(Top dividend stocks report updated with Nucor and Honeywell guidance, and broker action on Whole Foods.)
NEW YORK (
Whole Foods Market
joined a roster of companies
raising their shareholder payouts in recent weeks.
Dividend activity has picked up in recent months as companies begin to regain some sense of stability in the state of the economy, and visibility of future earnings growth. The
iShares Dow Jones Select Dividend
, an exchange-traded fund that tracks the
Dow Jones U.S. Select Dividend Index
, is up 13% so far in 2010, and up nearly 12% year-over-year.
With record cash in corporate coffers, investors have been egging on corporate management teams to
return value to shareholders in the form of dividend checks -- and a growing number of companies are listening.
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, according to a study from National Data Research.
Dividend investing is "a sustainable strategy that will be a key driver for performance and total return in 2011," said Lawrence Glazer, Managing Partner with Mayflower Advisors, in a recent appearance on
. Glazer encouraged investors to reconsider top dividend-paying "Dogs of the Dow" such as
Johnson & Johnson
, blue chips that have offered decades of dividend increases and sustainable payouts, many with stronger yields than 10-year treasury notes.
Verizon, which recently increased its quarterly dividend by 2.6% to 48.75 cents per share, offers an annualized dividend yield of around 5.73%; Johnson & Johnson 3.49%, Merck 4.22% and Kraft 3.77%.
Glazer also tapped the
iShares Dow Jones Select Dividend
iShares Dow Jones International Select Dividend Index Fund
ETFs as deserving of consideration for a sound investment strategy that includes diversification plus additional tax efficiency. The DVY yields around 3.45% while the IDV around 4.33%.
Here is a breakdown of 10 dividend stocks increasing their shareholder payouts in recent weeks, ranked by average daily volume.
(Stock quotes and dividend yields are based on closing prices on Dec. 10, 2010.)
: General Electric is a Fairfield, Conn.-based provider of services ranging from aircraft engines, power generation, water processing and household appliances to medical imaging, business & consumer financing, media content & industrial products.
General Electric upped its quarterly dividend by 16.7% to 14 cents per share, from 12 cents per share.
The higher dividend is payable Jan. 25 to shareowners of record at the close of business on Dec. 27, bringing General Electric's yield to 3.2%.
"We are able to increase the GE dividend for the second time this year because of continued strong cash generation, accelerated recovery at
and solid underlying performance in our Industrial businesses through year-end 2010," said GE CEO Jeff Immelt.
Dow Jones Industrial Average
component's dividend had been a tradition among the company's large base of retail investors and a bedrock of sorts until Immelt, who had said he would not lower it, changed course in the wake of the financial crisis. Immelt called the shift, which led to investor lawsuits, one of his most difficult decisions as CEO.
While GE did not receive a preferred equity investment from the government, it did receive other forms of government support extended to banks like such as a temporary guarantee of its debt issuance.
On Dec. 14 GE said it signed an agreement with
to supply it with gas turbines and other equipment and services to expand Saudi Aramco's Shaybah gas-oil processing capabilities. The deal is valued at $500 million.
"The agreement demonstrates the strength of GE Energy's integrated high-technology equipment and services portfolio and reflect GE's commitment to continued investment and localization in the region," GE said.
: Englewood, Colo.-based Western Union is engaged in global money transfer and payment services, providing people with fast, reliable and convenient ways to send money around the world.
Western Union increased its quarterly dividend by 17% to 7 cents per share. It will be paid on Jan. 4 to holders of record on Dec. 23. That brings its yield to around 1.5%.
The money transfer service recently beat third-quarter expectations, with management raising its full-year profit outlook.
Western Union raised earnings-per-share guidance to a range of $1.29 to $1.32 from a previous range of $1.24 to $1.29. It still expects a 7 cent per share charge for restructuring expenses. Western Union also raised revenue guidance to a range of 1% to 2% increase from 2009, from an earlier estimate of anywhere from a 2% decline to 1% growth.
