) -- When it comes to
, payout growth is just as important as current yield. Among the
components. But, not all Dow stocks are on equal footing in terms of shareholder treatment. In fact, some of the highest-yielding Dow stocks, such as
, have cut their dividends in the past. Below is a snapshot of those with the best three-year dividend growth.
1. IBM (IBM) - Get International Business Machines Corporation Report, 3-Year Dividend Growth: 71%
Now, here is a look at the Dow companies expected to raise their dividend the most in 2011.
is a credit-card company. Third-quarter sales increased 9.7%, but net income and earnings per share more than doubled. American Express has grown its dividend 25% in the past year. It has boosted the payout 13%, on average, over three- and five-year spans. The stock receives buy recommendations from two-thirds of analysts in coverage. Piper Jaffray offers the highest price target, at $64, implying a 12-month gain of 43%. Credit Suisse rates the stock underperform with a low $40 target.
is the world's largest company, based on sales. Third-quarter revenue ascended 2.6% and net income increased 9.3%. Earnings per share advanced 16% to 95 cents, boosted by a smaller float. Wal-Mart has expanded its dividend 11% over a one-year span and 11%, on average, over three years. It has boosted the payout by 15%, on average, over a five-year span. Analysts remain optimistic about the stock's 2011 upside, with 24, or 71%, advising clients to purchase shares. HSBC offers a target of $68, suggesting a 26% one-year gain.
Johnson & Johnson
sells consumer products, pharmaceuticals and medical devices. Its third-quarter profit inched up 2.2% to $3.4 billion, or $1.23 a share, as revenue declined marginally. J&J has boosted its quarterly distribution 9.3% in the past year, and 9.2% and nearly 11%, on average, respectively, over three- and five-year periods. Analysts are luke warm on the stock, which receives 13 buy ratings and 12 hold calls. No researchers advise selling. Citigroup predicts J&J's stock will advance 11% to $70. Goldman Sachs expects the shares to decrease to $59.
makes syrup and beverages. Coke's third-quarter net income stretched 8.4% to $2.1 billion, or 88 cents a share, as sales increased 4.7%. Coke has amplified its dividend 7.3% in the past 12 months. It has boosted the payout 9% and 9.5%, on average, respectively, over three- and five-year spans. Coke is currently the highest rated Dow stock, based on analyst rankings. Of researchers following the company, 17, or 81%, advise purchasing its shares, and four recommend holding them. Barclays expects the stock to climb 18% to $74.
is the world's largest software company, selling the Windows operating system and Office product suite. Fiscal first-quarter net income surged 51% to $5.4 billion, or 62 cents a share, as revenue extended 25%. Microsoft has increased its distribution 5.8% in the past year. It has grown the payout 10% and 11%, respectively, on average, over three- and five-year horizons. Three quarters of analysts in coverage recommend that clients buy Microsoft, making it the fourth highest-rated Dow stock. Stifel Financial projects a $40 price target.
Procter & Gamble
is a consumer products company, selling beauty, grooming and health care products. Fiscal first-quarter net income dropped 6.8%, but earnings per share rose 5.2% to $1.02, boosted by a lower share count. Revenue inched up 1.6% to $20 billion. P&G's dividend has risen 9.6% over a one-year span. It has grown 12%, on average, in the past three years and the past five years. The stock receives buy ratings from 68% of analysts in coverage. A median target of $71.92 suggests an impending 12-month advance of 12%.
is the world's largest pharmaceutical company. Third-quarter net income tumbled 70% to $866 million, or 11 cents a share, as revenue rebounded 39%. Despite being among the cheapest Dow stocks, with a forward P/E of just 7.9 (a 35% peer discount), many investors are avoiding Pfizer due to patent expiry in 2011. Currently, 19, or 70% of researchers, rank the stock buy, six rate it hold and two rank it sell. JPMorgan is most optimistic about upside, offering a $24 price target. Conversely, Citigroup predicts that the shares will drop nearly 7% to $17.
is an industrial conglomerate. Its third-quarter earnings per share advanced 32% to 29 cents. Revenue declined 4.5%. GE has cut its dividend 25% in the past 12 months. The payout has dropped 26%, on average, over a three-year span and 13%, on average, over a five-year horizon. Still, analysts predict that distributions will rise in the near term as the economic recovery accelerates. Of those covering GE, 10, or 53%, advocate purchasing its shares and nine recommend holding them. Credit Suisse has a target of $22.
is a diversified financial services company. Like many other big-cap financials, JPMorgan cut its dividend during the financial crisis as it struggled to boost capital ratios and shore up its balance sheet. Currently, its stock pays a quarterly dividend of just five cents, converting to a paltry 0.5% yield. Researchers expect the payout to more than triple in the quarters ahead as earnings normalize. JPMorgan is the second highest-rated Dow stock, receiving positive reviews from 82% of analysts in coverage. FBR dissents, with a modest $45 target.
Bank of America
, like JPMorgan, is a bank with retail, corporate and investment operations. Its dividend has plummeted from a high of 64 cents in 2008 to just 1 cent in the most-recent quarter. Analysts expect the distribution to more than triple in the near term. The distribution may have even further upside, given historical yields. Bank of America has been a recent top performer, having risen 21% in the past month as foreclosure scrutiny subsided. But an unfavorable court ruling in Massachusetts on Thursday sent the shares down 2.3% intraday.
-- Written by Jake Lynch in Boston.
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