By Andrew Hawkins
We took a look at 7 companies that are offering attractive dividends. These companies are in good positions to see growth and will help any portfolio see exceptional yields.
RLI Corporation (NYSE:RLI): RLI Corp. is a specialty insurance provider operating in 3 main segments. The 3 segments include casualty, property, and surety. The casualty segment specializes in providing general liability coverage to commercial issuers. The property segment offers coverage of property and also provides unique insurance such as natural disaster and fire coverage. The surety segment offers bonds and writes commercial and small contract surety coverage. It also offers fidelity and crime coverage for certain financial institutions. RLI has locations in all 50 states and has been profitable for the past 15 consecutive years.
RLI recently raised the quarterly dividend for Q2 2011 to $0.30 from $0.29 in Q1. With a current trading price of about $60, the annual dividend yield is 2%. RLI is interesting to look at because late in 2010 they issued a special cash dividend on top of their typical quarterly dividend. This special dividend was $7.00 and helped RLI produce a 15.5% annual dividend yield for 2010. This atypical cash dividend may not happen again in the near future but did shed some light on the priorities of the company. At the time of the special issuance, President and CEO Jonathan Michael said “as a result of continued success, we have accumulated capital that exceeds our current needs… we are pleased to announce a return of capital to shareholders in the form of a special dividend.” RLI has a strong history of returning capital through dividends and stock repurchasing. RLI management still has board approval for about $94 million more in stock repurchasing.
Integrys Energy Group Inc. (NYSE:TEG): Integrys is a utility company that provides energy and natural gas to the United States and Canada. TEG offers services and products in both regulated and unregulated energy markets. TEG operates through various subsidiaries such as Michigan Gas Utilities, Minnesota Energy Resources, North Shore Gas, Upper Peninsula Power Company, and more. Integrys Energy Group was formerly known as WPS Resources Corporation and was changed in 2007.
TEG has declared that it is going to maintain the current quarterly dividend of $0.68 for Q2 2011. The stock is trading around $52.17. This would project an annual dividend yield of 5.2%. TEG has a 71 year record of paying dividends to shareholders. The same quarterly dividend yielded 6.48% in 2009 and 5.61% in 2010. The dividend has been stagnant since 2009, but before that TEG had increased dividends fairly consistently year-to-year. I think that TEG will soon return to its dividend increasing ways.
Cincinnati Financial Corporation (NASDAQ:CINF): CINF mainly offers property casualty insurance to commercial entities within the United States. It does this by offering business, auto, and home insurance through The Cincinnati Insurance Company, a subsidiary. It does offer a personal line of services, but this is still a smaller side of the business. CINF has a market cap of $4.94 billion and has a price to earnings ratio of 13.36.
Currently, CINF trades around $30.32 and offers a quarterly dividend of $0.40. This makes for a projected annual dividend yield of 1.59%. CINF released less than stellar first quarter results. Net Income was down to $62 million from $68 million in Q1 2010, but this was explained by a larger than normal number of weather-related catastrophes. During the announcement of second quarter dividend, President and CEO Steven Johnston made the point that CINF “has more than $1 billion of cash and marketable securities at the parent level, providing exceptional financial flexibility and liquidity to support our dividend record through periods of earnings pressure.” This must have made an impact on some analysts because on May 24 the S&P 500 raised the dividend forecast on Cincinnati Financial Corp.
The Dow Chemical Company (DOW): The Dow Chemical Company is a leader in the chemical production industry. They manufacture and sell mostly raw materials that are used in a variety of end products. DOW has a large global reach and earns over a quarter of its revenue in emerging markets. DOW has a market cap of $41.6 billion and is currently trading around $35.40.
DOW announced a second quarter dividend of $0.25 which is large jump from a first quarter dividend of $0.15. This dividend yields about 2.8%. Back in 2009, DOW slashed dividends in order to improve the company’s cash position. The dividends went from $0.42 a quarter to $0.15 a quarter. The company had some adjusting to do during these hard times and they could not afford to maintain their dividends. Now, the company has found solid ground and is looking to move its dividend up. The initial jump from $0.15 to $0.25 was a good first step and I expect DOW to continue raising dividends to try to return value to investors.
Cardinal Health (NYSE:CAH): Cardinal Health is a distributor of medical supplies and pharmaceuticals. CAH distributes throughout America and Puerto Rico and has some big name clients like CVS Caremark (NYSE:CVS). CAH is broken down into two segments, medical and pharmaceutical. The medical segment offers a range of medical supplies, including surgical equipment. The pharmaceutical segment offers a variety of name brand and generic pharmaceuticals. It also offers new product launch support and other services. It has a market cap of $15.6 billion and is trading around $44.40.
The second quarter dividend for 2011 is $0.215. This is a 10.3% increase over last quarter’s $0.195 dividend. CAH has a projected yield of 1.9%. In April, CAH released quarterly results. They had a 7% revenue increase. Diluted earnings per share from continuing operations jumped 15% to $0.71. CAH experienced large profit growth, 25% year-over-year, in the pharmaceutical segment. Cardinal still has a modest payout ratio of 28% and I think this healthcare company will continue to bump up dividends.
CSX Corporation (NYSE:CSX): CSX is a railroad company in the eastern portion of the United States. CSX mainly offers services like transportation of freight via its railroads. The railroad carries all sorts of materials and cargo, such as, coal, chemicals, agriculture, food, and even automobiles. CSX is a relatively small railroad competitor with a market cap of $27.74 billion and trades around $75.40.
The first quarter of 2011 was good for CSX. They raised revenue to $2.8 billion, which is a 13% jump from a year before. Also, profit rose from $305 million in Q1 2010 to $395 million. CSX recently underwent a 3:1 stock split and had a 38% jump in quarterly dividends. As of 2006, CSX has kicked dividends up around 300% and repurchased $5.6 billion worth of shares. It also has invested $8.3 billion into future business growth and expansion. Since a 2:1 stock split in 2006, dividends have increased from $0.10 to $0.36. I see the stock split and the dividend hike as indicators that CSX is looking to return value to shareholders and will continue to look for ways to do that down the road.
Telefonos de Mexico (NYSE:TMX): TMX is a telecommunications service provider that operates in Mexico. It has traditional telephone services and also provides data services. It also has over 350 Telmex stores that sell a variety of computer and telecommunications equipment. TMX has been trying to add a television service to its product line but has had difficulty doing this. Also, Telmex is run by Carlos Slim, the richest man in the world.
TMX offers an attractive annual yield of 5.3% and has a quarterly dividend of $0.2245. It has a market cap of $15.3 billion and is priced around $16.90. TMX has a recent decline in share price because of the news that it was not approved for a television license. Telmex vows that it will continue to seek a license so it can add TV to its list of services. I believe that Telmex will eventually meet all the requirements and receive the license. Once this happens, the largest fixed-line provider will have a phone/Internet/TV package that will make them very competitive. Until this happens, shareholders can enjoy the high yield.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.