividend amount $0.17, dividend yield 4.40%

Full Disclosure: I own shares of KMB, PEP, GE

Relevant Articles:

- My Dividend Growth Plan - Strategy
- Cola Wars - Coke versus Pepsi
- Analysis of General Electric
- Kimberly-Clark (KMB) Dividend Analysis

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