By Andrew Hawkins
I first wrote 6 Dividend Rockets Poised to Take Off and then I wrote 5 More Dividend Rockets Ready to Blast Off This Summer. This is the third installment of the Dividend Rocket Series. I will be on the lookout for more rockets on the launch pads waiting to take off. For now, take a look at 6 more rockets ready to light up the sky.
Cisco Systems Inc. (NASDAQ:CSCO): Cisco Systems is the leader in networking and communications equipment and software. They sell servers, routers, switching components and various other products. They also provide a range of security products like video and audio surveillance, intrusion prevention, and web and email security products. CSCO’s market cap is $89.02 billion which puts it above competitors like Hewlett-Packard (NYSE:HPQ) at $77.34 billion market cap and Dell Inc. (NASDAQ:DELL) at $29.69 billion market cap. It is also far behind computer hardware powerhouses IBM and Apple Inc (OTC:APPL), which have market caps of $203.25 billion and $311.10 billion respectively.
Cisco announced the company’s first ever cash dividend in the first quarter of 2011. The Board of Directors approved a $0.06 quarterly dividend. I believe that this shows a shift in mentality for Cisco. It shows that they are no longer a small player in the field and they are looking to return value to shareholders. According to Cisco’s website, Frank Calderoni Executive Vice President & Chief Financial Officer of Cisco said “This dividend complements our leading position, and is an important part of our commitment to bring value to shareholders." Cisco has enough cash ($10.49 billion operating cash flow TTM) to cover these dividends. I believe that Mr. Calderoni statement proved a commitment to shareholders through dividends and I think we will see this new dividend rocket take off.
Ross Stores (NASDAQ:ROST): Ross is the second largest off-price retailer in the country. Through two chains of stores, they offer clothing, home accessories, footwear, gift items, linens, and other items. It offers a wider range of products such as furniture, educational toys, luggage, cookware, sporting goods, and other goods through a catalog and online service. There are over 900 Ross Dress for Less stores across the nation and ROST operates a smaller chain, dd’s DISCOUNTS.
Ross Stores has a reputation of returning value to its shareholders. Since 1993, it has bought back shares every year and they have increased dividends every year since 1994. In the first quarter of 2011, ROST announced a $0.22 quarterly dividend. This is a 37.5% increase from fourth quarter 2010’s dividend of $0.16. The $0.22 dividend reflects a 1.1% dividend yield. ROST has a payout ratio of 14% and I believe that ROST will continue its tradition of increasing dividends and provide a nice yield to those owning shares.
Sigma-Aldrich Corporation (NASDAQ:SIAL): Sigma-Aldrich sells mainly to pharmaceutical companies, universities, and government institutions, hospitals, non-profit organizations, and other companies. They offer a variety of chemicals, biochemical, and equipment in the United States and globally. Sigma experience record sales in the first quarter of 2011. Profits jumped from $100 million from Q1 2010 to $119 million, a 19% jump. SIAL has a large international presence and on May 23 announced it was going to buy Vetec Quimica Fina, a Brazilian high quality specialty chemical maker. The purchase was made to fortify Sigma’s Latin American position.
SIAL currently has a quarterly cash dividend of $0.18. This produces a dividend yield of 1.1%. The company has a 20% payout and has $523 million in operating cash flow. Sigma-Aldrich has been raising dividends every year since 1990. Sigma-Aldrich also underwent a 2:1 stock split in 2007. This provides more liquidity to the shares. I believe that with the cash flow SIAL has and the commitment to increasing dividends demonstrated by the past performance, investor will see a nice return.
Stryker Corp. (NYSE:SYK): SYK designs and produces medical devices that are used mostly in orthopedic surgeries. The company is broken down into two segments. The first is Orthopedic Implants and provides reconstructive, trauma, and spinal implant systems. The second segment, MedSurg Equipment, produces and sells surgery equipment. This equipment consists of surgical navigation systems, endoscopes, digital imaging systems, patient handling equipment, and more.
Stryker announced a first quarter dividend of $0.18. This is only the second year that Stryker has given quarterly dividends. In 2010, Stryker moved away from annual cash dividends to quarterly cash dividends. The current forward annual dividend yield is 1.17%. SYK has a payout ratio of 21%. It also has a little less than $1.5 billion in operating cash flow. I think Stryker has cemented itself within the industry and is a leader in innovation and will see growth because of it. They have also been raising dividends every year for 20 years and I think they will maintain this reputation moving forward.
IBM (NYSE:IBM): International Business Machines is an appropriately named leader in the technology industry. IBM is involved in many segments and has many business divisions. They provide IT consulting through their Global Business Services segment. They create numerous software that help companies manage warehouses, secure data, provide analytics, gauge forecasts, and automate datacenters. IBM has a Global Financing segment that provides loans and leases to the technology industry. IBM is truly a global powerhouse.
IBM has a market cap of $203.18 billion, which is on par with competitor Microsoft (NASDAQ:MSFT) and much higher than most other competitors. It is trading around $167.75 and has a P/E of 14.08. The annual dividend is $3.00 and that produces an annual dividend yield of 1.8%. IBM has such a competitive advantage over so many of its competitors that I think it will continue to be profitable for quite a while into the future. When the quarterly dividend is paid in June, IBM will have paid a quarterly dividend since 1916. IBM CEO and chairman Samuel Palmisano said “since 2003, we have returned over $100 billion to shareholders in the form of dividends and share repurchases”. He goes on to say “our commitment to delivering value to our shareholders remains as important today, as it has ever been”.
Clorox Company (NYSE:CLX): The Clorox Company makes consumer products in 4 main segments. The first segment, cleaning, produces cleaning supplies under brand names such as Clorox, Formula 409, Liquid-Plumr, Pine-Sol, Tilex, Armor All, and more. As you can imagine, the products are all cleaners for everything from car tires to hardwood floors. The lifestyle segment offers products that have to do with food and beverage. Through brands such as Hidden Valley, Brita, Burts Bees, and KC Masterpiece, CLX provides food products, water filtration systems, and personal care items. The household segment is in charge of brand names such as Kingsford, Scoop Away, Match Light, Fresh Step, and Glad. The household segment produces cat litter, trash bags, charcoal, and other household items. Through the company’s last segment, international, the company markets a combination of the three other segments to international markets under various brand names.
Clorox has the highest annual dividend yield of the pack I chose to look at today. With a quarterly dividend of $0.60, CLX has a dividend yield of about 3.4%. Clorox is still a relatively small consumer goods producer compared to some of the leaders. It has a market cap of $9.29 billion while competitors like Colgate-Palmolive (NYSE:CL) stands at about $41.60 billion and Procter & Gamble (NYSE:PG) stands at about $185.29 billion. Despite this, CLX is finding growth in international markets and I believe has strong brand names and a few emerging names that are gaining traction. With a payout ratio of 54%, I think investors will find some great dividend yield in CLX.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.