Nine Dividend Stocks confident in raising dividends

Several notable companies raised their dividends last week. Dividend raises are not only getting more frequent, but they also seem to be spreading globally as well. A dividend raise in this tough environment indicates confidence in the business and the ability to generate free chas flow. A strong cash flow also enables companies to fund future growth internally, rather than relying exclusively on the capital markets for growth. The companies which decided to share their continued growth with shareholders by rewarding them with a dividend raise include:

Vodafone (VOD), a mobile telecommunications company with operations in Europe, the Middle East, Africa, the Asia Pacific, and the United States., raised its final dividend by 3.5% to 0.052 GBP per share. ADR holders are expected to receive a dividend payment of $0.80 for the second half of 2009 based off current forex rates. Vodafone is an international dividend achiever, which has rewarded its shareholders with an uninterrupted streak of increased dividends for over ten consecutive years. The stock currently yields 4.30%.

ACE Limited (ACE), which provides insurance and reinsurance services to commercial and individual customers worldwide, increased its regular cash dividend by 7% to 31 cents per share. ACE Limited is aninternational dividend achiever, which has increased its quarterly dividend in each of the last fifteen years, which it has more than doubled since 2001. The stock currently yields 2.80%.

Raven Industries, Inc. (RAVN), which manufactures various products for industrial, agricultural, construction, and military/aerospace markets in North America, increased its quarterly dividend by 8% to 14 cents per share. Raven Industries, Inc. is a dividend achiever, which has increased its quarterlydividend in each of the past thirteen years, which it has more than doubled since 2004. The stock currently yields 1.90%.

AAON, INC. (AAON), which engages in the manufacture and sale of air-conditioning and heating equipment, increased its semi-annual cash dividend by 13% to 18 cents per share. AAON, INC. has rewarded its shareholders with an uninterrupted streak of increased dividends since 2006. The stock currently yields 1.70%.

Northrop Grumman Corporation (NOC), which provides products, services, and solutions in information and services, aerospace, electronics, and shipbuilding in the United States, increased its regular cash dividend from 40 cents to 43 cents per share. Northrop Grumman Corporation has rewarded its shareholders with an uninterrupted streak of increased dividends for 5 consecutive years. The stock currently yields 3.60%.

Xcel Energy Inc. (XEL), which engages in the generation, purchase, transmission, distribution, and sale of electricity to residential, commercial, industrial, and public authorities in the United States, boosted its dividend by 3.2% to 24.50 cents per share. Xcel Energy Inc has rewarded shareholders with an uninterrupted streak of increased dividends since 2004. The stock currently yields 5.80%.

Airgas, Inc. (ARG), which is one of the largest U.S. distributor of industrial, medical, and specialty gases, and hardgoods, such as welding equipment and supplies, increased its regular cash dividend by 12.50% from 16 cents to 18 cents per share. Airgas, Inc. has rewarded its shareholders with an uninterrupted streak of increased dividends since 2004. The stock currently yields 1.70%.

Unum Group (UNM), which provides group and individual disability insurance products in the United States and the United Kingdom, raised its quarterly dividend by 10% to 8.25 cents per share. Unum Group lost its dividend achiever status in 2000 and has been unable to consistently increase dividends since then. The stock currently yields 1.80%.

AmerisourceBergen Corporation (NC), a pharmaceutical services company, which offers drug distribution and related services to healthcare providers and pharmaceutical manufacturers, announced its plans to raise quarterly dividends by 20% to $0.06/share after a 2:1 stock split. AmerisourceBergen Corporation has increased dividends for 4 consecutive years. The stock currently yields 1.10%.

I also expect several dividend aristocrats such as Clorox (CLX) and Lowe’s (LOW) to raise their distributions by the end of May, marking it one of the busiest month for dividend increases.

Lowe’s (LOW) has raised its dividend every May since 2004. This dividend growth stock has been raising dividends for 46 consecutive years and has a 5-year dividend growth rate of 46.70%.

Clorox (CLX) has raised its dividend every May over the past 2 years. Before that the board of directors of Clorox tended to announce dividend increases in November for the preceding three years. This dividend growth stock has been raising dividends for 31 consecutive years and has a 5-year dividend growth rate of 11.20%. (analysis)
Full Disclosure: Long CLX

10 Weekend Links

Sometimes I get 10 interesting links to share with my readers. This weekend i am continuing my linkfest with the following articles:

The Kirk Report outlined a list of "The World's Most Ethical Companies, which have outperformed the stockmarket since 2002.

Canadian Capitalist asked his readers about the books they love to read.

DividendsValue discussed the concept of International Income Investing. Make sure to check his analysis of McDonald's Corporation on Div-Net as well.

The Dividend Guy is analyzing the effect of Fixed Income on his Asset Allocation.

Dividend Tree analyzed Qualcomm.

