4th quarter 2011 earnings are in and many of our companies have met expectations. The few glitches that did occur were due in the main to a stronger dollar and delays in orders. One message that was clear across the board was the impact of events in Europe. Thankfully most of our companies have broadened their international exposure and continue to see growth in the emerging markets.
As we go forward the United States will have some growth but will not be a meaningful contributor to earnings in 2012. Cash flow amongst the companies that fit our investment criteria, however, is expected to be robust. Our universe of stocks shows an average of $6.00 a share in cash flow and $1.84 in free cash flow per share. The universe has a dividend average of 2.7% versus 1.9% for the S&P 500. 6 of our companies have increased their dividend in the 1st quarter of 2012.
In this newsletter we would like to highlight 3 companies that have had significant increases in their dividend this quarter. Each of these companies pays a dividend yield in excess of the 10-year Treasury bond, which is currently yielding 2.0%.
Eaton Corp (ETN) is an industrial company with 26% of its sales coming from the emerging markets. They also benefit from a strong trucking replacement cycle here in the United States. Despite a small miss in 4th quarter earnings due to order delays, the company still had a 27% year over year increase in profits. Profitability remains strong and is expected to continue into 2012. Their quarterly dividend increased by 12% from $.34 to $.38 and the company is currently yielding 3.0%.
Coca-Cola (KO) made a smart move in 2010 when it completed its’ purchase of the North American bottling operations from Coca-Cola Enterprises. In 2011, sales rose over 32% mostly as a result of this purchase. In trying to reinvigorate the brand in a slowing carbonated beverage market, the company has introduced several new products in the non-carbonated group. 2012 will also pose its challenges, especially in regards to currency translations; however, earnings are still expected to increase in the high single digits. The quarterly dividend was increased from $.47 to $.51 for an increase of 8.5% and the company is currently yielding 3.0%.
Pfizer (PFE) lowered earning guidance for 2012 due to a stronger dollar and an aging drug pipeline. The company expects to overcome these issues through further restructuring and advances in new drugs. The company trades at a very attractive 30% discount to the market. They increased their dividend by 10% from $.20 to $.22 per quarter and the company currently yields 4.2%