"All of our regions contributed to the consumer-to-consumer transaction growth, and margins were strong," President and CEO Hikmet Ersek said. "We now expect full year earnings per share to be higher than our previous outlook, even with increased marketing and other investments in the fourth quarter to propel future growth."
Western Union booked quarterly profits of $238.4 million, or 36 cents per share, during the September period on revenue of $1.33 billion. Western Union's bottom line was 32% stronger than the $181 million earned in the year-ago period, despite restructuring charges and currency fluctuations that weighed on results. It beat the average analyst expectation by a penny, according to
Revenue was in-line with Western Union's earlier guidance and slightly better than the average analyst expectation of $1.3 billion. The company cited 10% growth in consumer-to-consumer transactions as well as a 35% increase in U.S. domestic money transfer as reasons for the profit climb.
: Morris Township, N.J.-based Honeywell International is a technology and manufacturing company, which serves customers with aerospace products and services, control, sensing and security technologies for buildings, homes and industry, turbochargers, automotive products and chemicals.
Honeywell upped its annual cash dividend by 9.9% to $1.33 per share, to be paid with the first quarter 2011 dividend payment. Honeywell did not specify the exact paydate or ex-dividend date.
Going forward Honeywell's dividend yield will be around 2.6%.
"Raising the dividend rate by 10% reflects Honeywell's strong cash generation and the continued improvement in our underlying business performance," said CEO Dave Cote.
In November Honeywell announced that it was awarded a $100 million avionics and auxiliary power unit contract from
for its fleet of 58 Airbus A321 aircrafts.
On Dec. 15 Honeywell said it expects 2011 profits to grow between 17% and 24%, to a range of $3.50 to $3.70 per share, led by demand for its thermostats and other systems that manage operations in large buildings. Revenue could surge as much as 9% to $36 billion next year on double-digit order growth in its commercial aerospace business.
"We're clearly growing faster than the markets we serve, and combined with the improved outlook for the global economy, we're confident in our expectations for higher revenues, segment margin expansion, strong cash flow, and double-digit earnings growth in 2011," Cote said.
The manufacturer also reaffirmed its guidance for 2010, expecting earnings of $2.98 per share on revenue of $33 billion.
: Schaffhausen, Switzerland-based Tyco International is a provider of security products and services, fire protection and detection products and services, valves and controls and other industrial products.
The company said Thursday its board recommended that shareholders approve an annual dividend of $1 per share, a 20% increase over its current 84-cent annual dividend.
"The dividend increase reflects our continued confidence in the strength of Tyco's businesses and our ability to generate strong cash flow," said CEO Ed Breen. "This action is also consistent with our capital allocation strategy to invest in our businesses, make selective acquisitions and return excess cash to shareholders."
The next previously announced quarterly dividend of .23 Swiss Francs, or 23.4 cents, is payable Feb. 23 to shareholders of record on Jan. 28. The payment in U.S. dollars will reflect post-conversion rates so the USD amount shareholders will actually receive may be more or less than the amount stated.
The proposed annual dividend of $1 per share is an ordinary cash dividend to be paid from Tyco's "contributed surplus" equity position in its statutory accounts. It will be paid in four quarterly installments of 25 cents per share from May 2011 through February 2012. Dividends will not be converted from Swiss Francs but will be paid in USD and will therefore be unaffected by currency rates.
: Los Angeles-based Occidental Petroleum is a multinational organization whose subsidiaries and affiliates operate in the oil and gas, chemical and midstream, marketing and other segments.
Occidental Petroleum said its board approved a 21.1% increase to its quarterly dividend to pay shareholders 46 cents per share, up from 38 cents, effective with the April 15, 2011 payment. The formal dividend declaration will be made by the board of directors in February, the company said. The higher dividend will bring Occidental's yield to about 1.6%.
Occidental Petroleum divested its Argentine oil and gas operations to a
subsidiary for $2.5 billion.
The company also announced a plan to acquire oil and gas properties in South Texas and North Dakota for $3.2 billion. The South Texas property was purchased from
Royal Dutch Shell
for $1.8 billion, effective Jan. 1, to be wholly operated by Occidental, with an "excellent inventory of drilling opportunities." The 180,000 net contiguous acres in North Dakota were purchased from a private seller for around $1.4 billion.
