BALTIMORE (Stockpickr) -- Dividend hikes were big news last week, with a slew of companies announcing that they were raising their payouts to shareholders this earnings season. That glut of dividend news has been long-awaited. Typically, large dividend payment boosts take place earlier during earnings season, but this quarter we're seeing many of the traditional blue-chip players sit out.
In their place are newcomers working hard to return value to shareholders in the form of cash. A handful of high-profile tech stocks -- including mature tech giants
(CSCO) -- have been making waves of late by hiking or initiating dividend payments. Small-caps stocks are another group that are returning cash to shareholders in the form of dividends, leaving yields on traditional income stocks less than impressive right now.
It's not that big companies don't have cash, of course; right now, firms are sitting on historic amounts of money. The issue is more about parting with liquidity. With uncertain times ahead, management at some of the world's largest firms is reticent about parting with their cushions of cash. But while they guard their coffers, the newcomers are drawing the attention of income investors looking for higher-yielding dividend stocks.
With that in mind, let's take a look at some of the
certainly fits the traditional blue-chip mold, this $64 billion payment processor is relatively new to the world of Wall Street, having only gone public in 2008. And though Visa's 0.78% dividend yield doesn't likely draw many investors on its own merit, the company should be commended for its efforts. Last week marks the third time that Visa has increased its shareholder payouts, a 20% increase that brings the quarterly dividend to 15 cents per share.
There's a lot to like about Visa, even if shares have failed to live up to the company's growth potential so far in 2010. Visa is the world's largest payment network, laying claim to nearly 60% of the credit and debit cards in the worlds' wallets. As a processor, Visa has benefited immensely from the consumer spending spree of the mid-2000s, but was protected from the credit risk that smashed valuations of card issuers in 2008.
Even as credit usage died down following the credit crunch of 2008, the ubiquity of Visa's debit card offerings ensured that the company continued to profit from consumers' shift away from physical cash. As consumer demand perks up in the coming quarters, Visa should be able to cash in.
That's the hope of the
(FCNTX), a fund that holds Morningstar's coveted 5-star rating and holds a major stake in Visa's shares. Other Contrafund holdings include
may be a tobacco stock, but it's this company's stock price that's been smoking in 2010. Shares of Reynolds have rallied 22% so far this year, not counting the company's dividend payout. That payout just got a bit bigger too. Last week, management announced an 8.9% increase, raising its quarterly dividend to 49 cents per share, a 3.03% yield at current levels.
Reynolds is the second-largest player in the U.S. cigarette market, a position that affords the company enviable revenues but paltry growth prospects due to brand saturation. As a result, the company's marketers have been hard at work developing innovative premium product offerings in smokeless tobacco that offer deep margins and actual growth potential.
That said, the company's emerging products still represent a small fraction of its business, something that investors shouldn't expect to change in the near future. Even so, Reynolds' market position isn't likely to change anytime soon -- and the company's dividend payouts should continue to be a big draw for this stock.
(WGRNX) is one of Reynolds' largest shareholders, a fact that's helped to contribute to the fund's outsized performance year-to-date. Other holdings include
Natural gas player
Kinder Morgan Management
also hiked its dividend last week. For this firm, however, increasing payouts to shareholders was less a function of management's decision to part with cash than a function of the company's larger earnings in the latest quarter. As a master limited partnership, KMR is obligated to pay out the vast majority of its earnings to unit holders, a structure that holds tax advantages for the stock's owners.
Essentially, KMR's business is owning shares of
Kinder Morgan Energy Partners
. The primary difference is the fact that KMR issues a stock dividend. As a result, KMR has significantly higher institutional ownership.
One of the biggest of those owners is the
(JSVAX), which holds 3.9 million sharers of Kinder Morgan Management, making the partnership its biggest portfolio position. Other large stakes include
St. Joe Corporation
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-- 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.