Archive for January, 2010
Dividend News For January 26th
About: (Tellabs (Nasdaq: TLAB), Rollins (NYSE: ROL), Canadian National Railway (NYSE: CNI), Calamos Asset Management (Nasdaq: CLMS), Vanguard Natural Resources (NYSE: VNR), Dividend Genius, dividend stock, dividend stocks, stock dividend, stock dividends)
January continues to be a great month in terms of dividend news and Tuesday was a particularly strong day with several noteworthy companies announcing dividend hikes or new dividends. Let’s take a look at some of the day’s dividend news.
Network equipment maker Tellabs (Nasdaq: TLAB) said it earned $62 million, or 16 cents a share, in the fourth quarter. Excluding one-time items, the company earned nine cents a share, beating analyst estimates of seven cents a share. Tellabs has been cutting costs and lowering its headcount over the past several years and as a result, the company has the cash to pay its first-ever dividend. Tellabs will pay two cents a share on February 26th to shareholders of record on February 12th.
Pest control company Rollins (NYSE: ROL) boosted its quarterly payout by nearly 29% to nine cents a share. The new dividend will be paid on March 10th to shareholders of record on February 10th.
Railroad operator Canadian National Railway (NYSE: CNI) said fourth-quarter results beat analyst estimates and that it expects double-digit earnings growth in 2010. The company boosted its quarterly dividend by seven percent to just over 25 cents a share.
Calamos Asset Management (Nasdaq: CLMS) booked a fourth-quarter profit after posting a loss in the year earlier period and the company boosted its quarterly payout by 36% to 7.5 cents a share from 5.5 cents. The new dividend is payable on February 24th to shareholders of record on Feb 9th.
Oil and gas explorer Vanguard Natural Resources (NYSE: VNR) raised its 2009 profit view by $6 million and said it will boost its fourth-quarter dividend to 52.5 cents a share from 50 cents.
China’s Economy – The Driving Force Behind Global Economic Recovery
Fresh glimmers of China’s consumer prosperity have arrived in the form of a new report from the usually dry government-run Xinhua News Agency. Xinhua says China overtook Japan last year to become the world’s second-largest diamond market.
Trade on the Shanghai diamond exchange jumped by 16.4 percent to more than $1.5 billion last year, boosting China ahead of economically stagnant Japan. The U.S. remains the world’s number one market for the precious gems.
Xinhua says “the year-on-year rise, when much of the rest of the world was mired in deep recession, was because of China’s boisterous economic growth in 2009. As the economy continued to develop in a stable manner, consumer demand for jewelry continued to grow, especially for diamonds for the wedding market,” Xinhua explains.
We have often looked to the soaring sales figures from China’s auto industry to provide an indicator of consumer confidence and spending power. Last year China raced past the United States to become the world’s leading car market.
China’s increasingly affluent middle class and its vast pool of customers are also key factors behind the sudden rise of diamond sales in the world’s most populous country.
Advertising and marketing are also crucial to this trend. Diamonds have not always been considered important symbols for weddings in China, where jade and gold pieces have traditionally been given as gifts.
Demand for diamonds started to develop in the 1990’s when De Beers brought its global advertising campaign to China, tapping into the Chinese desire for conspicuous consumption and pursuit of Western luxuries.
Every year about 10 million couples get married in China, and the figure is expected to reach 11.82 million in 2010, according to the Ministry of Civil Affairs.
As we so often find, China is once again headed for global leadership. De Beers,
the largest diamond producer in the world, expects that China will surpass the
US to become the world’s largest diamond consumer market by 2020.
Once again, we see the growth of China becoming an increasingly important driver of the global economy.
GE Says Restoring Dividend Is First Priority, Aims To Increase Payout By 2011
General Electric (NYSE: GE), the Dow component and formerly the biggest dividend payer in dollar terms, said last week restoring its dividend is a top priority for the industrial conglomerate. GE cut its quarterly payout last year for the first time since 1938, but CEO Jeff Immelt said last week GE may see the ability to grow its dividend in-line with earnings by 2011.
The company anticipates having $25 billion in cash to deploy by the end of this year. CFO Keith Sherin mentioned on the company’s fourth-quarter earnings conference call that t and that GE is placing a higher priority on restoring its dividend than on mergers and acquisitions or share buybacks. GE cut its quarterly dividend to 10 cents a share from 31 cents in February of 2009 in an effort to conserve cash. GE’s dividend cut followed a $15 billion dilutive share offering in the fall of 2008.
GE’s fourth-quarter results beat analyst estimates and said that international orders in several of its businesses are starting to pick up and the company is starting to see an increase in its order backlogs in several of its divisions. Investors should note that while the company did say the dividend is a top priority, it did not rule out acquisitions or share repurchases and that raising dividend rests on improved profitability. Given GE’s sensitivity to the broader economy, we’ll likely need to see the economy improve in earnest before GE’s dividend regains its lost luster.
The last time GE raised its dividend was during the fourth quarter of 2007.
