Regular yearly increases are the holy grail of dividend investing. Those raises are what keep an investors income stream growing faster than inflation, and building that oh-so-important yield on cost.
So when a company freezes their dividend, or even worse, cuts it, that is often a sell signal for many investors. And in many instances, that decision could be justified - after a couple of decades of dividend growth, a cut or freeze usually indicates declining business prospects and financials, or changes in management's attitude or culture.
That doesn't necessarily mean however that a company is down for the count. If the right changes are made, companies can regain profitability, and refocus on building shareholder value, including yearly dividend increases.
The 5 companies listed below have at some point in the past decade cut their dividends, leading to their removal from the exclusive Dividend Aristocrats list. Since the cut, not only have they maintained a quarterly payout, they have also begun increasing the dividend again.
Pfizer Inc. is a research-based, global biopharmaceutical company.
The dividend was cut in half in 2009, from $0.32 a quarter to $0.16. Since then, the dividend has been raised twice, first to $0.18 in 2011 and then again to $0.20 in 2011. The annual payout of $0.80 yields 4.1% at the current price of $19.66
General Electric (NYSE:GE)
General Electric Company is a diversified technology and financial services corporation. The products and services of the company range from aircraft engines, power generation, water processing, and household appliances to medical imaging, business and consumer financing and industrial products.
The dividend was cut in 2009 by 68%, from $0.31 a quarter to $0.10. Since then, the company has raised the dividend three times, first to $0.12, then $0.14, then to $0.15, where it is currently settled. At the current price of $16.39, the stock yields 3.7%
Legg Mason (NYSE:LM)
Legg Mason, Inc. is a holding company. Acting through its subsidiaries, the company provides investment management and related services to institutional and individual clients, company-sponsored mutual funds and other pooled investment vehicles.
The dividend was gutted in 2009, from $0.24 quarterly to $0.03, an 88% decrease. Since then, the dividend has grown a total of 166% to a quarterly payout of $0.08, where the $26.93 price tag yields 1.2%
KeyCorp is the parent holding company for KeyBank National Association (KeyBank), its principal subsidiary, through which its banking services are provided through two business segments: Key Community Bank and Key Corporate Bank. As of December 31, 2010, these services were provided across the country through its 1,033 retail banking branches in 14 states
KEY cut it's dividend beginning in 2008, when the dividend was slashed 32% from $1.46 to $1.00, and the situation only got worse, with cuts continuing to $0.09 and then $0.04.
The company gave its first increase in July of this year, when the quarterly rate grew a whopping 200%, from $0.01 to $0.03, for an annual payout of $0.12. At the current price of $7.33, the stock yields 1.6%.
Avery Dennison Corporation (NYSE:AVY)
Avery Dennison Corporation develops identification and decorative solutions for businesses and consumers globally. It is engaged in the production of pressure-sensitive materials, office and consumer products and a range of tickets, tags, labels and other converted products. It operates in three segments: Pressure-sensitive Materials, Retail Information Services, and Office and Consumer Products.
The dividend was cut in 2009 by over 50%, from $0.41 quarterly to $0.20. The company then gave its first raise in February of 2011, with a 25% bump to $0.25. The annual payout of $1 yields 3.8% at the current price of $26.61.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. This list provides general information, not individually targeted personalized advice. Investors should assess for themselves whether the advice is appropriate to their individual investment objectives, financial situation and particular needs before making any investment decision.