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Dividend-Increasing Stocks of the Week - 20069 views
BALTIMORE (Stockpickr) --
Last week was another surprisingly strong one for dividend-increasers; 38 stocks announced increases in their payouts to shareholders in the last week, falling just short of 2010 and 2011’s record 43 increases just two weeks ago. The sheer number of dividend hikes is also significant because of which companies made the list; this latest group includes some of Wall Street’s bigger names, an auspicious signal to income investors who’re already enjoying a generous earnings season.
For the last few years, we’ve asserted that dividend-increasers are worth watching for a bevy of reasons, particularly in the current economy. And the statistics back up that claim.
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. And while that statistic applies to all companies that pay dividends, the companies that increase those dividend payouts over time are even better.
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Each week, we take a look at companies that are actively increasing their dividend payouts to shareholders. Without further ado, here’s a look at this week’s dividend stocks.
First up this week is integrated energy giant ConocoPhillips (COP), whose management opted to increase its quarterly dividend payout by 20% to 66 cents per share, a 3.5% yield at current share price levels. ConocoPhillips has been making a stellar run so far in 2011, climbing 11% year-to-date vs. around half that from the broad market. Shareholders should expect the dividend hikes to continue for the foreseeable future.
That’s because from a shareholder value standpoint, ConocoPhillips is a habitual top-performer. The company has consistently increased dividends and funded share buybacks, two initiatives that plant management’s objectives squarely in-line with those of shareholders. Overall, the commodity boom of late has been beneficial to ConocoPhillips, but any gains have been muted by relatively lagging performance in the commodities that COP has exposure to. If crude oil and natural gas play catch up to many of the soft commodities that have rallied lately, this company’s margins are likely to expand in kind.
Among ConocoPhillips’ biggest shareholders is Legg Mason Capital Management, headed by storied stock picker Bill Miller. The stocks is also one of Warren Buffett's top holdings, and with a B buy rating, it's one of TheStreet Ratings' top-rated oil and stocks.
As impressive as ConocoPhillips’ performance may be, it’s been eclipsed by Polo Ralph Lauren (RL), a $12 billion apparel stock that’s seen shares rally nearly 13% since the first trading day of 2011. Polo Ralph Lauren is benefiting from a broad uptick in consumer spending -- one that’s focused more dollars on the higher-end, aspirational brands that line the company’s product portfolio. Last week, management opted to double its dividend, bringing quarterly payouts to 20 cents per share.
While relatively low dividend yields don’t qualify Polo Ralph Lauren as a bona fide “income stock,” the company’s exposure to one of the fastest-recovering corners of the economy is reason enough to give this stock added attention right now. As with most premium brands right now, the high growth (read recovery) in the U.S. isn’t likely to last -- so Polo Ralph Lauren is looking abroad to fuel top-line increases in the near term. That’s a risky proposition, but it’s one that the company does have the wherewithal to pursue; with a robust net cash position on its balance sheet, shareholders shouldn’t worry about liquidity in RL.
Timber giant Weyerhaeuser (WY) upped its status as a dividend-investor’s go-to stock following its recent conversion to a real estate investment trust (REIT). The new structure provides significant tax advantages -- and it requires the company to pay the vast majority of its income out directly to shareholders as distributions. The company’s 200% dividend increase brings its payout to 15 cents per share, a 2.38% yield on the stock.
Weyerhaeuser is one of the world’s biggest owners of forests, with more than 22 million acres under its control. As such, it’s a powerhouse in supplying timber (as well as other commodities) that’s used for lumber and paper products. Unfortunately, that’s meant that Weyerhaeuser is completely beholden to the ebb and flow of commodity markets, which ultimately set the prices for the company’s products. While that’s provided for margin expansion of late, it’s a trend that could easily reverse in the future. That said, this stock is an excellent, income-generating option for investors looking for exposure to oft-ignored soft commodities.
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.