If you're an income investor, one thing that should be more attractive than a big yield is the company's ability to sustain and grow the dividend long term, like these companies are proving, notes Jim Trippon of Dividend Genius.
Nestled in among the earnings reports, sometimes along with them, are announcements of dividend increases. As we’ve written about consistently, this has been a year where dividend increases have consistently appeared, as many companies continue to reward shareholders. The last few weeks were no different, with several companies announcing dividend hikes.
This has been the subplot of the earnings season, where dividend news has been strongly overshadowed by some earnings reports that missed analyst estimates and have caused the market to take at least a pause, if not a hard look at things. Still, many companies make their annual dividend increases in the fall, so this can be a busy time for dividend investors who watch these stocks.
Last month, the tech giant made its eighth consecutive annual dividend increase, to 23 cents per share. This was a 15% increase, and brings the yield to 3%.
While Microsoft is one of the big names of tech, it is, however, “old tech.” That is, even though Microsoft dominates the PC field with its Windows operating system, it is no longer the meaningful growth stock it once was. Some would argue it’s no longer a growth stock, period.
As growth has slowed, the massive change to tablets and mobile devices has begun, a secular trend that doesn’t look as though it’s ever going to be reversed. The dividend may assume greater importance in Microsoft’s future.
Omega Healthcare (OHI)
Many investors probably haven’t heard of this health-care REIT. The company recently raised its quarterly dividend to 44 cents, a nearly 5% increase.
The yield on Omega Healthcare with the new dividend payment is now 7.5%. Many of the health-care REITs, which are required—just as regular REITs are—to pass through roughly 90% of their income to investors, pay high yields.
Realty Income (O)
This traditional REIT, which acquires and owns commercial real estate, yields around 4.4%. It recently increased its distribution, or dividend payment, to just over 15 cents per share, or unit. This is slightly more than a 4% increase in its dividend.
Realty Income is a solid mid-level yield play, as its distributions have been increased each year for nearly two decades. Though the growth of the dividend hasn’t been spectacular, there’s a place in most portfolios for a solid company which makes steady dividend increases.
Westwood Holdings Group (WHG)
This is probably another stock that many investors haven’t followed. This is an asset management company whose dividend yields 4.2%. Westwood increased its quarterly dividend from 37 cents to 40 cents, and on occasion has paid out special dividends.
Although asset management is a growing industry, the company has a high dividend payout ratio, roughly 80%, so it will need to have strong earnings growth to pull that figure down to a more reasonable level.
Most times the market responds positively to news of a stock’s dividend increase, though this isn’t always the case. Corning, whose earnings report was greeted with a mixture of indifference and concern over a potentially softer economy for its products, such as Gorilla Glass and other display panel technology, raised its dividend by 9 cents.
The dividend increase was 20%, so the stock now yields 2.7%. Revenue was down a bit and earnings were essentially flat, but the diversified glass products maker has not only raised its dividend, but has a share buyback program as well.
Kinder Morgan Energy Partners (KMP)
This master limited partnership is an energy pipeline and storage company. Kinder Morgan has been one of the most successful energy MLPs, and generates significant cash flow, which funds its strong distributions. It currently yields 5.9% after it recently increased its quarterly distribution for the 16th consecutive year.
Kinder Morgan operates 180 storage terminals, has more than 75,000 miles of pipeline assets, while it continues new strategic investments and acquisitions. As a pipeline transportation company, Kinder Morgan operates as a toll business, so its fees aren’t as volatile as fluctuating commodity prices. This is a historically strong MLP.