BALTIMORE (Stockpickr) -- Dividends came back in a big way last week following a barrage of corporate earnings. All told, 27 companies increased their dividend payouts to shareholders, which makes last week the third biggest week for dividend increases in 2010.
Some of Wall Street's biggest names announced sizable dividend hikes, giving investors a glimpse at how management sees performance continuing in 2010. After all, fundamentally unsound companies aren't opting to part with extra cash this year. But that's not the only reason that dividend increases should be significant to investors.
Historically, companies that pay higher dividends materially outperform those that don't. In 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. That means that when a company actually increases its dividend, investors would do well to take notice.
Here's a look at the companies that
$180 billion household product maker
Proctor & Gamble
yesterday, delivering respectable third-quarter numbers. But for the scores of income investors who hone in on this stock, the real news came last week when Proctor announced it was
increasing its quarterly dividend payout
to 48.18 cents per share; a 9.5% jump.
With a portfolio of higher-end consumer brands, Proctor & Gamble was able to shield itself from the full effects of the economic recession of the past couple of years while maintaining its respectable profitability. In 2010, the company's focus has turned to cutting costs -- particularly input costs -- to compete with lower-priced store brands. As far as Proctor's dividend is concerned, things look safe; the company is sitting on a mountain of cash, and it generated more than $15 billion in cash from operations last year.
One way for investors to get a part of this dividend stock is through the
(VFINX), a mutual fund that tracks the composition of the S&P 500 index. Among the fund's other holds are
is an electric utility company that provides power to customers in the states of Alabama, Georgia, Florida and Mississippi. But the stock's power generation business is also lighting up Wall Street thanks to a 5.25% dividend yield at the heels of a sizable dividend increase last week.
One of the biggest advantages Southern enjoys right now is its geographic location. With a growing population and low cost merchant power availability, Southern Company operates without many of the regulatory hiccups that utilities face in other parts of the country. And in the capital-heavy utility industry, Southern stands out against its mostly debt-laden peers. The company has a considerably less leveraged balance sheet than many other utilities of its size, ensuring the security of its dividend.
(FRUSX) is one of Southern's biggest institutional shareholders. The $2.3 billion fund, which holds Morningstar's coveted five-star rating, also owns positions in
Constellation Energy Group
Health care monolith
Johnson & Johnson
has merely been treading water in 2010, vs. an S&P 500 index that's up more than 8% year-to-date. But that hasn't kept investors from taking an interest in this stock; as one of the bluest of blue chips, Johnson & Johnson benefits from increased investor visibility. Last week's 10.5% dividend increase should help the company capitalize on that investor favor this quarter.
With health care the big story of the year, Johnson & Johnson is one of the few companies that comes out a clear winner. Any legislation that makes healthcare more accessible -- whatever the costs -- should ultimately drive up sales volume for the company, which controls the leading products in the majority of its lines. And an incredibly diverse product portfolio should keep J&J insulated from any ill pricing effects that pharma stocks will otherwise be exposed to. With one of the cleanest balance sheets in the industry, this stock should be able to continue increasing its shareholder payouts in the years to come.
Among Johnson & Johnson's most notable institutional owners is
(TOCQX), a fund that's also invested in shares of
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.
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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.