Occidental also announced an agreement to increase it general partner ownership in
to 35%, and to acquire the remaining 50% joint venture interest in
Elk Hills Power Plant
Occidental expects all of these transactions to be completed no later than the end of the first quarter of 2011.
: Federal Way, Wash.-based Weyerhaeuser is a forest products company which mainly grows and harvests trees, builds homes and makes a range of forest products essential to everyday lives.
real estate investment trust said it intends to pay a quarterly dividend of 15 cents per share, with the first dividend payment expected to occur in March 2011, for a yield of about 3.4%. The board will determine and declare the actual dividend on a quarterly basis.
"This action establishes a dividend that is attractive to shareholders -- one that is sustainable and that we expect to grow over time," said CEO Dan Fulton.
"We do not anticipate significant improvement in the housing market in 2011," Fulton said. "While there is significant near term uncertainty, the longer-term outlook remains positive as we expect improved macroeconomic conditions and housing starts to return to trend levels."
Weyerhaeuser said it is targeting a dividend payout ratio of 75% of funds from operations.
It also reiterated that it intends to make the REIT election upon filing its 2010 tax return, making the effective date Jan. 1, 2010.
Analysts from UBS recently downgraded Weyerhaeuser shares from buy to neutral, citing the firm's valuation as a reason for the action.
Following Weyerhaeuser's better-than-expected quarterly financial results, released in late October, analysts from Barclays Capital reiterated an overweight rating and raised their price target on the stock to $29.
RBC Capital Markets also reiterated an outperform rating, and raised their price target to $23, following the earnings report. Research firm Dahlman Rose initiated coverage of Weyerhaeuser earlier in October with a buy rating and $20 price target.
United Parcel Service
United Parcel Service
: Atlanta-based United Parcel Service offers an array of services in the package and freight delivery industry. It operates through three segments: U.S. Domestic Package, International Package, and Supply Chain and Freight.
The mail and package shipper's CFO Kurt Kuehn told a German newspaper that UPS plans to increase its dividend in the coming year. UPS pays "a very high dividend and are planning a further dividend increase next year," he told
Kuehn did not specify a dollar amount for the increased payout, nor an expected pay date, though UPS traditional pays quarterly dividends in February, May, August and November. UPS paid quarterly cash dividends of 47 cents per share in 2010, after paying 45 cents per share each quarter since early 2008.
The CFO also said UPS would use excess cash on hand for larger stock buybacks as means of attracting investors, rather than through acquisitions or other large purchases.
"If we buy companies that cost $50 million, $100 million or $200 million that does not mean that a company of our size burns up all its capital," Kuehn said. "If we buy, then possibly not in the traditional parcel business, but maybe in supply chain services or a specialized customer segment."
UPS generated $3.5 billion in free cash flow in the first nine months of 2010. It repurchased 9.3 million shares for about $589 million. "Next year, we want to significantly increase that
buyback volume," Kuehn told the German newspaper.
: Charlotte, N.C.-based Nucor and its affiliates are manufacturers of steel and steel products, with operating facilities and customers mainly located in North America.
Nucor said last week its board of directors approved a 0.7% increase to its quarterly cash dividend. It will pay 36.25 cents per share, up from 36 cents, on Feb. 11 to shareholders of record on Dec. 31. The payout will mark Nucor's 151st consecutive quarterly cash dividend, bringing its annualized yield to 3.5%.
The company increased its dividend for 38 consecutive years, every year since 1973.
Nucor reported lower-than-expected third-quarter results and warned of uncertainty in the near-future.
, the world's largest steelmaker, as well as
United States Steel
AK Steel Holding
, warned in late October of lower profits as a sluggish economy pressures steel demand, and raw material costs squeeze sector players' margins.
"A stubbornly reluctant economic recovery and soaring raw material costs will continue to challenge us in the near term," warned AK Steel CEO James Wainscott.
