How Much Further Can Dividends Rise? 3M Co (MMM), Wells Fargo & Company (WFC)

Page 1 of 2

Investors are hungrier than ever for dividend stocks, and the feeding frenzy shows no sign of slowing down. Rather, as the stock market soars toward all-time highs, the more important question is whether dividend increases can keep up the pace.

So far, the answer seems to be yes. After huge dividend increases in 2012, dividend-paying stocks are off to a good start in the new year. Moreover, all signs point to companies having plenty of capacity to raise their payouts in the future — as long as they actually want to pay more.

3M Co (NYSE:MMM)

Forget the fiscal cliff
In 2012, the market set all sorts of new dividend records. According to data from S&P Dow Jones Indices, companies paid $281.5 billion in dividends during 2012, up 17% from the previous year and handily beating the previous record of around $248 billion set back in 2009. Nearly 2,900 companies raised their payouts last year, which was also a record high since the company started tracking dividend increases.

Some skeptics might argue that the rise in dividend payments came largely because of concerns over the fiscal cliff and the rush among companies to accelerate dividends into the 2012 tax year to take advantage of favorable rates. As it turned out, the worst-case scenario didn’t play out for dividend taxation, as the compromise that lawmakers reached set a maximum tax rate of 20% on dividend income, well below the top 39.6% rate that would have applied under previous law.

Yet even with the higher rate, companies haven’t hesitated to boost their payouts. Consider these recent examples:

  • Just yesterday, 3M Co (NYSE:MMM) raised its payout by 8%, extending its streak of rising dividend payouts to 55 years. With the rise, 3M shares now yield 2.5% despite trading at all-time highs.
  • Last week, fertilizer company Potash Corp./Saskatchewan (NYSE:POT) pushed its dividend higher by a more substantial 33%, raising its yield to 2.6% and marking the fourth increase in its payout in two years. With healthy conditions in the fertilizer market and a just-concluded deal to export more potash to China, PotashCorp was in a good position to reward shareholders.
  • Wells Fargo & Company (NYSE:WFC) hiked its dividend last month by 14%, making its annual payout an even $1 per share and pushing its yield closer to the 3% mark. Wells Fargo is just one of many banks that have gradually raised their dividend payouts as they’ve recovered from the financial crisis.

Payout increases are good news for investors, but how long can the good times last? Despite worries, many dividend experts are bullish about the prospects for future payout growth.

Page 1 of 2
blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months. Our beta is only 1.2 (don't click this link if beating the market isn't important to you).

Lists

Shopaholics Rejoice: The 12 Biggest Malls in the World

Fright Night: 10 Horror Movies Based on True Stories

Mach Mania: The 10 Fastest Jets in the World

Military Heavyweights: The 10 Countries with the Most Tanks

All In: The 7 Richest Poker Players in the World

Abracadabra: The 10 Best Magicians in the World

The 10 Richest Asian Countries in the World in 2014

Eyes in the Sky: 10 Things You Need to Know About Drones

Rising Stars: The 6 Best Silicon Valley Startups

Military Muscle: The 5 Most Advanced Armies in South America

All that Glitters: The 7 Most Luxurious Jewelry Brands in the World

5 Things You Didn’t Know About ISIS but Should

Empowering Your Money: The 5 Best Energy Stocks to Invest In

The 11 Best Android Apps You Can’t Get on iOS

The 10 Most Important International Conflicts in 2014

Mood Enhancers: The 20 Most Uplifting Songs of all Time

Lover Beware: The 8 Countries that Cheat the Most

Breath of Fresh Air: The 25 Countries with the Best Air Quality on the Planet

Singles Beware: The 8 Worst Mistakes Made on First Dates

Healthy and Happy: The 10 Countries with Lowest Healthcare Costs

The 6 Best Company Team Building Activities to Build Workplace Camaraderie

Ships Ahoy: The 10 Busiest Shipping Ports in the World

10 Productivity Tips to Save You Time and Help You Do More With Less

Grab a Bite: The Most Popular Fast Food Restaurants in America

Friday Night Thirst: The 10 Most Popular Cocktails in the World

The 6 Greatest Unsolved Mysteries We May Never Figure Out

7 Useless Products You Never Should’ve Bought

The 5 Reasons Why You’re Single and Miserable

The 7 Most Addictive Foods in the World We Can’t Stop Eating (Even Though We Should)

5 Amazing Places You Can Swim with Dolphins

The Top 7 Most Livable Countries In The World

The 10 Most Expensive Baseball Cards Ever Pulled From A Pack

The 5 Easiest Second Languages to Learn for English Speakers

Silver Spoon: The 6 Richest Families in the World

The 20 Countries with the Largest Prison Populations in the World

The Top 10 Richest Actors in the World

The 10 Best Airline Stocks to Invest In Before They Fly Too High

Burger Kings: The 10 Most Expensive Burgers in the World

The 10 Most Ethnically Diverse Countries in the World

The 10 Most Exclusive Credit Cards in the World

The 10 Most Expensive Cruise Ships in the World

The 10 Fastest Supercomputers in the World

The 10 Best Countries for Doing Business 2015

6 Most Expensive Fruits In The World

10 Worst Airlines in the World

The 10 Biggest Tax Havens in the World to Stash Your Money

The 15 Most Murderous Countries in the World

10 Largest Colleges in the World: Bigger Isn’t Always Better

Comedians in Cars Getting Coffee: The 6 Comedians Seinfeld Needs to Interview

Easy Money: The 10 Most Successful Investors in the World Today

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!