When a company announces an increase in their quarterly (or in some cases, monthly) dividend payout I see it as a positive catalyst for most income driven investors looking to establish a secondary revenue stream. I like to think of dividend increases as raises in pay, and in some cases that raise actually happens once are year similar to many companies in the private sector.
Altria Group (MO) announced today that it will be increasing its quarterly dividend from $0.41/share to $0.44/share. The Richmond, Virginia based firm currently yields 5.19% ($1.76) and through its subsidiaries, engages in the manufacture and sale of cigarettes, smokeless products, and wine in the United States and internationally. It offers cigarettes primarily under the Marlboro brand; smokeless tobacco products under the Copenhagen, Skoal, Red Seal, Husky, and Marlboro Snus brands; cigars principally under the Black & Mild brand; and pipe tobacco. Potential investors looking to establish a position in MO should do so from both an income and growth perspective. Altria, in my opinion, is not only a great income play but also a great growth play. If we consider the company's profit (25.68%) and operating margins (42.23%) over the last 12 months potential investors will see that not only were the numbers very impressive, but they were much better than some of the competition such as Reynolds American Inc. (RAI) which had only managed to demonstrate a profit margin of 16.81% and an operating margin of 32.92% over the same period.
Intuit (INTU) announced on Tuesday that it will be increasing its quarterly dividend from $0.15/share to $0.17/share. The Richmond, Virginia based firm currently yields 1.16% ($0.68) and provides business and financial management solutions for small and medium-sized businesses, consumers, accounting professionals, and financial institutions primarily in the United States, Canada, India, Singapore, and the United Kingdom. Potential investors looking to establish a position in INTU should do so from both an income and growth perspective. Intuit, in my opinion, is not only one of the better income plays in the sector it also possesses excellent qualities to be considered growth play. If we consider the company's profit (19.08%) and operating margins (28.36%) over the last 12 months potential investors will see that not only were the numbers pretty good, but they were much better than some of the competition such as H&R Block Inc. (HRB) which had only managed to demonstrate a negative profit margin of 9.52% and an operating margin of 21.42% over the same period.
Potential investors looking to establish a position in either MO or INTU should do so with a medium sized position and add to that position as both dividend and earnings announcements approach. My only concern with MO regards the company's recent EPS trends. Over the last four quarters the company has either been in-line or slightly ahead of estimates, which isn't such a bad thing, but if they do miss estimates we could see a 3% - 4% sell-off in terms of share price. In terms of INTU the biggest negative catalyst has also been the company's recent EPS trends which have demonstrated a downward trend over the last four quarters culminating with the company's most recent quarter in which they missed estimates by 50%.