BALTIMORE (Stockpickr) -- As companies vie for investor attention this week and next, one of the biggest attention-grabbing tools is cash.
I'm talking, of course, about dividends. With the 2009 calendar year (and tax year) about to draw to a close, companies who want to squeeze in a payout to shareholders on this year's return are rushing to do so right now. But as compelling as any dividend payout may be, the stocks to watch are the ones that actually increased their dividends this quarter.
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.
released strong second-quarter 2010 numbers in mid-December.
The company benefited from cost-conscious consumers who chose to eat in more using the company's food products. The company increased its dividend to 49 cents, pushing its dividend yield to 2.76%.
General Mills' flagship product is its cereal line, which owns headlining brands such as Cheerios, the most popular breakfast cereal in the U.S., with a 12.6% market share -- more than twice the market of its closes competitor,
Special K. But General Mills has also diversified its offerings in a big way, with a portfolio of popular brands that include Pillsbury and Progresso. The company's ability to leverage top brands and create significant free cash flows should serve it well as we enter 2010.
William Danoff certainly hopes that's true. He's the manager of the
(FCNTX), a fund with Morningstar's coveted five-star rating that owns a sizable stake in General Mills. In addition to the cereal giant, the fund also owns stakes in
Credit rating firm
has been on the defensive lately.
The firm's contributions to the credit crisis, a result of its inaccurate ratings on mortgage-backed securities, have prompted regulators to rethink whether private firms should really be rating the credit worthiness of their own customer firms. And following Warren Buffett's departure from a slew of Moody's stock, investors who seek guidance from the Oracle of Omaha have been staying away from shares.
Still, those factors haven't slowed down the stock's appreciation. Shares of Moody's are up 34% in the past three month alone. Part of that increase has been thanks to the company's increased focus on nonrating business domestically, as well as its entry into regulatory roles in emerging markets such as China, where credit-fueled growth is on the rise. Last week, the company increased its dividend from 10 cents to 10.5 cents per share, giving it a yield of about 1.5%.
As Moody's distances itself from being thought of merely as a credit rater and pushes into new ground, shareholders should benefit in a big way.
That's a bet that the
(JEFSX) is making right now. The fund counts Moody's as more than 3% of its portfolio, in addition to stakes in
The world's largest drugmaker,
, also increased its dividend last week, upping its payout from 16 cents to 18 cents per share, and hiking its yield to about 3.9%.
Pfizer has had an interesting year following a $68 billion merger with
, and stands to see increased competition in the cholesterol market down the road following the loss of its flagship Lipitor patent in 2011.
But all could turn out very well for Pfizer in 2010. As investors get a glimpse of the ultimate cost savings that the Wyeth merger will provide, and as new drugs, like the rheumatoid arthritis therapy that Pfizer has in the pipeline, become monetized, investors who own Pfizer now should win out in the long run.
At least, that's the position being taken by the
(DODGX), which owns a stake in Pfizer alongside positions 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.