More Distribution Increases From The World Of MLPS
About: (master limited partnerships (MLPs), Oneok Partners L.P. (NYSE: OKS), Oneok Inc. (NYSE: OKE), Paso Pipeline Partners, L.P. (NYSE: EPB) Dividend Genius, dividend stock, dividend stocks, stock dividend, stock dividends)
We hold several oil and gas master limited partnerships (MLPs) in the Dividend Genius portfolio and all of them have been stout performers since our initial recommendations. As we always say, part of the reason to invest in MLPs is their strong dividends and impressive yields. To be sure, MLPs, the good ones at least, don’t stand pat when it comes to their distributions, and 2010 has seen a steady flow of distribution increases from MLPs.
Two of the MLPs that we hold in the Dividend Genius portfolio have already boosted their payouts this year and it appears that trend is working its way through the sector. Last week, we noticed two more MLPs boosting their payouts. Oklahoma-based Oneok Partners L.P. (NYSE: OKS) raised its quarterly distribution by a penny to $1.10 a share. The new distribution is payable on February 12 to unitholders of record on January 29. Oneok Inc. (NYSE: OKE), the parent company of the MLP, also boosted its quarterly divedend by 4.8% to 44 cents from 42 cents.
El Paso Pipeline Partners, L.P. (NYSE: EPB) joined the fray as well, announcing a quarterly distribution increase of more than 12% to 36 cents per unit from 32 cents. The new distribution is payable on February 12 to unitholders of record on February 1.
Time To Like Consumer Staples? Try One That’s Increasing Its Dividend
After a few days of precipitous declines in the market, it appears that risk appetite may be waning and if that’s the case, then defensive investors may do well to check out the consumer staples sector. The dividends here are usually pretty good and the yields fair, certainly better than what you’ll find with CDs or Treasuries. That said, if you’re going to hunt for dividends among the consumer staples, you might as well do so with a company that looks primed to boost its dividend and Kimberly Clark (NYSE: KMB).
The maker of Huggies diapers and Kleenex tissues said last week it expects a “healthy increase” to its dividend this year. Kimberly Clark already pays a quarterly dividend of 60 cents a share and the stock yields a decent 4%. This year will represent the 38th consecutive year Kimberly Clark has raised its dividend.
And in case you’re trying to decide between a company that is raising its dividend and one that is repurchasing its shares, Kimberly Clark has you covered. Following in the steps of Tiffany (NYSE: TIF) and Washington Post (NYSE: WPO), which we told you about last week, Kimberly Clark is doing the dividend/repurchase two-step as well. The company said it will buyback $500 million to $600 million of its own shares this year.
China Drives Stock Markets Crazy
Global stock markets fell into a swoon as China announced stellar new growth figures. As we predicted, fourth quarter growth hit double digits, coming in at a slightly better than expected 10.7 percent – the fastest rate of economic expansion since 2007.
The economic numbers released in Beijing contain almost entirely good news for investors. But China’s blazing growth has been blamed for market declines in Asia, Europe and the U.S. Shanghai was one of the few exceptions, as China’s main stock market gained slightly on the news.
Does it make any sense to blame China’s success for market declines elsewhere? Not much.
The theory we’re hearing from talking heads on TV and print pundits is that China’s soaring growth will spark a tightening of monetary policy by Beijing. That much is likely true. Inflation is at almost two percent in China and increased interest rates and higher bank reserve ratios are pretty much a certainty.
But why would non-Chinese stock markets take a hit because of double-digit expansion and probable monetary tightening in China? After all, China’s robust GDP expansion was widely predicted within 0.2 percent of the final number days earlier. Monetary tightening in China is already underway and more clampdowns on excess lending were predicted weeks ago by the China Stock Digest, and were widely anticipated in the popular press over the past week.
In other words, the announcement of China’s world-beating growth was already baked into stock prices.
One of the few sectors that will feel the effects worldwide of a Chinese clampdown on lending may be the commodity sector. Beijing will probably rein in new loans to heavy industries that are overbuilt, including the steel industry. But a future reduction in demand for some resources can’t be blamed for a market-wide meltdown, especially in the U.S. A more probable cause of the market plunge in New York is President Obama’s decision to clamp down on the size of US banks and on the kind of risks they can take.
For the record, the news from China was very positive on many fronts.
Retail sales rose 16.9 percent last year. That gain was the biggest since 1986. Sales jumped even more in December on a year-over-year basis, climbing 17.5 percent.
Industrial production increased at a pace of 18.5 percent. Urban fixed-asset investment jumped 30.5 percent in 2009.
China has staged a clear “V-shaped” recovery according to the National Bureau of Statistics.
China will be the “world’s biggest engine of growth” according to Bloomberg. The World Bank raised its forecast for global expansion in 2010 to 2.7 percent from 2 percent last June. The bank predicts 9 percent growth in China during 2010. The only cloud on the horizon is the widely expected arrival of moderate inflation.
Many China-based ADRs have been rattled by the media panic over monetary tightening in China. The market’s fear is that businesses in general will suffer from tight money policies.
But Beijing has no interest in putting the squeeze on the entire economy. China’s leaders have said repeatedly that their target has been “reasonably fast” economic growth with a target of approximately eight percent expansion.
Beijing hit the bull’s-eye with an average of 8.7 percent growth for all of 2009.
