Four ETFs to Play Expected Dividend Hikes

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 |  Includes: CVX, DLN, DVY, IBM, PEY, PFM, SDY, SXL
by: Tom Lydon

One byproduct of a recovering economy is increased dividend payouts from some of the nation’s largest companies, and the number of companies doing so has hit records. As luck would have it, many of them are holdings in top ETFs.

A record 22 companies recently announced that they are raising their dividend payouts to shareholders. The Motley Fool reports that several solid blue-chip companies such as IBM, Costco (NASDAQ:COST) and Exxon Mobil (NYSE:XOM) are among those boosting payouts.

Selena Maranjian for The Motley Fool reports that there are three points that investors should consider before selecting a dividend paying company.

  • Consistency: Look for reliability. The S&P 500’s list of “Dividend Aristocrats” features the elite of the dividend world: companies that have increased their dividends for 25 years in a row.
  • Protection: Look for sustainability. A too-high payout ratio is a red flag that can warn you about potential dividend cuts in the future. The payout ratio is the percentage of net income paid out in dividends; if a company is giving most or all of its income back to shareholders, it won’t have much cash left for other needs.
  • Growth and Sharing: A low payout ratio suggests that a company has a lot of room for growth on the dividend front. Over the long haul, expected dividend growth is arguably more important than a stock’s initial yield, since it can boost a modest yield into a payout powerhouse.

Some of the companies expected to up their dividend payouts:

  • Exxon Mobil Corporation engages in the exploration, production, transportation, and sale of crude oil and natural gas. The company raised its quarterly dividends to 44 cents/share, up from 42 cents/share.
  • Sunoco Logistics Partners L.P. (NYSE:SXL) engages in the transport, terminalling, and storage of refined products and crude oil, as well as the purchase and sale of crude oil in the United States. The company increased quarterly distribution to $1.11 per share, from $1.09 prior.
  • Chevron Corporation (NYSE:CVX) operates as an integrated energy company worldwide. The company raised its quarterly dividends by 5.90% 72 cents/share.
  • IBM is an information technology (IT) company. The company increased its dividend by 18% to 55 cents/share.
  • iShares Dow Jones Select Dividend Index (NYSEARCA:DVY): Chevron 2%

  • SPDR S&P Dividend (NYSEARCA:SDY): Sunoco 2.2% (NYSE:SUN); Coca-Cola 1.8% (NYSE:KO)

  • WisdomTree Large Cap Dividend (NYSEARCA:DLN): Exxon Mobil 3.8%; Procter & Gamble (PK) 2.7%; Cocoa-Cola 1.8%; Intel Corp. (NASDAQ:INTC) 2.1%; IBM 1.5%; Eli Lilly (NYSE:LLY) 1.1%; Pfizer (NYSE:PFE) 2.4%

  • PowerShares Dividends Achievers Portfolio (NYSEARCA:PFM): Chevron, 5.2%; IBM, 5.1%; Procter & Gamble, 5.1%; Exxon, 4.8%; Coca-Cola, 4.3%

Disclosure: None