7 Stocks with Increased Dividend Distributions

Several companies raised distributions last week. The most notable raiser was fast food chain McDonald's (MCD), which surprised investors with a 10% dividend increase. This marked the 33rd consecutive annual dividend increase for this Oak Brook, Illinois based dividend aristocrat.

McDonald's Chief Executive Officer Jim Skinner said:

So far in 2009 we've returned nearly $4.0 billion to shareholders through dividends and share repurchases, bringing total cash returned since the beginning of 2007 to about $15.5 billion. With today's dividend increase, we expect to end the year near the high end of our three-year, $15 billion to $17 billion total cash return target.

This achievement reflects the success of our better, not just bigger strategy, which has helped drive sales, profits and, ultimately, cash from operations. Going forward, our philosophy on our use of capital remains unchanged. Our first priority is to reinvest to grow our business and enhance shareholder value. After these investment opportunities, we expect to return all of our free cash flow over the long term through dividends and share repurchases -- while maintaining a strong financial foundation. Today's dividend increase underscores our confidence in the long-term strength of our business and ongoing commitment to returning cash to shareholders.

The golden arches have definitely weathered the economic storm relatively unscattered, with monthly sales consistently marking comparable gains. I recently added to my position in McDonald's, as I believe that the company possesses strong dividend growth characteristics. The company has more than doubled its dividends since 2006.

Several other companies announced increases in distributions:

Lockheed Martin Corporation (LMT) increased its quarterly dividend by 10.50% to 63 cents per share. Lockheed Martin Corporation has increased its quarterly dividend in each of the past six years. The stock currently yields 2.90%.

Sanderson Farms, Inc. (SAFM), an integrated poultry processing company, increased its quarterly dividend by 7% to 15 cents per share. Sanderson Farms, Inc. doesn’t follow a path of regular annual dividend increases that I prefer in a dividend stock.

ConAgra Foods, Inc. (CAG), which operates as a food company in North America and internationally, increased its quarterly dividend by 5% to 20 cents per share. This is the third dividend increase for ConAgra Foods, Inc. since the company cut its distributions in 2006. The stock currently yields 3.50%.

Chimera Investment Corporation (CIM), which invests in residential mortgage backed securities (RMBS), residential mortgage loans, real estate-related securities and asset backed securities (ABS), increased its quarterly dividend by 50% to 12 cents per share. Chimera Investment Corporation has a relatively short dividend history, which started in 2007. The dividend payment seems to be fluctuating a lot, which is not something to have when you try to live off your income streams. The stock currently yields 11.80%.

Hatteras Financial Corp. (HTS), which invests in adjustable-rate and hybrid adjustable-rate single-family residential mortgage pass-through securities guaranteed by a U.S. Government agency or issued by a U.S. Government-sponsored entity, increased its quarterly dividend by 4.5% to $1.15 per share. Despite the fact that Hatteras Financial Corp. has only been around since 2008, its dividends have been pretty stable. The stock currently yields 13.90%.

Triangle Capital Corporation (TCAP), which is a private equity and venture capital firm specializing in lower middle market companies, announced that its board has approved a 2.5% increase in dividends to 41cents per share. Triangle Capital Corporation has increased quarterly dividends since ever since it went public in 2007. The stock currently yields 14.10%.

I would be careful with the last three stocks mentioned, as they distribute most of their earnings out to shareholders, and thus have to depend on stock sales in order to keep growing the business. More stock sales dilute existing shareholders’ interests and could spell trouble if the capital markets freeze for one reason or another. Successful dividend investing is more than just chasing the highest dividend stocks – it’s more about finding a stock that has adequately covered dividends, whose business model could support future dividend increases.

Disclosure: Long MCD

Comments

[Cramer #1:]

You can add Altria (MO) also very cheap..also... P/E of 9 and Yield of 7.6%

Read this...

Altria (MO): "It has got unbelievable management, because it has a fabulous dividend. I think that MO’s dividend which was raised recently can go higher… this stock has $20 all over it."

The inner gem in Altria is that MO own 27.6% of SaBMiller #2 brewer in the world and one of the best Coke bottler in the world....

Read...

Ok....lets see numbers:

Value:
-Sab Miller: $10B
-UST:$10B
-John Middelton:$2.9B

Now the Value of PMUSA:
Only $13.5B for Philip Morris USA with over 50% market share in US...Imagine....

Marlboro’s share is larger than the combined share of the next ten largest cigarette brands and larger than R.J. Reynolds and Lorillard combined. In the fourth-quarter 2008, Marlboro gained 0.4 share points versus the prior year period growing to a 41.6 percent retail share, making it both the nation’s largest and fastest growing cigarette brand.

Imagine
R.J. Reynolds value is
Market Cap: 13.02B

And Lorillard is at $12.2B

Altria's Malboro brands is bigger than RAI & LO combined= +/- $25B market LOL now for $13.5B??? Hello???

"We were not surprised that Altria also announced that it is to keep its 28.5% stake in SABMiller. The company acquired its holding in 2002, and since then, the value of the investment has increased from $3.4 billion to over $10 billion. Altria's relatively low tax basis means the firm would face a hefty tax bill if it were to sell its equity stake. We think that at this stage, shareholders would be better served by Altria holding its economic interest in SABMiller."...

Looking at Yahoo numbers...my numbers above make sense....
$10B for SAB Miller
$10B for UST...
$2.9B for John Middelton...
the rest for PMUSA and PM Capital Corp=???

$48.56B-$10B-$10B-$2.9B= $25.66 for PMUSA
exactly like I said in my previous post...

THE Market give only $13.5B for PMUSA vs $25B for the real value...

Buffet would love this kind of cash flow and dividend company...at fire sale price...LOL

VALUATION MEASURES

Market Cap (intraday)5: 36.25B
Enterprise Value (27-Sep-09)3: 48.56B

Sep 28 02:46 PM

[Low Sweat I...:]

I enjoyed this article. There is some very good research showing stocks that consistently raise their dividends have outperformed the market.

I also applaud your cautionary point about ultra high yield stocks, and enjoyed the additional article you linked in.

Look at some of the dividend-growth ETFs. The Vanguard VIG has solidly outperformed popular high-yield dividend-growth ETFs (such as SDY) both in terms of better price appreciation and fewer portfolio dividend blow-ups.

Sep 28 02:58 PM

[YoYoMama:]

This is the second time this author has recommended CIM, and I'm a bit baffled. If cash flow is needed to maintain the high dividends, this one is in trouble. CIM has a P/FCF of 111.72, and a P/C of 200.79!! There is only 2 cents per share to pay a dividend of 30 cents. Perhaps the "dividend is fluctuating" because the dividend is in trouble. I would avoid.

Sep 29 09:36 AM

[StockData.org:]

I don't think he is recommending CIM-- try reading the article again.


On Sep 29 09:36 AM YoYoMama wrote:

> This is the second time this author has recommended CIM, and I'm
> a bit baffled. If cash flow is needed to maintain the high dividends,
> this one is in trouble. CIM has a P/FCF of 111.72, and a P/C of
> 200.79!! There is only 2 cents per share to pay a dividend of 30
> cents. Perhaps the "dividend is fluctuating" because the dividend
> is in trouble. I would avoid.

Sep 29 10:47 AM