Dividend Champs 1st Quarter 2014
There is no doubt that 2013 was a remarkable year for stocks. Investment professionals like myself, are still amazed at the size of returns, given our slow economic growth and high levels of unemployment. We believe the market was able to move to such levels with the help of the Quantitative Easing programs.
Now that that program is beginning to unwind, what can investors expect for the next few years? Will we see a sizable correction? Will the economy continue to grow and, if so, at what pace?
What we do know is that dividend yield is an important source of total return. Dividend paying stocks will offer some downside protection during periods of uncertainty and overtime. CAIM’s own investment process focuses on searching for companies with attractive dividend yields (not necessarily high yields), and the ability to consistently increase the dividend and grow their earnings.
In 2013, 96% of the stocks in our portfolio increased their dividend an average of 11.25%. 56% of our companies had a small increase in their payout ratio. We would like to highlight two companies that have significantly increased their dividend for the first quarter of 2014:
1. Qualcomm (QCOM $76.97, 1.8% dividend yield). We highlighted Qualcomm back in November as a candidate for holiday gift giving (link). On March 3, the company announced a 20% quarterly dividend increase from $.35 to $.42 per share. They also announced an increase in their current stock buyback program by $5 billion. For a total buyback of $7.8 billion. The company is expected to grow their earnings by 13% in 2014. This is as compared to a 6% increase for the S&P; 500 yet trades, at a 10% discount to the S&P.;
2. Eaton Corp. (ETN $73.80, 2.7% dividend yield). Eaton may not be a household name, but they are a global leader in power management solutions. As stated on their Facebook page: “We make power operate more efficiently, effectively, safely and sustainably.” The company serves many industries but is best known as the world’s largest producer of medium and heavy-duty truck transmissions. So far, in 2014, they have increased their dividend by 16% from $.42 to $.49. Earnings are projected to grow 16% in 2014, versus 6% for the S&P; 500.