Fortune Brands, (FO), is the company behind many of our favorite brands including Jim Beam, Moen and Titleist, announced that its board of directors has approved an 8% increase in the dividend on the company’s common stock.
The dividend will increase 12 cents per share to an annual rate of $1.68 from $1.56 per share. The next quarterly dividend is payable on September 4, 2007 to shareholders of record at the close of business August 15, 2007.
We create value for shareholders of Fortune Brands in many ways, including building our consumer brands, positioning our businesses for stronger growth, improving productivity and using our financial strength to pay dividends that return immediate value to shareholders,” said Norm Wesley, chairman and CEO of Fortune Brands. “We’re pleased that we’ve increased the dividend in each of the 11 years since we began trading as Fortune Brands, more than doubling our payout over that period.
The dividend increase announced today represents the sixth consecutive increase of 8% or more.
The company is also creating shareholder value through mindful disposition of its free cash flow and the maintenance of good will through the growth and strength of its brands. Fortune is looking to add to its brand strength by acquiring the maker of Absolut, one of the world’s most popular Vodkas.
The increase in Fortune’s dividend brings the dividend yield over 2.0% and with a Price to Earnings ratio lower than the industry average, Fortune is a definite stock to watch.
Adding to the luster of Fortune is the fact that they engage in businesses that cater to the baby boomer crowd. The aging boomers have more disposable income than any generation before and research has proven that they tend to spend money directly in Fortune’s three business segments:
1) Home and Hardware - Moen, Kitchen Craft, Decora, Kemper, Master Lock
2) Wine and Spirits - Jim Beam, Maker’s Mark, Sauza, Courvosier, Clos du Bois, Geyser Peak, among others.
3) Golf - Titelist, Cobra, Pinnacle, Foot Joy, and Vokey.
This phenomenon may explain why Fortune’s revenues have grown at almost a 17% average over the past 5 years, while the revenues of the industry as a whole have grown at less than 11%. In addition, Fortune’s dividend has grown, on average, over 9% per year over the past 5 years.
Fortune Brands is just one example of the influence of the baby boomer generation on the revenues of large companies. The drastic influence of this largest generation to enter retirement age is exactly why we need to buy dividend stocks now.
Disclosure: I do not own shares of Fortune Brands.