Last week was marked by more volatility which doesn’t seem to surprise anyone. Luckily this time the direction was up as the stock market had its best week since 1974, mainly fueled by the half a percentage point interest cut by the Federal Reserve as well the smaller than expected contraction in the GDP.
During those large swings up and down it is easy for investors to lose focus on the big picture and not sticking to their financial plan by converting all of their holdings to cash. Luckily there were several dividend companies that reminded their patient long-term holders that increasing dividend payments could help them out in increasing their total returns over time.
Vornado Realty (VNO) announced that its Board has approved a 5.60% increase in its quarterly dividend from $0.90 to $0.95 per common share. Vornado Realty is a dividend achiever having increased its dividends for over fifteen years. The stock currently yields 5.60%.
Home Properties (HME) announced that its Board has approved a 1.50% increase in its quarterly dividend from $0.66 to $0.67 per common share. Home Properties is a dividend achiever having increased its dividends for over one decade. The stock currently yields 7.20%.
Questar (STR) announced that its Board has approved a 2.00% increase in its quarterly dividend from $0.1225 to $0.1250 per common share. Questar is a dividend aristocrat having increased its dividends for 29 years. The stock currently yields 1.50%.
Williams Partners L.P. (WPZ) announced that its Board has approved a 15.00% increase in its quarterly distgributions from $0.55 paid in third quarter 2007 to $0.635 per unit. The partnership stock currently yields 12.10%.
Dominion Resources (D) management anticipates that in January it will recommend to the board of directors an annual dividend rate in 2009 of $1.75 per share, or a quarterly dividend rate of 43.75 cents per share. This represents nearly an 11 percent increase over the current annual dividend rate of $1.58 per share. This utility currently yields 4.40%.
The Hanover Insurance Group, Inc. (THG) announced that its Board has approved a 12.50% increase in its annual dividend from $0.40 to $0.45 per common share. The stock currently yields 1.30%.
This dividend increases list led me to put VNO and HME on my list for further research.
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I love the idea of companies actually paying back some earnings. It seems like so many company stocks you buy today never pay a dividend. Really when you think about it what are you buying if you don't get to share in the profits!
ReplyDeleteFTP,
ReplyDeleteThanks for stopping by. I agree with you that companies which have the earnings should pay their owners, the shareholders, back. Otherwise what good are record earnings if the owners never see a dime of it?
FO dividend increased. 5% yield
ReplyDelete@FixThePig If a company can put their earnings to good use, there is no reason for them to pay fat dividends.
ReplyDeleteI agree that it is nice to receive tangible (sort of) cash money from the businesses you own. However if they are plowing their earnings back into their business at attractive rates i.e. ROE (careful), then it should lead to an even greater enterprise value.
Stock is an ownership interest in a real business. Make sure your business is intelligently allocating it's capital, and weather it's dividends, share buybacks, capital investments or R&D it really doesn't matter.
Cheers.
Ethan
Ethan,
ReplyDeleteIn theory it makes sense for companies to reinvest their earnings straight back into the business.
In reality these money are wasted away on failed acquisitions, taking on too much risk with new products. Companies that consistently not only pay but increase their dividends over time are more fiscally responsible than the companies that don't pay any dividends.
Companies that reward shareholders with dividends are showing confidence in their ability to generate growing earnings because they could afford to. Furthermore companies paying out dividends show shareholders that earnings are real and not manufactured using an army of CPA's.
As a small business owner myself, I enjoy getting cash back from my businesses on a regular schedule so that I could decide if I wanted to reinvest into the business by purchasing more shares or spend it on something else.
Last but not least most companies can only grow their ROE/ROA to so much as they could be reaching the limits of their marketplace. The ROE would then incrementally start declining, making it worthwhile for these stocks to pay out dividends instead of spending the cash on acquisitions to buy competitors or start a division in a completely new sector in order to diversify. Most often than not diversifications do not work..
To summarize it is nice for companies to pay out some portion of earnings ( up to mid 50%) back and then reinvest the rest in the business. Success comes from good balancing.
@Dividend Growth Investor I believe we both said the exact same thing, we just used different phrases and examples.
ReplyDeleteI think a companies earnings payout policy should be decided by their management, in the hopes you have invested in a business with honest and able management, you should be fine, dividends or no dividends.
However to clarify, I am not trying to say that all companies who don't pay dividends or low dividends are fine investments.
Without a doubt some day a business will hit an ROE wall, which better put is a ceiling in their companies life cycle, no doubt this will be succeeded by declining ROE, the time frame in which this unfolds could be super long or short. No telling, depends on business and market environment (i think I am getting to meta here and not practical enough). At this point paying out more earnings is the smart thing to do. But again if you have invested in a company with honest and able management, they will make the right decision.
Finally, you don't want to invest in companies whose top executives are hell bent on building an empire, as you said this can lead to "failed acquisitions, taking on too much risk with new products."
Please making conversation with you and as I said in the opening of this comment I think we are in agreement here.
Cheers.
Ethan