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7 Dividend Stocks That Want to Pay You More Cash - views
BALTIMORE (Stockpickr) -- It's official: Earnings season has begun!
Alcoa (AA) kicked off the barrage of earnings reports with its call after the closing bell on Monday, spurring that period of time when corporate management teams must bend knee and report to their owners: the investing public. Earnings season is a critical time period for the market. For most companies, it’s the only time each quarter when new fundamental data gets released to the public. For that reason, earnings season can send a stock on a bullish rampage, or torpedo any chance at earning a decent return.
For income investors, earnings season is an even bigger deal. That’s because it also tends to be the time when companies announce their dividend payouts for the quarter. The past year has been stellar for dividend investors -- right now, corporate profits, cash holdings, and dividend payouts all sit at record highs.
Even if that fundamental strength isn’t being factored into share prices right now, investors shouldn’t eschew dividends if they want to earn market-beating returns year after year. The data shows that dividends and performance have historically been inseparable.
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Over the last 36 years, dividend stocks have 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 data compiled by Ned Davis Research. The numbers are even more compelling when looking at companies that consistently increase their payouts.
That's why we pay close attention to the firms that are shoveling more corporate cash to shareholders. With that, here's a look at seven stocks that hiked payouts recently.
New Dividend: 76.5 cents quarterly (per share)
Dividend Percent Increase: 2%
Current Yield: 4.46%
First up today is Duke Energy (DUK), a holding company that owns a group of regulated utilities serving more than 7 million customers spread across six Southern and Midwestern states. Traditionally, power and gas utilities are a bastion of safety for dividend investors, and Duke is no exception. Thanks to a small 2% dividend increase last week, the firm’s payout got hike to a quarterly 76.5 cents per share -- a not-so-small 4.46% yield at current price levels.
Besides its utility business, Duke also owns attractive generation assets spread in its operating region as well as hydroelectric plants in Latin America. The generation business adds a bit of volatility to DUK’s earnings, a good thing for investors who are looking for something beyond a boring regulated utility firm.
Of course, Duke’s dividend hike shouldn’t have come as a total surprise; I talked about the likelihood of a dividend increase in "5 High-Yield Stocks Ready to Boost Dividends."
New Dividend: 26 cents quarterly (per share)
Dividend Percent Increase: 7.22%
Current Yield: 2.71%
Medtronic (MDT) is another dividend hike that we saw coming -- a month ago it was one of 5 Blue-Chip Stocks Ready to Boost Dividends. The medical device firm develops a range of products that includes everything from pacemakers and defibrillators to stents and insulin pumps.
Medtronic’s focus on chronic diseases has carved it out an attractive space in the niche medical device market. With Obamacare likely to increase the number of patients who can afford MDT’s offerings, sales should see an organic bump in the coming years.
Typically, Medtronic hikes its dividend payout every year, a move that makes MDT a solid holding for income investors who want exposure outside of the typical big pharma basket of health care stocks.
I also featured Medtronic last week in "5 Health Care Stocks Setting Up to Break Out."
New Dividend: 33 cents quarterly (per share)
Dividend Percent Increase: 8.2%
Current Yield: 3.38%
There’s more to General Mills (GIS) than just cereal. While the firm may be best known for brands like Cheerios, the firm also owns a handful of diverse food labels, including Haagen-Dazs, Yoplait, and Betty Crocker. Those name-brand food products have contributed to hefty net margins for the Minneapolis-based firm, which in turn has supported a hefty dividend payout for investors.
Last week, General Mills hiked its payout by 8.2%, bringing its quarterly dividend to 33 cents per share. With a yield currently weighing in at 3.38%, GIS is a solid offering for investors looking for exposure to consumer spending.
General Mills shows up on a recent list of 10 Century-Old Blue-Chip Stocks Still Earning Their Keep.
New Dividend: 50 cents quarterly (per share)
Dividend Percent Increase: 16.28%
Current Yield: 3.86%
Casual dining restaurateur Darden Restaurants (DRI) is the firm behind popular concepts like Red Lobster, Olive Garden and LongHorn Steakhouse, boasting more than 1,800 North American locations in all. Darden has actually churned out some impressive performance in the past few years, capitalizing on the mass-market appeal of its restaurant chains in an environment where mass-affluent consumers were trading down from pricier restaurants.
That positioning has helped Darden climb more than 56% since the middle of 2009, and pay out a hefty dividend yield in the process. Darden was another dividend hiker that I talked about back in late May in "5 Stocks Ready to Boost Dividends."
John Wiley & Sons
New Dividend: 24 cents quarterly (per share)
Dividend Percent Increase: 20%
Current Yield: 1.93%
Book publisher John Wiley & Sons (JW.A) announced a 20% increase to its quarterly dividend last week, raising its current dividend yield to 1.93%. Wiley’s biggest business isn’t its consumer-facing retail books -- scientific, professional and trade books actually make up most of sales, and a disproportionate share of profits since they sell at higher prices.
Wiley’s embrace of digital book distribution should be a boon to its bottom line – it cuts out one of the biggest costs of book publishing (the publishing itself) and speeds up the distribution process. Even if it means sharing sales with Apple’s (AAPL) iTunes or Amazon (AMZN), the transition makes sense in 2012.
John Wiley shows up on a list of 20 Smaller Stocks With Growing Dividends.
Harman International Industries
New Dividend: 15 cents quarterly (per share)
Dividend Percent Increase: 100%
Current Yield: 0.74%
Mid-cap audio product maker Harman International Industries (HAR) doubled its dividend payout last week, ratcheting its quarterly dividend to 15 cents per share. While that’s still just a 0.74% yield (hardly qualifying HAR for core income holding status), it’s a good sign that the firm is enjoying strong fundamental performance. Stair-step revenue growth in the years since the recession is a big reason why Harman is able to afford to pay out bigger profits to shareholders in 2012.
Harman owns a big portfolio of audio brands, including eponymous Harman/Kardon, Infinity and JBL. Besides selling products to consumers, HAR has done a good job of positioning many of its brands as upscale premium audio options on a number of car brands. That should help to tie HAR’s fortunes with the fast-growing car industry right now.
New Dividend: 13 cents quarterly (per share)
Dividend Percent Increase: 8.33%
Current Yield: 2.38%
Last up is metal manufacturer Worthington Industries (WOR). Worthington processes steel, making products like stampings, metal gas cylinders, and metal framing that’s used in a handful of sectors, including construction and automotive. Last week, Worthington announced an 8.33% dividend increase, bringing the firm’s payout to 13 cents per share -- a 2.38% yield at current price levels.
Shares of Worthington have been on fire this year, climbing more than 33% largely on the heels of better-than-expected fundamental performance in the firm’s fiscal fourth quarter call last month. While Worthington is beholden to the ebb and flow of base metal prices in the commodity markets, the firm looks well-positioned to continue outperforming the basic materials sector for the second half of the year.
To see these dividend plays in action, check out the Dividend Stocks portfolio on Stockpickr.
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-- 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.