Wide Moad Investing keeps analyzing Buffett's letters to shareholders. He is up to 1981 now. WMI has 28 more years to analyze.

It's not just Warren Buffett who likes the railways - The Money Gardener is bullish on canadian pacific.

Jae from Old School Value reminiscenses on his stock market experiences in How to Invest In the Stock Market-Background

Blogger Pinyo from Moolanomy has created a headlines aggregator called Great Nexus. Make sure to check it out.

Get Rich Slowly has an interesting post on Harry Browne’s Permanent Portfolio.

Ten Links for March 21, 2009

As a new feature on the blog, I am adding the ten articles from around the blogosphere that I enjoyed. Check out the links below:

Barron's Electronic Investor has a nice overview of dividend investing resources available to investors inWhere to Find High, Safe Stock Yields. Yours truly was also featured in there.

Canadian Capitalist analyzed the Toronto Star article on Derek Foster, the self proclaimed "Canadian Youngest Retiree" and also gave us several reasons why Selling puts isn’t “money for nothing”.

Four-Pillars also analyzed the Derek Foster story in Is Dividend Investing Dead? The Derek Foster Story. He also hosted Edition #197 of Carnival of Personal Finance and included my post on master limited partnerships.

DividendsValue wrote about something that has been on my mind for months now -Should You Sell A Dividend Stock After A Dividend Freeze?. While I disagree with him on selling after a dividend freeze, since historic data does not support this decision, the article is showing how one could have cut their losses significantly.

Jason Kelly reviewed the most recent ebook from Dave Van Knapp of SensibleStocks.com titled "The Top 40 Dividend Stocks For 2009". Check out the book description from this page.

This article provides an opposing view to mine on dividend cuts and suspensions. Not Paying a Dividend is Now a Sign of Prudence.

Cliff Wachtel wrote a post in 5 parts titled "The High Dividend Stock Investor's Collapsing Dollar Survival Guide".

StockerBlog made a list of Monthly Dividend Stocks. Dividend Growth Investor readers know however that one could create a portfolio for monthly income,even if dividends are paid out every quarter.

TJ Smith from Bullish Bankers provided a list with "Five Dividends to Count On".

Disciplined Approach to Investing gave us an overview of Oracle Corp: New Dividend and Currency Impact. Cash Rich tech companies are starting to pay out dividends to shareholders.

As goes January so goes the year – Testing the January Barometer

Warren Buffett’s iconic letter to shareholders has been published on Berkshire Hathaway's website. The legendary chairman of Berkshire Hathaway has been writing this annual letter for more than 32 years. In it he summarizes the performance of the various businesses that make up the portfolio of his conglomerate. The Oracle of Omaha often gives insight on his decision making process, when making investments.

Of particular importance to me were his words on his reduction of stakes in Johnson and Johnson (JNJ),Procter and Gamble (PG) and Conoco Phillips (COP):

"On the plus side last year, we made purchases totaling $14.5 billion in fixed-income securities issued by Wrigley, Goldman Sachs and General Electric. We very much like these commitments, which carry high current yields that, in themselves, make the investments more than satisfactory. But in each of these three purchases, we also acquired a substantial equity participation as a bonus. To fund these large purchases, I had to sell portions of some holdings that I would have preferred to keep (primarily Johnson & Johnson, Procter & Gamble and ConocoPhillips). However, I have pledged – to you, the rating agencies and myself – to always run Berkshire with more than ample cash. We never want to count on the kindness of strangers in order to meet tomorrow’s obligations. When forced to choose, I will not trade even a night’s sleep for the chance of extra profits."
I speculated before that one reason why he might be selling solid dividend stocks such as Johnson & Johnson and Procter and Gamble could be that they haven’t fallen as much as the broader market, which makes them ideal for Buffett to deploy the funds in other beaten down sectors. Another reason could be that he needs to raise as much cash as possible, in order to participate in other preferred stock or fixed income deals, where he could earn a 10%-15% annual dividend yield, with very favorable terms for his company. Ordinary investors do not however have the purchasing power to participate in such favorable deals at this time.

Buffett also spend several pages discussing derivatives and shortcomings of the Black Scholes option-pricing model.

Six Dividend Stocks Raising the bar

The stock market averages keep responding in a way that shows investors are expecting the worst in terms of profitability for most major US and Global corporations. Some pundits are getting bullish, while others are getting increasingly bearish. The odds of both camps being correct are slim to none. With this confusing information, what are investors supposed to do?
My main recommendation for buy and hold investors is to ignore all the day to day chatter and forecasts, since noone can predict enough market movements in order to make money. The best course of action to take is to assume a long-term strategy of buying stocks that keep increasing their dividends even during the current uncertain economic and market conditions.

