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Dividend Stocks for the Week - 22124 views
BALTIMORE (Stockpickr) -- We’re continuing 2011’s trend for dividend performance in the past week, with 35 companies announcing increases in their payouts to shareholders.
While that doesn’t quite meet up to the 43 dividend increases we saw the previous week, it’s important to remember that last week’s number was the biggest instance of dividend increases in more than a year. If anything, the fact that dividends continue to be on the rise is an auspicious signal for investors because it suggests that companies are becoming confident enough in the current economic situation to part with their precious cash.
For income investors, that suggests an even bigger trend is in the works. History shows that when dividends rise, investors should pay attention. 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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And while that statistic applies to all companies that pay dividends, 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.
Dun & Bradstreet
The past year has brought strong stock performance for shareholders of Dun & Bradstreet (DNB), the $4.2 billion firm that provides commercial information on businesses as well as risk management and marketing solutions to its clients; shares of the company rose more than 15% in the trailing 12 months. That performance has spurred management to increase the company’s quarterly dividend payout by 2.9% to 36 cents per share.
While that dividend hike may not sound enormous, it’s the latest in a string of consistent increases that the company has undertaken since 2007. D&B even maintained its payouts through the roughest patches of the recession. By far, D&B’s biggest asset is its commercial database of businesses, which other firms use to rate the creditworthiness of potential partners, competitors, and clients. As a result, the company manages to deliver massive cash generation abilities -- nearly 20% margins and minimal noncash income statement items are big contributors to that.
It’s Dun &Bradstreet’s cash prowess that should keep those dividends moving for shareholders for the foreseeable future. That’s the hope of Breeden Capital Management, a hedge fund manager founded by Richard Breeden in 1996. Other major Breeden positions include H&R Block (HRB) and Zale Corporation (ZLC).
While the trucking industry saw significant struggles back in 2008 as demand tapered off and fuel costs hit all-time highs, there’s a powerful resurgence in the trucking business right now -- an industry whose performance often acts as a leading economic indicator. J.B. Hunt (JBHT) is one of the biggest names in trucking. If you’ve spent much time on U.S. highways, you’ve probably seen the firm’s logo more than a few times. Last week, J.B. Hunt announced an 8.3% dividend increase, bringing its quarterly dividend to 13 cents per share.
J.B. Hunt is a major player in the intermodal delivery business, transporting rail freight to ultimate end customers. That intermodal business contributes more than 50% of the company’s sales -- and its fixed-contract nature provides significant downside protection against the cost effectiveness of rail transport, one of the biggest threats to trucking in an inflationary environment. Contracted hauling services still account for around 40% of sale, and brokerage and logistics make up nearly 10% of total revenue. That mix of operations significantly cuts down on the risks seen by the firm’s trucking peers.
One of J.B. Hunt’s biggest shareholders is Richard Aster’s Meridian Fund, which manages assets in excess of $2.4 billion. Other Meridian holdings include Citrix Systems (CTXS) and another firm that increased its dividend this week, Mattel (MAT).
United Parcel Service
Shipping giant United Parcel Service (UPS) is another firm that stands to gain considerably as systemic demand perks up at the tail end of the economic recession. Last week, the company increased its dividend by 10.6%, bringing its quarterly payout to 52 cents per share -- a 2.78% yield at current share prices.
As the world’s largest package delivery company, UPS deploys a fleet of more than 100,000 vehicles and 500 aircraft, making it one of the world’s largest airlines by fleet size (that said, its aviation operations are smaller than those of peer FedEx (FDX)). That global reach affords UPS significant logistical advantages over its competitors, as well as the ability to transport items at incredibly low costs spread across tens of millions of packages per day. Despite the capital-intense nature of maintaining a delivery network, UPS is in excellent financial health, and deals with minimal balance sheet leverage. As such, the company should have no trouble keeping up with payouts to its shareholder base.
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, Elmerraji 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.