The warning signs of a dividend cut should always be in the back of your mind. That said, Texas Instruments Incorporated (NASDAQ:TXN) recently announced a massive dividend increase, a dedication to its policy of returning value to shareholders, and the near completion of its corporate transformation. This is the type of dividend paying company an investor could really love—there are others.
Dividends Aren’t Guaranteed
For example, Nokia Corporation (ADR) (NYSE:NOK) eliminated its dividend “to ensure strategic flexibility.” The company is attempting a comeback in the cell phone handset market that is far from certain. While it has been making strides, achieving solid reviews for its Lumia phone, it has a long way to go. With a volatile dividend prior to the elimination, investors would have been purposely missing the obvious to jump aboard for the yield. However, many likely did.
Washington Real Estate Investment Trust (NYSE:WRE) also recently cut its dividend. While this company, which focuses on owning investment properties in and around Washington D.C. had once proudly proclaimed its impressive history of annual dividend increases, it recently chose to keep the payout static. That’s a bad sign for companies with long histories of dividend increases. The cut was announced along with a management change and a notable business restructuring. While it will likely be a stronger company for the changes, it has clearly disappointed shareholders.
Keep an Eye on Pitney Bowes Inc. (NYSE:PBI)
A high yielder to keep an eye on now is Pitney Bowes. This company has been hard hit by the Internet because it is so tied to regular mail services. While management is working hard to catch up to the times by bringing out more Internet-based services and trying to create services that transcend both physical delivery and online delivery, there is no question that the company has problems. The big concern is that after years of annual dividend increases, the company recently chose not to increase its dividend at the normal time.
This was supposed to give the company’s new CEO a chance to review the business, but it is a bad sign for the dividend. While a cut doesn’t always come next, it’s easier for the new CEO to make such a move early on in his or her tenure than to admit it is needed later. Avon was in a similar situation before its disbursement was trimmed.
Some Companies to Love
Texas Instruments Incorporated (NASDAQ:TXN), however, is almost the exact opposite of the above companies. In a recent conference call, the company basically said that it is nearly done with a corporate makeover that should position it for solid growth over the longer-term. Moreover, it increased the dividend some 33% and expressed its commitment to returning value to shareholders through both its dividend and share buybacks. To hold a meeting specifically highlighting these things is a strong statement and one that investors should note.
The company, however, isn’t alone. For example, Realty Income Corp (NYSE:O) has long harped about its dividend history. In fact, the company’s nickname is “The Monthly Dividend Company.” A trip to the company’s website shows just how important dividends are to management. The nickname, by the way, is trademarked—you know this company is serious about its dividend!
IAC/InteractiveCorp (NASDAQ:IACI) is another company that takes dividends seriously. And like TI, its a tech company. IAC basically owns a portfolio of web properties across which it sells advertising. The company doubled its quarterly disbursement to $0.24 per share in late 2012 after initiating its payment in 2011. That alone isn’t a reason to like the company’s dividend focus. However, the words of the company’s chairman are.
“I think it’s an outdated and somewhat inane concept that high growth companies shouldn’t pay dividends. We’ve been growing our earnings consistently, have substantially no debt, and large reserves of cash. We should be and are committed to investing in our businesses wherever prudent, and returning a portion of the balance to our shareholders, in continued opportunistic purchases of the stock (we’ve bought in 42% of the Company’s shares over the last 3 years) and now, in paying a quarterly dividend.” Those statements came in late 2011 and are a great reason to keep this web company on your watch list.
Management Commitment
Management that is very vocal about its support for dividend payments is a critical part of avoiding the harm that a dividend cut can cause. When looking for dividend payers, a preference should be given to companies that talk up their dividend commitment. In other words, it’s well worth your effort to examine Texas Instruments Incorporated (NASDAQ:TXN), Realty Income Corp (NYSE:O), and IAC/InterActiveCorp (NASDAQ:IACI).
The article These Companies Publicly Support Their Dividends originally appeared on Fool.com.
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