Dividend Champs. March 2013.
Dividend paying stocks were predictably steady and reliable in 2012. They performed well even though most lagged behind the performance of the S&P 500.
All 30 stocks in CAIM’s investment portfolios increased their dividend last year. In the first quarter of 2013 we currently have 10 companies that have increased the dividend by an average of 7.2%. We have purposely excluded the massive 40% dividend hike by Qualcomm in this average in order to offer a fair representation of results.
In Barron’s Speaking of Dividends column this weekend, Howard Silverblatt notes that 406 companies of the S&P 500 now pay a dividend. He also points out that if you had invested $1,000 in each of what he calls the Magnificent 7- companies that have sweetened their payouts for at least 30 years – at year end 1982, that investment would have been worth $425,581 at the close of 2012. His seven stocks include 3M (MMM), Coca Cola (KO), ExxonMobil (XOM), Johnson & Johnson (JNJ), McDonald’s (MCD), Procter and Gamble (PG), and Walmart (WMT). You’ll find many of these names in our own portfolio.
Below are 3 companies from CAIM with dividend increases worth noting.
Williams Companies (WMB $34.71, 3.9% yield). WMB is primarily a natural gas transport company. The company increased the dividend only 4.3% in the first quarter of 2013. In 2012, however, they raised the dividend every quarter for a total increase of 25.4%. Management states they are likely to increase the dividend 20% a year through 2014.
Qualcomm (QCOM $66.65, 1.5% yield). This is one of two tech companies that make the parts for smart phones. QCOM generates a very strong cash flow of $4.56 per share. This has enabled the company to increase their dividend by 40% in the first quarter of 2013. The payout ratio remains fairly low at 24%, which leaves the door open for future increase in coming years. In addition, the company announced a new $5 billion stock buyback plan on top of their current $4 billion plan, which has $2.5 billion remaining. Both moves signal managements’ very strong conviction in the company’s ability to continue to generate cash.
T. Rowe Price (TROW $75.20, 2.0% yield). TROW is a no load mutual company with a strong history of dividend increases. They paid a special dividend of $1 per share in addition to the regular quarterly dividend in 2012 and started off 2013 with an increase of 11.7% to the quarterly payout going forward. The stock market appears to be impressed with these increases as the stock is already up 14.0% in 2013.