BALTIMORE (Stockpickr) -- Another set of companies announced dividends last week, scrambling either to get cash to shareholders before the year's end or to be among the first payouts of the New Year.
But of those announcements, the ones to watch were the companies that actually increased their regular payouts to shareholders, despite an economy that's anything but healed going into 2010.
Dividend increases are a big deal for any company and an even bigger deal in this economy, where management has to decide whether to prioritize balance sheet liquidity or sharing profits with shareholders. And that's not all. Historically, companies that pay dividends materially outperform those that don't, and when the market turns bearish, dividends could be the only semblance of return that investors see for a while.
That's why every week, Stockpickr reviews recent dividend increases and compiles a portfolio of
. These stocks represent some of the most interesting investments on the market right now.
Shareholders of instrument and tool company
should be feeling pretty good right now.
The company, which has staged a 32% comeback since January, is sitting on double-digit margins thanks in part to a solid brand portfolio and recurring revenues that make up 40% of the company's sales. Danaher increased its dividend 33.3% to 4 cents per share, pumping the company's dividend yield to 0.21%.
And while that yield might sound skimpy, it's around 10 times the industry average of 0.02%. That edge over industry numbers is the norm for Danaher, which also boasts gross and net margins that outpace the industry and sector by triple digits. With rumblings about an attractive M&A market reverberating around Wall Street in the last month or so as well, things look good for the stock, which has focused on smart strategic acquisitions to generate past growth.
One fund that's hoping to capitalize on Danaher's position right now is the
(PRGFX), an $18.9 billion fund run by Rob Bartolo since October 2007. Among the fund's other holdings are internet giants
, neither of which pays out a dividend.
$2 billion insurance underwriter
, has also managed to edge out its peer group this year, gaining 3.37% vs. an insurance industry that's actually down more than 5% since January.
The company's recent dividend hike, to 48 cents per share, pushes its yield to 4.94%, 31 times higher than the industry average payout to shareholders.
While the insurance industry has suffered this year, amid slowing growth -- and sales contractions in many areas -- Erie has managed to come out ahead, helped in large part by net margins of 11.42% in its third quarter.
Charles Royce's five-star-rated
seeks long-term capital appreciation through financial services stocks, including a sizable stake in Erie. Among the fund's 95 other positions are
T. Rowe Price Group
, which has a 1.93% dividend yield, and
, which offers a 0.31% yield right now.
Erie wasn't the only stock in the financial sector to increase its dividend payouts last week.
So did global money transfer company
, raising its dividend to 6 cents from 4 cents for shareholders of record on Dec. 21.
While Western Union's business has changed dramatically since the company's founding in 1851, its core business hasn't changed much at all in this new economic environment, which has found many financial services firms changing their offerings to keep up. Many of Western Union's customers are immigrants who transfer payments home to family in their home countries, a practice that has lead many countries to list money transfers as one of the leading contributors to GDP. And while the rate of payments has slowed the last couple of years, slowing Western Union's business as well, a shrinking base of competitors, along with what Morningstar's Brett Horn notes as the nondiscretionary nature of those payments, has helped WU keep it shares where they currently sit.
That's paid off for
, which owns stakes in Western Union alongside a number of other large-cap U.S. stocks -- the fund's average market cap presently sits at more than $37 billion. In addition to WU, the GE fund owns stakes in
For the rest of this week's dividend stocks, check out the
And if you haven't already done so,
today to create your own dividend portfolio.
-- Written by Jonas Elmerraji in Baltimore.
At the time of publication, author had no positions in stocks mentioned.
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 Forbes and Investopedia, and has been featured in Investor's Business Daily, in Consumer's Digest and on MSNBC.com.