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Dividend Stocks: Becton, McCormick, National Oilwell - 10718 views
The S&P 500 has rallied 2.7% since Monday, a strong turnaround from the tepid Thanksgiving-week performance investors only just experienced. Today, with stock futures pointing to another day of upside trading, many market participants are ratcheting up their risk tolerance levels and going after attractive stock buying opportunities. But as investors focus on capital gains this week, they shouldn’t be leaving dividend stocks on the table.
That’s because dividends at fundamentally sound companies offer a reprieve from market conditions when times are tough -- and they pave the path to bigger stock gains when the bulls are in control of the market.
Does that sound surprising? 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.
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Right now, companies that are willing to part with cash in arguably tough times are worth a second look.
And while companies that pay dividends are great, the companies that increase those dividend payouts over time are even better. 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 medical equipment maker Becton Dickinson (BDX), an $18.6 billion firm that weighs in as the world’s biggest supplier of medical devices and surgical products. The company announced a 10.8% dividend increase last week, bringing its quarterly payouts to 41 cents per share.
Becton has forged an empire from selling consumable surgical products -- such as syringes and scalpels -- with a focus on developing next-generation safety features that help Becton’s products stand out from the competition.
The company’s exposure to the recurring surgical instrument business has made Becton an attractive stock of late; despite the firm’s blue-chip stature, it’s continued to experience solid revenue growth throughout the recession. Now a track record of dividend increases is keeping investors engaged in this stock.
Spice and flavoring manufacturer McCormick & Co. (MKC) is another firm that hiked its dividend payouts last week. The 121-year-old company increased its quarterly dividend to 28 cents per share, a 7.7% increase.
McCormick is the clear leader in the North American spice and seasoning business, controlling more than half of the market. The company has achieved that dominance by creating or acquiring a robust portfolio of popular seasoning brands, building a large private-label business, and actively pursuing the industrial and commercial food business.
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While the company’s relatively recent acquisition of Lawry’s increased the company’s debt load by more than 50%, it’s still a manageable obligation for a company of McCormick’s scale to handle -- and to keep paying out its dividend to investors.
When it comes to those dividend payouts, McCormick is one of the most consistent firms in the world. The company’s dividend has been uninterrupted for the last 85 years.
That fact has helped attract investors like the T. Rowe Price Equity Income Fund (PRFDX), run by storied fund manager Brian Rogers. The fund’s other positions include stakes in American Express (AXP) and AT&T (T).
National Oilwell Varco (NOV) is one of the largest oil rig equipment suppliers in the world, with 825 locations spread across six continents. Last week, the company increased its dividend by 10% to 11 cents per share. Even though National Oilwell isn’t a traditional income stock (its yield only rings in at 0.71% at current levels), the stock has nonetheless managed to impress investors of late with a 56% year-end rally in 2010 that’s sent share prices from below $40 to more than $60 in the last three months.
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Now the question is whether or not the company can justify those increased prices with its fundamental performance. National Oilwell does benefit from a nearly ubiquitous presence in the oil drilling industry, with products that touch nearly 90% of the world’s oilrigs. As a result, the company saw shares rocket just a few years ago as oil prices skyrocketed and drillers attempted to expand their reach under more attractive financial arrangements. But the drop in the price of oil and backlash from the Deepwater Horizon spill have both impacted NOV’s share price of late.
That said, international expansion looks to be the biggest growth driver for 2011 and beyond -- and this company’s current posture should ensure that it gets a large chunk of any new equipment contracts.
In the meantime, the company’s strong balance sheet should ensure that it’s able to continue paying its dividend to investors like the ProFunds UltraSector Oil & Gas Fund (ENPIX). Besides National Oilwell, the fund’s other holdings include Exxon Mobil (XOM) and Chevron (CVX).
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.
At the time of publication, the Rhino Stock Report was long BDX.
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.