Tuesday, September 7, 2010

Five Dividend Machines Raising Distributions

The dividend approach to investing is not a get rich scheme. Investors who ultimately make money with dividends are interested in slow but steady returns, low volatility and positive feedback in the form of dividends during all market environments. The companies that manage to raise dividends for long periods of time are characterized by having a strong brand, and strong competitive advantages that help them increase earnings over time. Only companies that expect strong earnings in the foreseeable future will commit to raising dividends. As a result investors in these dividend machines enjoy an increasing stream of dividend income, which matches or exceeds inflation over time.

The companies that announced dividend increases over the past week include:

Diageo plc (DEO) engages in producing, distilling, brewing, bottling, packaging, distributing, developing, and marketing spirits, beer, and wine. This British company pays dividends twice per year, and the payments are split 40:60. The board of directors most recently recommended a final dividend of 23.50 pence per share, an increase of 6% from the year ended 30 June 2009. The full dividend would therefore be 38.10 pence per share, an increase of 5.5% from the year ended 30 June 2009. In addition to that the company announced it expects to raise dividends by another 6% in 2011. This international dividend achiever has raised dividends for over one decade and yields 3.50%. Check my analysis of the stock.

Verizon Communications Inc. (VZ) provides communication services in the United States and internationally. It operates in two segments, Wireline and Domestic Wireless. The company raised its quarterly dividend by 2.60% to 48.75 cents/share. The company has consistently raised its annual dividends since 2005. Yield: 6.50% (analysis)

HCC Insurance Holdings, Inc. (HCC), together with its subsidiaries, provides property and casualty, surety, group life, accident, and health insurance coverage, as well as related agency and reinsurance brokerage services to commercial customers and individuals worldwide. The company raised its quarterly dividend by 7.4% to 14.5 cents/share. This dividend achiever has raised distributions for 14 consecutive years. Yield: 2.30%

Friedman Industries (FRD), Incorporated, together with its subsidiaries, engages in steel processing, pipe manufacturing and processing, and steel and pipe distribution in the United States. The company raised its quarterly dividend by 100% to 8 cents/share. The company pays a fluctuating dividend payment however, and as a result does not have stability in the dividend payment. This instability is something I tend to avoid. Yield: 4.80%

Harris Corporation (HRS), together with its subsidiaries, operates as a communications and information technology company that serves government and commercial markets worldwide. It operates in three segments: RF Communications, Government Communications Systems, and Broadcast Communications. The company raised its quarterly dividend by 14% to 25 cents/share. The company has continuously raised dividends since 2002. Yield: 2.30%

The above list shows companies that raised dividends for the week. It is not a recommendation to buy or sell securities. I screen the list of dividend raisers every week in order to Uncover Hidden Dividend Gems, as well as to evaluate the overall breadth in dividend increases versus dividend cutters.

Full Disclosure: Long DEO

Relevant Articles:

- Diageo (DEO) Dividend Stock Analysis
- The case for dividend investing in retirement
- Why Dividend Growth Stocks Rock?
- How to Uncover Hidden Dividend Gems

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