Dividends Forecast for 2011

 |  Includes: CAT, CVX, ECA, ENB, HON, HUSKF, JNJ, MMM, PWE, T, VZ
by: The Dividend Guy

Time flies and we are already done with January! I thought about producing a dividend year end review but just couldn’t gather all the info before the end of January. So, if you are looking at making some moves in 2011, it could be interesting to take a look at what happened last year. As well, take a look at what investing opportunities we are facing in 2011.

2010 was good news for dividend investors

After we ate our socks back in 2008 and early 2009, 2010 was a great year in terms of dividend payout and dividend increase news. In fact, most companies started to pay or increased their dividend in 2010. Now that the fear of seeing the end of the world has subsided, companies looked at their bank accounts, saw a huge stack of cash and decided to give some back to patient investors. An interesting point to outline was that most special dividend payouts were made in the last quarter of 2010. I guess that matches the threat of higher taxes on dividends in 2011! Some companies were looking to reward their investors.

Dividend Growth from Techno, Consumer and Basic Materials

There are 4 sectors which shone in terms of dividend growth for 2010 and here they are:

Techno: 19.01%

Consumer, Cyclical: 15.58%

Basic Materials: 9.58%

Consumer, Non-Cyclical: 9.36%

I guess it has to do directly with the amount of cash these companies were accumulating without reinvesting back in 2009.

In general 50% of the companies included in the Russell 3000 increased their dividend yield in 2010 (compared to 39% in 2009).

What Dividend Stocks Will Pay in 2011?

Among several sectors, I think that REITs are going to be the favorite high dividend payer of 2011. I would also look at some of my 2011 Best Canadian REITs list if I were you. But let’s take a larger look at all the sectors and their dividend paying stocks:

Basic Materials

Considering the steady climb of commodities’ prices since 2009, this can only mean more profit for basic materials. While they are not known for their high dividend paying stocks, mining stocks can certainly cope with long term growth and capital gains. However, I’m not a big fan of speculating on the price of gold or copper, so I’ll leave this sector out of my portfolio.


This is a dividend sector I want to follow in 2011. I am particularly interested in AT&T (NYSE:T) which is on my stock radar. While they have been through a rough patch in 2008-09, the communication sector shows great signs; strong cash flow and growing revenues are part of the party. AT&T and Verizon (NYSE:VZ) are definitely interesting picks in this category.

Consumer, Cyclical

The price of most stocks in this sector rose big time in 2010 so dividend yield dropped. I think we will see the continuity of rising dividends in 2011 since several companies are accumulating cash like farmers grow corn! The challenge will be to find dividend payer over 3% in this sector.

Consumer, Non-Cyclical

Obviously a very interesting sector when you are looking at dividend yield. I mentioned that I recently purchased Johnson & Johnson (NYSE:JNJ) for my portfolio. There are several companies in this sector with a lot of cash flow to distribute. I will definitely look into it.


When you think energy + dividends, you have to turn towards a) pipelines or b) Canadian Oil Sands (COS). Both include huge (monster) companies with a lot of resources. Oil prices are set to keep rising in 2011, this should help them boost their cash flow (which equals dividends! Yeah!). There are several interesting companies on the Canadian side: Husky (OTCPK:HUSKF), Penn West (NYSE:PWE), Enbridge (NYSE:ENB), Canadian Oil Sands, EnCana (NYSE:ECA). While I bought Chevron (NYSE:CVX) not so long ago, the energy sector still seems appealing to me. This time around, I’ll be considering Canadian companies.


It is no big secret that I definitely prefer Canadian banks over American ones. I think that the banking environment in the USA is still toxic and it scares me. Most importantly, I don’t understand the US banking system completely (since I don’t live there) so I would rather invest in something that I understand (following one of Buffett’s investing rules!). As I mentioned previously, REITs will be on my watch list too!


Some very strong and powerful companies are in this sector [I’m thinking of 3M (NYSE:MMM), Caterpillar (NYSE:CAT) and Honeywell (NYSE:HON)]. Since the economy is progressing slowly, industrials are looking like a locomotive just starting out. General Electric (NYSE:GE) scared us big time back in 2009 but they are already showing good signs (dividend increase in 2010). This should continue in 2011.


This is a very interesting sector in my opinion. Since I have built a strong online income, I do believe in internet technology and computers. Techno stocks will not only increase their dividend payouts but they will continue to grow as well. We should see some strong capital gains in this sector too. I think we have never seen so much interest from consumers toward technology. BlackBerries, iPhones and iPads continue to generate a lot of interest.


Same old, same old! High dividend payouts, dividend payout ratios around 50% … things should just continue on as they always have in this sector. I’m not sure if I will include them in my portfolio though. I also like to see some growth in my investments and I have the feeling that utilities will be quite stable … a bit too stable for me …

Overall Thoughts on 2011 Dividend Stocks

As you can see, I am fairly optimistic about the stock market in 2011. While I know that we will see some important fluctuations, I truly think that we will have a great investing year, what do you think?