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3 Stocks With Recent Dividend Boosts - 17646 views
That’s a particularly compelling story right now given the massive increase in volatility that’s taken place since the end of February. As uncertainty increases in the market, the relative safety of fundamentals-driven dividend income is becoming all the more attractive to Main Street investors.
At the same time, the statistics suggest that betting on dividend stocks has capital gain merits as well – even in rough markets.
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Over the last 36 years, dividend stocks outperformed the rest of the S&P 500 by 2.5% annually, and they outperformed nonpayers by nearly 8% every year, all while paying out cash to their shareholders, according to a study from NDR. That said, not all dividend stocks are created equal. While that statistic applies to all companies that pay dividends, the companies that increase those dividend payouts over time are even better.
That’s why, each Friday, we take a look at the companies that increased their dividend checks to shareholder in the last week. Here’s a look at this week’s stocks with recent dividend increases.
Semiconductor equipment giant Applied Materials (AMAT) is by far the world’s biggest supplier of chip manufacturing tools. And with Applied’s biggest customers seeing an upswing in demand for their products (which has been battered in recent years), this stock is likely to see in-kind growth numbers hit their top line in the next several quarters. Meanwhile, management is delivering income growth to shareholders thanks to a 14.3% dividend increase that brings the company’s current payout to 8 cents per share.
That brings Applied Materials’ dividend yield to 2.16% right now, a particularly attractive dividend for the tech sector. Investors seeking income diversification would do well to take note.
Also worth noting is Applied’s fundamental prowess. The company boasts broad business interests, with a relatively nascent solar equipment division and an immensely attractive service provider arm. That exposure to other industries should give Applied much-needed growth prospects, while staying complementary enough to the firm’s core business to give it an edge. Financially, this stock is in terrific shape, with a positive $3.9 billion net cash position and respectable cash flow generation capabilities. Expect the new dividend rate to remain in place.
Bank of Nova Scotia
Bank of Nova Scotia (BNS) -- aka Scotiabank -- is one of Canada’s largest banks, and one of the biggest in North America, with assets of approximately $550 billion U.S. Shares have made a significant run in the trailing year, climbing more than 20% while the broad financial sector gained a measly 3.64% over that same period. That effective return just increased for investors following the bank’s decision to increase its dividend 6.1% last week. The change brings Scotiabank’s quarterly dividend payout to 52 cents per share, a 3.66% yield at current price levels.
Scotiabank isn’t just one of the biggest banks in Canada -- it’s also one of the best-positioned with international exposure. The firm has a significant footprint in the Latin American and Asian emerging markets, a factor that increases growth potential and cuts back on the potential downside from excessive exposure to tepid North American markets.
As with most large Canadian banks, Scotiabank offers a number of fee-based services that look more attractive than its retail banking business. Chief among them are wealth management and investment banking. As long as the firm manages risk appropriately, investors should expect outperformance over its retail-focused peers in the U.S.
As is the case with most Canadian banks right now, Scotiabank currently sports a highly leveraged balance sheet. That means that a major miss on its loan book could spark a major liquidity concern for the firm. Even so, those risks are comparatively small in 2011’s lending environment. Investors looking for a better alternative for exposure to the financial sector should look here.
As of the most-recent period, Scotiabank was one of the top holdings in the portfolio of Ken Fisher's Fisher Asset Management.
2011 is already proving to be a good year for Tyco (TYC), the Swiss-based conglomerate that owns security firm ADT. Shares are already up more than 6%, year-to-date, a far cry from the S&P’s 1.2% increase in value. Much of that performance has been predicated on solid results from the firm’s businesses. Top-line growth has perked up more than 5% in the last year, and acquisitions should help accelerate bottom line growth in the coming quarters.
ADT is the firm’s biggest division, generating significant recurring revenues that sport double-digit operating margins. As consumers begin to spend on luxury discretionary purchases en masse again in 2011, expect sales of security services to increase at a similar clip.
While Tyco has had some difficulties in its past (the result of a scandal involving its predecessor’s management team) this is a different company both in form and function. Management has been working hard to remind shareholders of that through lean operations and strong dividend payouts. Those dividends increased by 19% last week to 25 cents per share. The company’s strong recurring cash flow generation should help lock that payout down for shareholders.
For the rest of this week’s dividend stocks, check out the Dividend Stocks for the Week portfolio on Stockpickr.
And if you haven't already done so, join Stockpickr today to create your own dividend portfolio.
-- Written by Jonas Elmerraji in Baltimore.
At the time of publication, author had no positions in stocks mentioned.
Jonas Elmerraji, based out of Baltimore, is the editor and portfolio manager of the Rhino Stock Report, a free investment advisory that returned 15% in 2008. He is a contributor to numerous financial outlets, including Forbes and Investopedia, and has been featured in Investor's Business Daily, in Consumer's Digest and on MSNBC.com.