BALTIMORE (Stockpickr) -- Last week saw an uptick in dividend increases, with 10 companies making the move to increase their dividend payouts. But recently the biggest news in the dividend world has been focused around a dividend cut -- from BP (BP). Despite management claims earlier this month that the company's dividend would get paid out this quarter regardless of pressure from Capitol Hill, BP capitulated this week, suspending its dividend payouts for the coming quarter.
The move frees up $2.6 billion quarterly for the oil giant to pay out the claims stemming from the Deepwater Horizon spill impacting the gulf coast. Even though the big news happened to be BP's dividend suspension, it makes more sense to focus on the companies that are increasing their payouts to shareholders right now.
Over the last 36 years, dividend stocks outperformed the rest of the
by 2.5% annually, and they outperformed nonpayers by nearly 8% each and every year, according to a study from NDR. And right now, companies that are willing to part with cash in arguably tough times are worth a second look.
Here's a look at
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Heavy equipment manufacturing giant
is looking forward to good times ahead. With significantly decreased sales volume as a result of the real estate crash in the U.S. (a market in which Caterpillar dominates), the recovering economy is providing hope for an uptick in the construction business. In the meantime, Cat's showing shareholders the money with a 4.8% dividend increase last week, which brings the company's quarterly payout to 44 cents per share.
That's not to say that Caterpillar hasn't benefitted from the bad times. The company announced earlier this month that it was taking advantage of extremely low valuations for rail manufacturers to purchase Electro-Motive Diesel, a locomotive maker. That move will add significant legs to Cat's relatively new Progress Rail division, which joined the company in 2006.
Although Caterpillar's financials are feeling a drag from the company's financing arm, the company's core business is able to deliver plenty of cash to Cat's coffers. The latest dividend hike should be a safe one for investors.
That's the premise that the
(STFGX) is operating under. The fund, which holds Morningstar's coveted five-star rating, also owns large stakes in
Who Else Owns Caterpillar?
Bill & Melinda Gates
Shipping and logistics giant
is another of last week's dividend increasers, thanks to a 9.1% dividend hike. That increase puts the company's current payout to shareholders at 12 cents per quarter, a 0.61% yield.
FedEx announced earnings this past week, wowing Wall Street with significant revenue growth, even if the company sported smaller-than-average margins. All in all, the company delivered earnings of $1.33 per share, more than twice as high as FedEx's year-ago numbers. That growth comes in large part from a hefty increase in shipping volume, particularly in the company's more expensive international priority service. That's a trend that management believes will continue in the future: They're forecasting earnings of $4.40 to $5.00 for fiscal 2011.
(VPMCX) management team certainly hopes so - FedEx makes up the largest position in the large-cap stock fund. Other holdings include
Who Else Owns FedEx?
Dodge & Cox
An overwhelmingly discretionary merchandise offering has made the recent recession more difficult for
than for some of its peers, but with consumer spending picking back up, this retail giant could be among the quickest to recover. Last week's 47.1% dividend increase is management's way of letting investors know that it's time to pay attention to the bullseye brand.
Even though around 60% of items on store shelves at Target are discretionary at present, the company is working hard to build up the number of "PFresh" locations, Target stores with increased space for food, which will decrease the company's discretion-heavy product mix and compete directly against the increased focus on food at rivals such as
Until the rollout of PFresh stores is complete (currently slated for 20% of Target's stores), the company will benefit from increased spending among its customers, who are on average more affluent than those of its key competitors. That buying power should pay off in 2010 now that consumers are feeling comfortable with spending once again.
As with Caterpillar, financing customers' purchases has added significant leverage to Target's balance sheet. Still, the retailer generates more than enough cash flow to make up for the added debt load -- and to secure its dividend going forward.
Among Target's biggest institutional owners is the
(AIVSX). The fund also owns large positions in
Who Else Owns Target?
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-- Written by Jonas Elmerraji in Baltimore.
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Jonas Elmerraji is the editor and portfolio manager of the
Rhino Stock Report
, a free investment advisory that returned 15% in 2008. He is a contributor to numerous financial outlets, including
, and has been featured in
Investor's Business Daily