As your parents might have told you once, when a company loves its shareholders very much, it sometimes offers a periodic dividend to show it. Then, if its financial affairs continue to go well, the company will occasionally boost its payout amount. A few big name companies have recently lifted their dividends by a considerable amount. Here’s one that’s doing everything right and another that looks a little dubious.
A fizzy payout
Ah, the joy of The Coca-Cola Company (NYSE:KO). Few companies could survive a disaster as big in scale as New Coke, but somehow this company did it, and over 25 years later, Coke is still a dominant player on Wall Street. Seeing as it produces the most widely consumed non-alcoholic beverage in the world, this makes perfect sense.
It may not be surprising, but one of the most high-profile companies in the world is also one of the stock market’s longest-serving Dividend Aristocrats. Coke announced on Feb. 21 that it would raise its quarterly dividend by 10%, extending a streak that has run for half a century. Even as society looks on the dark side of sugary drinks, Coke continues to bring in enormous annual revenues and retain solid profit margins.
Coke might be dependable, but some other companies are offering bigger dividends that might be more volatile. Texas Instruments Incorporated (NASDAQ:TXN) recently announced a sizable payout increase of 33%. Additionally, the company will be expanding its share buybacks. These are two moves that investors generally love to see from companies, but in the case of Texas Instruments Incorporated (NASDAQ:TXN), is it that great of a strategy?
Generally, a buyback and dividend of this magnitude happen when a company is thriving. A boosted dividend indicates that financials are on enough of an upswing that the business will not only stay afloat but grow even further after it issues the changes. Meanwhile, share buybacks solidify morale among investors: The stock increases in value if there are fewer shares available for purchase.