Dividend Growth Is Back In Style

12/13/2010


U.S. companies large and small have become more willing to share their wealth with stockholders.

The number of S&P 500 Index members increasing dividends rose year-over-year in each of the last 10 months, up an average of 78%. In October and November, 256 U.S.-traded companies raised their payouts, up 58% from 2009 levels, according to Standard & Poor's. The 137 increases in November were the most since April 2008.

It may take some time for dividends to rise to levels common three years ago, but the trend is definitely positive. In the first 11 months of this year, S&P 500 companies announced 232 dividend increases or initiations, up from 143 in the same period last year and 230 in 2008. Just as significantly, only four companies cut or suspended their dividends during the 11-month period, the lowest number in at least six years. For a list of dividend actions for S&P 500 companies so far this year, visit www.DowTheory.com/go/500.

Forecasts subscribers are sharing in that wealth. Among the 25 stocks on our buy lists that pay dividends, all but six have raised their payouts this year, averaging 17% increases. The table below lists the 19 recommended dividend growers, as well as another 58 monitored stocks that have boosted their payouts this year.

Three of our favorites are reviewed below.

Ameriprise Financial ($55; AMP) went public in October 2005 and declared its first quarterly dividend of $0.11 per share less than a month later. Now the quarterly distribution is $0.18 per share, last raised 6% in April. Spun off from American Express ($45; AXP), Ameriprise ranked as the sixth-biggest corporate spin-off at the time.

Ameriprise has generated positive free cash flow in three consecutive quarters. This year, Ameriprise resumed a share-repurchase program, suspended in September 2008.

Ameriprise offers investment advice, wealth-management services, and insurance products. The shares earn a Quadrix® Value score of 86, despite share-price gains in five consecutive months. Consensus per-share-profit estimates for this year and next year have jumped at least $0.15 in the past 30 days, with the market now expecting earnings to rise 51% to $4.46 in 2010, followed by another 17% in 2011. Ameriprise is a Buy and a Long-Term Buy.


Yielding 2.5%, Baxter International ($49; BAX) has grown its dividend at an annualized rate of 23% over the last three years, with the latest hike announced in November. Baxter is also a steady acquirer of its own stock, lowering the share count by 4% this year and 10% over the last three years. Free cash flow rose in four of the last six quarters.

A maker of blood and plasma-related products, Baxter also deploys its cash to make niche acquisitions. In November, it agreed to pay $30 million to purchase blood disorder-related assets of Archemix, a biopharmaceutical company. Additional milestone payments could reach $285 million. Less than one month earlier, Baxter said it would sell its U.S. generic-injectables business for about $112 million. Earning an Overall score of 85, Baxter is a Long-Term Buy.


In the first nine months of 2010, Travelers ($55; TRV) returned nearly $4 billion to shareholders through stock buybacks and dividends. The insurer's share count has declined 16% from just a year ago and 29% from three years ago. Because of those buybacks, the company's net dividend expense has declined, despite increases in the per-share distribution rate.

In the first nine months of 2010, Travelers paid out $512 million in dividends, compared to $557 million paid during the same period in 2007. Over that stretch, Travelers has boosted its per-share dividend 24%. Travelers last raised its quarterly dividend in April, a 9% hike. Travelers is a Focus List Buy and a Long-Term Buy.

