Summer is best known as a time when the kids are out of school, families are taking vacations, temperatures are soaring, and prices at the pump shoot sky high. Apparently, summer is also a time for a select group of companies to unleash some gigantic dividend increases.
In early June, I took a look at seven brand-name companies that, since the beginning of the year, had at least doubled their dividend. Just since summer began, we’ve tacked on an additional five companies that have matched this feat — and summer isn’t even over yet for another two-plus weeks!
Source: Tax Credits, Flickr.
Now, I’m sure some of you could care less about dividend-paying stocks because you’ve watched the U.S. indexes soar well over 100% since their March 2009 lows. While many high-growth and transformative companies have indeed eclipsed the gains of the majority of dividend-paying companies, over the long run, the safety and compounding wealth netted from dividends and the underlying share price appreciation of dividend stocks – not to mention the nights of better sleep — will almost always trump the ebb and flow of the next hot technology or sector fad.
So why is a dividend stock so attractive?
1). It gives you two ways to profit from the company (share price appreciation and the dividend).
2). It provides (in most cases) a steady and predictable stream of income.
3). Based on your income, some dividends may be taxed at a considerably lower rate than ordinary income.
4). Dividend payments are a sign from management that increasing shareholder value is important, and that the company’s cash flow is stable enough to support a sharing in profits with stakeholders.
With that in mind, let’s have a look at five companies that were piling on the dividends this summer while you were busy perfecting your cannonball form.
|Company||Previous Quarterly Dividend||New Quarterly Dividend||Increase|
|Hess Corp. (NYSE:HES)||$0.10||$0.25||150%|
|Oracle Corporation (NYSE:ORCL)||$0.06||$0.12||100%|
|Anadarko Petroleum Corporation (NYSE:APC)||$0.09||$0.18||100%|
|Harman International Industries Inc./DE/ (NYSE:HAR)||$0.15||$0.30||100%|
|Cabot Oil & Gas Corporation (NYSE:COG)||$0.01*||$0.02*||100%|
Source: Individual company press releases, * adjusted for split on Aug. 15, 2013.
As you can see, there’s certainly a bias toward the oil and gas industry when it comes to increasing shareholder stipends — and with good reason! The Obama administration is putting a priority on boosting domestic production in order to decrease U.S. dependence on foreign oil, and oil prices for West Texas Intermediate are back at a near two-year high.
Clearly, not all dividends are created equally, and some of these dividend hikes will prove more valuable than others; so let’s have a closer look behind each increase.
Hess Corp. (NYSE:HES)’ huge 150% increase in its dividend makes a lot of sense from a strategic perspective, and looks as if it’ll be a nice boost for shareholders. Earlier this year, Hess Corp. (NYSE:HES) made the decision to remove itself from the oil refining industry and focus solely on oil exploration and production. The sale of its refinery assets netted the company $3.5 billion in proceeds, which it can now use for general corporate purposes including paying out a revamped dividend. In addition, Hess Corp. (NYSE:HES) is also in the process of selling its energy marketing business to Direct Energy for a hair over $1 billion. With this hike, Hess Corp. (NYSE:HES)’ yield moves from just 0.5% to a more respectable 1.3%, and focuses the company on a faster-growing area of the oil sector.
CEO Larry Ellison, Source: Oracle PR, Flickr.