Most investors are not surprised when a company cuts its dividend. They see the early warning signs well in advance of the actual cut. Here are three signs that a company is heading toward a dividend cut:
1.) An abrupt or permanent shift in a company's business model as a result of business conditions.
2.) A dividend yield that is higher than average and/or higher than others in the industry.
3.) Diminishing cash available to pay dividends.
Ultimately, the ability of a company to pay its dividend is determined by its cash position - both cash on its balance sheet and its ability to generate cash flow. Below are several companies that are NOT cutting their dividends, but instead raising them:
Duke Energy Corporation (NYSE:DUK) operates as an energy company in the United States and Latin America. July 1st the company increased its quarterly dividend 1.9% to $0.795 per share. The dividend is payable September 16, 2014 to stockholders of record on August 15, 2014. The yield based on the new payout is 4.4%.
Watsco, Inc. (NYSE:WSO) distributes air conditioning, heating, and refrigeration equipment, as well as related parts and supplies in the United States, Canada, Mexico, and Puerto Rico. July 1st the company increased its quarterly dividend 50% to $0.60 per share. The dividend is payable July 31, 2014 to stockholders of record on July 15, 2014. The yield based on the new payout is 2.4%.
BreitBurn Energy Partners L.P. (NASDAQ:BBEP), an independent oil and gas company, acquires, explores, and develops oil, natural gas liquids (NGLs), and gas properties in the United States. July 1st the company increased its quarterly dividend 1.0% to $0.16750 per share. The dividend is payable July 16, 2014 to stockholders of record on July 11, 2014. The yield based on the new payout is 9.0%.
Tallgrass Energy Partners, LP (NYSE:TEP) acquires, owns, develops, and operates various midstream energy assets in North America. July 1st the company increased its quarterly dividend 17% to $0.38 per share. The dividend is payable August 14, 2014 to stockholders of record on July 30, 2014. The yield based on the new payout is 3.7%.
Selecting stocks with increasing dividends is critical for an income growth strategy. The above list contains stocks that recently raised their dividends; it is not a list of recommend buys. As always, due diligence should be performed before buying or selling any stock. For a list of stocks with a long string of consecutive cash dividend increases, see this list.
Full Disclosure: Long DUK in my High-Yield portfolio. See a list of all my dividend growth holdings here.