DIVIDEND GROWTH TRACKER
Of the Dow Theory Forecasts Monitored List's 118 stocks that currently pay a dividend, the 77 listed below have initiated or raised the dividend in 2010. All data as of Dec. 7. An A rating equates to above average, B to average, and C to below average. Stocks recommended for purchase are presented in bold.
Dividend
—— Change ——
Company (Price; Ticker)
Dividend
($)
Yield
(%)
Last 12
Months
(%)
3 Yrs.
(Ann.)
(%)
Advice
3M ($84; MMM)
2.10
2.5
3
3
B
Abbott Laboratories ($47; ABT)
1.76
3.8
10
11
A
Accenture ($45; ACN)
0.90
2.0
20
25
B
Aflac ($54; AFL)
1.20
2.2
7
14
A
Altera ($37; ALTR)
0.24
0.6
20
14
A
Altria ($24; MO)
1.52
6.3
9
NM
B
Ameriprise Financial ($55; AMP)
0.72
1.3
6
6
A
AmerisourceBergen ($32; ABC)
0.40
1.2
25
59
A
Applied Materials ($13; AMAT)
0.28
2.2
17
5
A
AstraZeneca ($48; AZN)
2.41
5.0
15
11
A
Auto. Data Processing ($47; ADP)
1.44
3.1
6
16
C
Baxter International ($49; BAX)
1.24
2.5
7
23
A
Best Buy ($42; BBY)
0.60
1.4
7
14
A
Canadian Nat'l Railway ($67; CNI) e
1.06
1.6
7
8
B
Caterpillar ($90; CAT)
1.76
1.9
5
7
C
Chevron ($86; CVX)
2.88
3.3
6
7
A
Coca-Cola ($64; KO)
1.76
2.7
7
9
B
Colgate-Palmolive ($78; CL)
2.12
2.7
20
14
B
ConocoPhillips ($64; COP)
2.20
3.4
10
10
B
Costco Wholesale ($70; COST)
0.82
1.2
14
12
B
CSX ($64; CSX)
1.04
1.6
8
20
A
CVS Caremark ($33; CVS)
0.35
1.1
16
13
B
Deere ($81; DE)
1.40
1.7
25
17
B
Disney ($37; DIS)
0.40
1.1
14
5
B
Emerson Electric ($57; EMR)
1.38
2.4
3
10
B
Exxon Mobil ($71; XOM)
1.76
2.5
5
8
A
FedEx ($93; FDX)
0.48
0.5
9
6
B
Freeport-McMoRan ($111; FCX)
2.00
1.8
233
17
A
General Dynamics ($69; GD)
1.68
2.4
11
13
A
General Electric ($17; GE)
0.48
2.8
20
(25)
B
General Mills ($35; GIS)
1.12
3.2
14
13
C
Heinz ($49; HNZ)
1.80
3.7
7
6
B
Home Depot ($34; HD)
0.94
2.8
5
2
C
IBM ($144; IBM)
2.60
1.8
18
18
A
Intel ($22; INTC)
0.72
3.3
14
17
A
Johnson & Johnson ($62; JNJ)
2.16
3.5
10
9
B
Kellogg ($49; K)
1.62
3.3
8
9
C
Kimberly-Clark ($62; KMB)
2.64
4.3
10
8
C
L-3 Communications ($73; LLL)
1.60
2.2
14
17
B
Lockheed Martin ($69; LMT)
3.00
4.3
19
29
B
Lowe's Companies ($25; LOW)
0.44
1.7
22
11
C
Lubrizol ($109; LZ)
1.44
1.3
16
6
A
McDonald's ($80; MCD)
2.44
3.0
11
18
A
McKesson ($67; MCK)
0.72
1.1
50
44
B
Medtronic ($34; MDT)
0.90
2.6
10
22
B
Microsoft ($27; MSFT)
0.64
2.4
23
17
A
Monsanto ($62; MON)
1.12
1.8
6
31
C
National Oilwell ($63; NOV)
0.44
0.7
NM
NM
B
Newmont Mining ($63; NEM)
0.60
1.0
50
14
A
News Corp. ($14; NWSa)
0.15
1.0
25
8
B
Nike ($87; NKE)
1.24
1.4
15
19
B
Norfolk Southern ($63; NSC)
1.44
2.3
6
11
B
Occidental Petroleum ($93; OXY)
1.52
1.6
15
20
B
PepsiCo ($65; PEP)
1.92
3.0
7
9
A
Philip Morris Int'l ($59; PM)
2.56
4.3
10
NM
A
Procter & Gamble ($62; PG)
1.93
3.1
10
11
B
Qualcomm ($48; QCOM)
0.76
1.6
12
11
B
Questar ($18; STR)
0.56
3.1
8
5
B
Raytheon ($47; RTN)
1.50
3.2
21
14
B
Rogers Commun. ($34; RCI) e
1.26
3.6
10
37
A
Ross Stores ($65; ROST)
0.64
1.0
45
29
A
Sigma-Aldrich ($65; SIAL)
0.64
1.0
10
12
A
Starbuck ($33; SBUX)
0.52
1.6
NM
NM
A
Target ($59; TGT)
1.00
1.7
47
21
A
Teck Resources ($56; TCK) e
0.59
1.1
NM
(21)
B
Texas Instruments ($33; TXN)
0.52
1.6
8
18
A
Time Warner ($31; TWX)
0.85
2.7
13
4
B
TJX Companies ($45; TJX)
0.60
1.3
25
19
A
Travelers ($55; TRV)
1.44
2.6
9
7
A
Union Pacific ($94; UNP)
1.52
1.6
41
29
A
United Parcel Service ($72; UPS)
1.88
2.6
4
4
B
United Technologies ($79; UTX)
1.70
2.2
10
10
B
UnitedHealth Group ($37; UNH)
0.50
1.4
NM
NM
A
Verizon Communications ($33; VZ)
1.95
5.9
3
6
B
Visa ($77; V)
0.60
0.8
20
NM
B
Walgreen ($36; WAG)
0.70
1.9
27
31
A
Wal-Mart Stores ($55; WMT)
1.21
2.2
11
11
A
NM Not Meaningful because company paid no dividend or a very small dividend in the historical period. e Dividend and yield estimated.

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