The Skinny on Possible Dividend Boosts

Even though Johnson & Johnson (JNJ Quote) is currently in the process of buying Guidant (GDT Quote) for $25 billion, I expect it will boost its 28.5-cent quarterly dividend in late April. The health care giant has raised its payout 41 consecutive years, and the 1.7% yield is equal to what the average S&P 500 stocks offers. The only thing more consistent than J&J's dividend is its earnings, which have grown at a compound annual rate of 15% over the past decade. I believe the company can afford to bump up its dividend to 30 cents a share, which it could cover with 35% of expected full-year earnings.

Marshall & Ilsley (MI Quote) will likely increase its dividend in late April for the 32nd consecutive year. The Wisconsin-based bank's 2% yield can be covered 3.6 times with expected 2005 earnings, but the company's payment is at the low end of its regional peers. I believe the company could afford to raise its quarterly dividend to 25 cents a share (2.4% yield) from 21 cents, though readers looking for regional bank exposure in this neck of the woods should also consider Associated Banc's (ASBC Quote) 3% yield.

PepsiCo (PEP Quote) has raised its quarterly dividend 32 consecutive years, and I expect the next boost to come in early May. Management stepped up and increased the payment 44% in 2004, to 23 cents a share. Even so, the company's 1.7% yield is still 70 basis points lower than what fellow beverage maker Coca-Cola (KO Quote) offers. I expect PepsiCo will raise its dividend to 25 cents a share, indicating a 1.8% yield that it can comfortably cover with 39% of expected full-year earnings.

Protective Life (PL Quote) has boosted its dividend 14 consecutive years, and the next increase of the 17.5-cent quarterly payment could come in early May. The life insurer's 1.7% yield is at the midpoint of the industry range and can be covered 5.1 times with expected 2005 earnings. With that in mind, I think the company could comfortably afford to pay 20 cents a share (1.9% yield).

Teleflex (TFX Quote) will likely increase its quarterly dividend for the 27th consecutive year in late April. The industrial manufacturer currently pays 22 cents a share, which the company could boost to 25 cents (2% yield). The new payout would be at the midpoint of the industry range and could be covered with 32% of expected 2005 earnings.