U.S. Steel CEO John Surma said steel production was at 70% capacity in the recent quarter, down from 82% in the prior quarter, with shipments of steel down about 6%. He did say, however, that "long-term demand trends for U.S. steel consumption ultimately will probably return to something like normal."
The World Steel Association recently forecast steel demand growth would ease to 5.3% in 2011, after growing 13.1% this year. In 2009 steel demand contracted by 6.6%.
On Dec. 16 Nucor announced fourth-quarter guidance. The steelmaker said it expects to book a loss of 10 cents to 15 cents per share in the current quarter, compared with year-earlier EPS of 18 cents. Analysts' consensus call is for a quarterly profit of 4 cents per share.
Nucor attributed its weak guidance to high scrap prices and an inability to realize sales price increases quickly enough for it to affect this quarter's results. Guidance confirms Nucor's cautionary statement in October that the fourth quarter "may indeed turn out to be the most challenging quarter of the year," dragged by soft demand for residential and non-residential construction.
Nucor did offer one relatively bright point in its outlook -- utilization rates were improving sequentially into the third quarter, it said, and "improving operating rates are resulting in only slightly lower shipments from the third quarter." Nucor was also able to "significantly raise prices for all steel mill products over the last 30 to 45 days," a move that should positively impact first-quarter results. Even so, rising raw material costs will continue to pressure Nucor through the winter months, the company concluded.
: Bellevue, Wash.-based Paccar is a technology company that designs, manufactures and distributes high-quality, light, medium and heavy duty commercial trucks and related aftermarket parts. It also provides financing and leasing of its trucks and related equipment.
Paccar said last week its board approved an extra cash dividend of 30 cents per share, payable on Dec. 29 to shareholders of record on Dec. 17.
Its board also approved a 33.3% increase to its regular quarterly cash dividend, paying 12 cents per share, up from 9 cents, on March 7, 2011 to holders of record on Feb. 17. That will bring Paccar's yield to around 0.8%.
"This special dividend reflects improving, but still challenging, truck markets in Europe and North America. Paccar has emerged from the recession in good financial position and is significantly increasing investment in new products and global markets," said CEO Mark Pigott.
In late Octoebr Paccar booked better-than-expected quarterly profits thanks to strengthening global demand for trucks and parts, and improved performance in its financial services business.
Analysts at Barclay Capital lifted their price target on Paccar shares by $3 to $54. The equities research firm maintained an equal weight rating on the stock.
Whole Foods Market
Whole Foods Market
: Austin, Texas-based Whole Foods Market owns and operates a chain of natural and organic foods supermarkets. Its products include seafood, grocery, meat and poultry, bakery, prepared foods and catering, specialty, coffee and tea and educational products.
Whole Foods said last week it reinstated its dividend after more than two years, saying its board has approved a quarterly cash payout of 10 cents per share, payable on Jan. 20 to shareholders of record on Jan. 10.
Going forward investors can expect Whole Foods to deliver a dividend yield of about 0.8%.
"The company's favorable financial position and long-term outlook give us the confidence to reinstate our quarterly cash dividend," said Whole Foods chairman John Elstrott. "As a company with significant future growth opportunities, we are fortunate to have sufficient cash on hand and predictable cash flow allowing us to pay off our debt, accelerate our growth, and also return cash to our shareholders."
The supermarket operator topped Wall Street's profit expectations for the last eight straight quarters, most recently posting a profit of $57.5 million, or 33 cents per share, beating the consensus estimate by 17%.
Whole Foods said its board plans to continue to pay a quarterly dividend on an ongoing basis, subject to capital availability and other factors. The company noted in its press release that it generated free cash flow of $328.5 million in fiscal 2010, and said its total cash and cash equivalents, restricted cash, and investments were $644.7 million as of Sept. 26, while total debt was $508.7 million. The company suspended its dividend in August 2008.
On Dec. 15 analysts from Goldman Sachs resumed coverage of Whole Foods with a neutral rating and $47 price target.
The firm noted that current valuation seems to discount flawless long-term execution and that any small misstep bares potential downside.
-- Written by Miriam Marcus Reimer in New York.
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