Dividend stocks are on the rise again
2009 was a bad year for dividends, but they’re rising again, says a U.S. advisory that features four U.S stocks and also has two Canadian buys.
The dividend never really went away.
But it did not have a good year in 2009.
Companies that once seemed as solid as Gibraltar — like Manulife Financial and General Electric — cut deeply into their dividends.
And these were only two of the more notorious examples. They had plenty of company.
But the trend has reversed itself in 2010, as we hear from one of the leading advisories in the U.S. On the S&P 500 Index, the improvement in dividend payouts has been impressive, says Dow Theory Forecasts.
This paints a picture of corporate confidence, says this advisory — even in the face of nervous credit markets and an economic recovery that seems to move in fits and starts.
The advisory gives us facts and figures on the turnaround in dividends and highlights four dividend-raising stocks it likes.
Among the stocks it follows regularly, there are also two Canadians firms that have raised their dividends, which we will not fail to mention.
Confidence in the future
At this point last year, 60 companies on the S&P 500 Index had cut or suspended their dividends. This year only two have done the same. (This issue went to press just before BP suspended its dividend, but that unhappy event can hardly be considered part of a trend).
To put this in perspective, suggests the advisory, consider that in the years between 2004 and 2007, no more than seven firms cut or suspended dividends in any one year.
On the upside, 127 members of the index have raised or initiated dividends this year — the number who had done so at this time last year was 87.
This advisory “has long been a fan of stocks that raise their dividends, an action that tends to reflect financial strength and management’s confidence in the future.”
Two Canadian names
Among the confident stocks this advisory follows that have raised their dividends, two Canadian names feature prominently.
One is Canadian National Railway (TSX-CNR; NYSE-CNI), which has the admirable habit of raising its dividend each year. The most recent hike pushed it up 7 per cent, to $1.08. The yield is now 1.7 per cent. The stock has breached its 52-week high to trade at $64.50.
The other is a recent dividend delinquent. Two years ago, Canada’s biggest miner, Teck Resources Ltd. (TSX-TCM.B; NYSE-TCK) had trouble digesting Fording Coal. It suspended its dividend.
Two months ago, the dividend was restored. It stands at $0.40 and yields 1.1 per cent. The stock, which crested at $46 in April, has trended down to $35.57, but this advisory, like many others, likes its future.
Four for raised dividends
Dow Theory Forecasts features four U.S. stocks that have pushed up the dividend this year. All are Buys and Long-Term Buys.
Abbott Laboratories (NYSE-ABT) has “a rich dividend yield,” says the advisory, at 3.6 per cent and it has raised the dividend for 38 consecutive years. It now stands at $1.76.
“Based on the drugmaker’s recent operating momentum and sturdy balance sheet, dividend growth should continue,” it adds. With several encouraging drug approvals in hand and the purchase of the generic drug business of a major firm in India, news is good. The stock is at $48.76.
Lubrizol (NYSE-LZ) kept the dividend at 26 cents a share for a decade. Then in 2007, it started raising it again. Recently the dividend got a 16 per cent hike to $0.36. It yields 1.5 per cent.
The company makes specialty chemicals for the transportation, industrial and consumer markets and it’s been doing well. Its operating cash flow leapt by 160 per cent this past year and per-share profits should rise by 15 per cent this year. The stock trades at $91.44.
Back in the medical field, Stryker (NYSE-SYK) has raised its dividend at an annualized rate of 40 per cent over the past three years. And it has lots of room to keep it going, since the payout is less than 20 per cent of trailing earnings. The dividend is $1.60 and yields 1.1 per cent.
Stryker makes medical devices and implants and is looking at projected sales growth of 9 per cent this year. It trades at $51.71.
TJX (NYSE-TJX) has kept its dividend growing at an annual rate of 24 per cent over the past decade. It has raised it every year since 1997. At $0.60, it yields 1.2 per cent today.
The company is the largest “off-price” apparel and home fashion department store chain in the U.S. TJMaxx is one of its big outlets south of the border, while Winners is a familiar name in Canada. Discounters have been one of the bright spots in the retail trade, says the advisory, and this firm’s sales have exceeded expectations. The stock stands at $46.47.
If investors are looking for reasons to be confident, companies that raise their dividends may be just the place to start.
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