CVS Caremark Corporation (CVS) announced that its Board has approved a 10.5% increase in its quarterly dividends to $0.07625 per common share. CVS Caremark Corporation has consistently increased itsdividends since 2003. The stock currently yields 1.10%.

Cintas Corporation (CTAS) announced that its Board has approved a 2% increase in its annual dividends from $0.46 to $0.47 per common share. Cintas Corporation is a dividend achiever, which has consistently increased its dividends for 25 years. The stock currently yields 2.00%. Over the past 8 years the company has managed to double its dividends.

Enterprise GP Holdings L.P., (EPE), which is engaged in the ownership of general and limited partner interests of publicly traded partnerships engaged in the midstream energy industry and related businesses, announced that its Board has approved an increase in its quarterly dividend to $0.47 per unit. Enterprise GP Holdings L.P. has consistently paid and increased its dividends every single quarter since 2005. The partnership shares currently yield 9.20%.

Linear Technology (LLTC) announced that its Board has approved an increase in its quarterly dividend from $0.21 to $0.22 per common share in an effort to return value to shareholders. Linear Technology is adividend achiever, which has consistently increased its dividends since 1992. The dividend growth has been astounding, as LLTC has managed to double its dividend payments to shareholders every three years on average for the past 16 years. The stock currently yields 3.80%.

Monsanto Company (MON), announced that its Board has approved a 10% increase in its quarterly dividend from $0.24 to $0.265 per common share. Monsanto Company has consistently increased its dividends since 2001. In fact the new dividend payment represents a 489% increase in comparison to the first dividend payments in 2001 of $0.045/share. The stock currently yields 1.20%.

Family Dollar Stores, Inc. (FDO) announced that its Board has approved a 8% increase in its quarterly dividend from $0.125 to $0.135 per common share. Family Dollar Stores, Inc.is a dividend aristocrat that has consistently increased its dividends for thirty-three consecutive years. The stock currently yields 1.80%.

LLTC looks like a promising dividend growth stock in order to gain some technology exposure in my dividend stock portfolio. I will add it to my list for further research. FDO looks promising in the current economic environment, however due to its low yield I would only consider initiating a position there on dips below $18.

TARP is bad for dividend investors

TARP allows the United States Department of the Treasury to purchase nonliquid, difficult to value assets from banks and other financial institutions. TARP also allow the Treasury to purchase whole loans and make direct equity investments in banks themselves. The targeted assets are securities backed by mortgages, sometimes described by the government, media, and others as “troubled” or “toxic” assets.
As of November 12, 2008, $290 billion of the first $350 billion allotment funding TARP has been allocated, primarily to the Capital Purchase Program: $250 billion for bank equity infusions, and $40 billion for an equity infusion into insurer American International Group.[
The eight financial companies that were the first to have received TARP funds include:

Bank of America (BAC) (analysis)
Bank of New York Mellon Corp
Citigroup (C )
Goldman Sachs (GS)
JPMorgan Chase (JPM)
Morgan Stanley (MS)
State Street (STT)
Wells Fargo (WFC)

There were 44 other institutions that received TARP money, including USB, CMA, Northern Trust, Suntrust Banks, KeyCorp, RF, BB&T and others. Check out my analysis of USBank or my analysis of BB&T.

There is some talk that a TARP funding to banks essentially marks the end of their dividends.

"Restrictions on Dividends:
For as long as any Senior Preferred is outstanding, no dividends may be declared or paid on junior preferred shares, preferred shares ranking pari passu with the Senior Preferred, or common shares (other than in the case of pari passu preferred shares, dividends on a pro rata basis with the Senior Preferred), nor may the QFI repurchase or redeem any junior preferred shares, preferred shares ranking pari passu with the Senior
Preferred or common shares, unless (i) in the case of cumulative Senior Preferred all accrued and unpaid dividends for all past dividend periods on the Senior Preferred are fully paid or (ii) in the case of non-cumulative Senior Preferred the full dividend for the latest completed dividend period has been declared and paid in full.

Common dividends: The UST’s consent shall be required for any increase in common
dividends per share until the third anniversary of the date of this investment unless prior to such third anniversary the Senior Preferred is redeemed in whole or the UST has transferred all of the Senior Preferred to third parties." Source TARP Capital Purchase Program

What really showed me that TARP program is serious, is a recent statement from State Street last week, which announced that it wasn’t going to raise its dividends in compliance with the restrictions on dividend rate increases generally imposed on all participants in the U.S. Treasury's TARP Capital Purchase Program.

Before that State Street (STT) was the only dividend aristocrat which had consistently increased its dividends twice per year for almost 27 years in a row.

Traditionally, financial shares were one of the best yielding stocks in the marketplace. It seems that TARP essentially is bad news for any dividend investors, as it could result in further decreases to already lowered payments. The lesson to be learned for individual investors is to diversify across sectors, no matter how great the yields look.