By hitting the brakes on some parts of the economy, China can easily deliver another year of world-beating growth in the eight percent range without risking runaway expansion and overheating.
Tiffany, Washington Post Raise Dividends AND Repurchase Shares
About: (Tiffany, Washington Post , Tiffany (NYSE: TIF), Washington Post Co. (NYSE: WPO), Berkshire Hathaway (NYSE: BRK-A, BRK-B), Oracle of Omaha, Kaplan education services firm, Dividend Genius, dividend stock, dividend stocks, stock dividend, stock dividends)
There is often a fair amount of debate surrounding what is a better method for a company to reward shareholders with: A dividend hike or a share repurchase plan. Dividend detractors say dividends cost a company cash that can be used to reinvest in its business. Supporters like the cash and view it as a sign of company’s strong balance sheet. Those that favor share buybacks like the idea of a smaller number of shares outstanding, which can help boost earnings per share.
Both strategies have merit, but what if you can find a company that is engaging in both practices? On Thursday we learned of two companies doing just that. Tiffany (NYSE: TIF), the high-end jeweler, said it will boost its quarterly dividend by 18% to 20 cents a share and reinstate a share repurchase plan with $402 million left on it.
Washington Post Co. (NYSE: WPO) joined the party by announcing a 4.7% dividend increase for its Class B shares. The new payout will be $9 a share per year, up from $8.60 a share. The publisher of its namesake newspaper and operator of the Kaplan education services firm, also said it will repurchase 750,000 of those Class B shares of which there are about 8.1 million outstanding. Good news to be sure, but trading near $450 Washington Post isn’t a realistic investment for most retail investors.
Tiffany and Washington Post share something else in common. Warren Buffett is an investor in both companies. The Oracle of Omaha purchased $250 million in Tiffany bonds early last year and his Berkshire Hathaway (NYSE: BRK-A, BRK-B) holding company is the largest Washington Post shareholder.
Flip The Switch To Another Utilities Dividend Increase
Consolidated Edison (NYSE: ED), one of the largest electric utilities in the U.S., said that fourth-quarter profits were up 26% on higher revenue. Excluding one-time items, ConEd earned 67 cents a share on sales of $3.27 billion, missing Street estimates that called for a profit of 76 cents a share. Tucked away in the quarterly update was news that ConEd will race its quarterly dividend by 0.8%.
That will take the company’s quarterly dividend to 59.5 cents a share from 59 cents. Analysts have said in the past that the time buy ConEd shares is when the stock yields 6%. As of Thursday’s close, the stock was yielding 5.1%. Of course, we shouldn’t forget that ConEd has now increased its dividend for 36 straight years and that’s a dividend history worth getting acquainted with.
The bad news may be that the company expects to earn $3.10 to $3.30 a share in 2010. That’s below Street estimates of $3.36 a share. Then again, if the stock trades lower in the coming days, that 6% yield may be right around the corner.
Sail The High Seas With A Dividend Increase From Nordic American Tanker
Oil shipping firm Nordic American Tanker (NYSE: NAT) has been a member of the Dividend Genius portfolio for a while now and since we added it to our roster, a few subscribers have asked us why the low-yielding stock, which had cut its dividend to conserve cash during the financial crisis, was included among a collection of high-yielding reliable dividend payers. Our answer was that Nordic American was among the best oil tanker stocks around and the company’s free cash and non-existent debt made it a compelling opportunity.
We also thought a dividend increase may come sooner rather than later and following an upgrade by Jefferies last week and a bullish writeup in Barron’s, Nordic American said on Thursday that it will pay a fourth-quarter dividend in the neighborhood of 23 cents a share. That’s well above the 10 cents a share the company paid in the third quarter.
The stock was down on news that the company will sell 4 million shares to raise cash to purchase more vessels, but if a company like Nordic American is considering the purchase of new vessels, which don’t come cheap, it’s reasonable to expect an uptick in demand might be on the horizon. Nordic American is planning to use proceeds from the secondary offering to purchase at least four new Suezmax tankers.
Nordic American’s dividend has a history of fluctuating dividends and 23 cents a share, while better than 10 cents, is still far below some of the company’s other recent payouts so maybe we’ll see more dividend increases out of the company as its outlook and profits improve.
Core Laboratories To Raise Its Dividend
Core Laboratories NV (NYSE: CLB), the Dutch oilfield services provider, said it will raise its quarterly dividend by 20% to 12 cents a share from 10 cents. The new dividend will be payable on February 25 to shareholders of record on January 25.
In a capital intensive industry, Core Labs devotes just 3%-4% of annual revenue to capital expenditures compared to 10%-15% for rivals, according to analysts. This allows the company to generate free cash flow at a pace that is superior to that of rivals and it appears the company is using some of that spare change to reward shareholders.
The oil services sector is highly correlated to price fluctuations in the price of crude oil, more so than integrated oil stocks and traditional exploration firms, and due to high offshore exploration costs, most oil services stocks don’t pay good dividends nor do they offer strong yields. The Core Labs dividend increase is certainly good news, but we still prefer master limited partnerships (MLPs) as ways of earning income in the energy patch.