Dividend Stocks: Snap-on, Yamana Gold
BALTIMORE (Stockpickr) -- As earnings season continues to chug along in November, so too have dividend increase announcements -- a favorable sign for investors who've been nervously watching the recent rally that companies are willing to part with all-important cash to return value to their stocks' owners.
Notably absent from last week's list were the big-name companies that we've come to expect dividends from come earnings season. Indeed, small- and mid-cap firms made up the brunt of the stocks that increased their dividends in the last week.
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But that said, smaller stocks are often indicative of a forthcoming change in bigger names. Income investors will be willing to wait on big-name dividend hikes -- but not for too long.
Why the focus on dividend payers? Over the last 36 years, dividend stocks outperformed the rest of the
S&P 500
by 2.5% annually, and they outperformed nonpayers by nearly 8% every year, all while paying out cash to their shareholders, 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.
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Without further ado, here's a look at the
stocks that announced dividend increases last week
.
Snap-on
(SNA) - Get Report
has long been a major tool maker, servicing the equipment needs of auto repair technicians through an integrated distribution network that keeps the company in control of its products from manufacture to delivery.
That control over its product line has afforded Snap-on beefier margins than the competition, and helped carve out the company's niche as the largest toolmaker in the professional market. It's also helped create the company's quarterly dividend, which was raised 6.7% to 32 cents per share last week.
One of the cornerstones of Snap-on's distribution machine is a fleet of 3,200 vans that sell and deliver tools directly to potential client shops. While those vans have proven effective for Snap-on, they've also proven expensive in the depressed sales environment of recent years.
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With a high susceptibility to the cyclical nature of its clients' businesses, Snap-on slashed fixed costs, reducing its sales force in the process. Even if that decision was shortsighted, it should help spur strong financial performance in the near-term. Hopefully, lessons of the recession will carry over to the company in the coming years as it turns to growth again.
One of Snap-on's biggest owners is storied hedge fund manager Julian Robertson, whose
also owns stakes in
Apple
(AAPL) - Get Report
and
Goldman Sachs
(GS) - Get Report
.
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With a 34.4-cent quarterly dividend payout,
Microchip Technology
(MCHP) - Get Report
boasts one of the most impressive yields in the tech sector with more than a 4% yield at current levels. That size comes thanks to a constant dividend improvement. Already, the company's 34.5-cent March 2011 payout has been moved up to December 2010 to reap tax advantages.
Microchip Technology produces microcontrollers that are used as components in a bevy of electronics. Microchip's success has been forged by producing high-volume, low-cost chips that are easily implemented into new products while still providing the company with a sizable margin.
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In 2010, Microchip has seen its share prices buoyed by the rebounding semiconductor market, rallying nearly 17% in the last six months alone. With a strong balance sheet, upticking customer orders, and a hefty dividend, expect that rally to extend into 2011.
That's the hope of the
(ADVDX), a fund that owns stakes in
Schlumberger
(SLB) - Get Report
and
Microsoft
(MSFT) - Get Report
, in addition to being among Microchip's largest institutional investors.
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One of the biggest dividend hikes of last week came from
Yamana Gold
(AUY) - Get Report
, an $8.59 billion gold producer that ranks as one of the most popular plays for investors and traders hoping to get exposure to the recent run-up in gold prices. Income investors are taking note too thanks to the 50% increase in the company's quarterly dividend. That move brings Yamana's payout to 3 cents per share.
Yamana benefits from robust margins and high growth rates, the result of the expansion-spree management has undertaken, looking for productive mining projects to add to the company's portfolio.
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At present, the company is looking to expand its output to 1.5 million gold-equivalent ounces in the next two years. While a lofty goal, the company already has many of the properties in place to make that number a reality.
Not surprisingly, the
Market Vectors Gold Miners ETF
(GDX) - Get Report
is among Yamana's biggest owners. The fund also owns positions in
Barrick Gold
(ABX)
and
Newmont Mining
(NEM) - Get Report
.
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For the rest of this week's dividend stocks, check out the
on Stockpickr.
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.
