Dividend ETFs Look for a Boost as Companies Hike Payouts

Includes: DTN, IYJ, SDY, VIG
by: Tom Lydon

Investors may be uncertain these days, taking refuge in safe-havens and volatility hedging ETFs. But corporate America doesn’t seem so concerned, and several big companies are hiking their dividends.

Corporate America is giving investors reason to cheer. On Wednesday, three major U.S. companies - Caterpillar (NYSE:CAT), Target (NYSE:TGT) and Viacom (NYSE:VIA) - all raised their dividends, according to the Associated Press.

Caterpillar raised its quarterly dividend 5% to 44 cents per share; Target raised its dividend 45% to 25 cents per share; and Viacom is distributing its first-ever dividend of 15 cents per share.

Caterpillar is widely considered a bellwether for the global economy since its equipment is heavily used worldwide.

Other companies that recently raised their dividends include liquor company Brown-Forman (NYSE:BF.B), engineering and construction company KBR, agribusiness company Bunge (NYSE:BG), and medical devices company CR Bard (NYSE:BCR).

Year to date, 135 companies have raised, initiated or reinstated their dividends, resulting in a $10.4 billion increase in payouts this year. Last year, the net payout dropped by $39.8 billion.

In addition to dividend increases, companies are ramping up their stock buyback programs, which effectively make shares more valuable by reducing the number of shares on the market. Buybacks also put money into shareholder hands.

Year to date, 310 companies have announced buyback programs, compared to 253 over the same time last year. In 2008, before the financial markets froze, 700 companies announced buyback programs.

At least on the corporate side, there is reason to be optimistic.

  • iShares Dow Jones US Industrial (BATS:IYJ): 2.5% CAT

  • SPDR S&P Dividend (NYSEARCA:SDY)

  • WisdomTree Dividend ex-Financials (NYSEARCA:DTN)

  • Vanguard Dividend Appreciation (NYSEARCA:VIG)

Sumin Kim contributed to this article.

Disclosure: None