Dividend Stocks: Good News / Bad News

It seems lately that the headlines are dominated by companies dropping their dividends such as Fifth Third (FITB) from $0.44 to $0.15, KeyCorp's (KEY) Board expressed its intention to reduce its dividend 50% to an annualized dividend of $0.75/share, FairPoint Communications (FRP) lowering their dividend 35% and Crystal River Capital (CRZ) cutting its dividend from $0.68 to $0.30. Not all the news is bad.

Consider the following companies that recently announced double-digit dividend increases:

• Chesapeake Energy (CHK) raised its dividend 11% to $0.075/share
• VSE Corporation (VSEC) raised its dividend 12.5% to $0.045/share
• Capstead Mortgage (CMO) raised its dividend 13% to $0.59/share
• Target (TGT) raised its dividend 14% to to $0.16/share
• Caterpillar (CAT) raised its dividend 17% to to $0.42/share
• Kaiser Aluminum (KALU) raised its dividend 33% to $0.24/share
• Monsanto (MON) raised its dividend 37% to $0.24/share

Unfortunately, after running these companies through my [D4L-PreScreen.xls] model, none of them warranted additional consideration. CAT was the closest with a NPV of MMA Differential of (621) .

On June 19, 2008, BB&T Corporation (BBT) stated that the company's capital levels remain strong and management anticipates "some increase in the cash dividend during 2008."

And finally, sometimes good news is found in maintaining the status quo. According to Bloomberg, Bank of America's (BAC) CEO told Oppenheimer analyst Meredith Whitney the company's dividend was safe. With an effective yield between 8% and 9%, and trading less than book value, BAC could end up as one of the great steals of 2008. Time will tell.

Disclosure: At the time of this writing, I owned BAC and BBT.

Comments

[hendi_alex]

The comment regarding the BBT dividend is a little dated as they announced a one penny increase yesterday. The dividend was raised from 46 cents to 47 cents per quarter.

[Whisper On The Wind]

I know people who sold BAC on Meredith Whitney's claims. I didn't. In fact, based on pure animal instinct that perhaps Meredith Whitney was a woman scorned and thus spewing her fury, I bought more. And wasn't it a pleasant surprise that I gained? Perhaps I should buy more, just out of spite. Ms. Whitney may be an intelligent woman but I'm following that scent of cash.

[ajhough]

I own both stocks mentioned and recently added a bit to BAC. I don't think these companies are going out of business and I have owned them for a long time. I listen to CNBC and hear all this panic and wonder who is listening. Stocks go up and stocks go down....