Use access key #2 to skip to page content.

sagitarius84 (< 20)

Five Dividend Geese Laying Golden Eggs for Investors

Recs

7

July 03, 2012 – Comments (4) | RELATED TICKERS: DUK , GIS , WPC

The story of the golden goose describes very well the world of dividend investing. On the outside, dividend stocks act like normal stocks as they go up in bull markets and go down in bear markets. On the inside however, these cash machines generate so much in excess cash flow that they are able to successfully reinvest in their business, while also paying higher dividends every year. Investors who hold onto their dividend growth stocks get a dividend check every quarter. Selling those dividend stocks and investing in the next hot tech stock would mean that investors would not be getting their golden eggs in a timely manner anymore, and would be at the mercy of the markets for their returns.

Several golden geese, announced plans to deliver higher dividends ( larger golden eggs) to their shareholders:

Hingham Institution for Savings (HIFS) provides various financial services to individuals and small businesses in Massachusetts. The company raised quarterly distributions by 4% to 26 cents/share. The bank typically pays a special dividend equivalent to the amount of regular quarterly distribution plus one penny. As a result, it essentially pays 5 quarterly dividends in a year. This marked the 18th consecutive annual dividend increase for this dividend achiever. Yield: 2.10% (analysis)

General Mills, Inc. (GIS) manufactures and markets branded consumer foods worldwide. It also supplies branded and unbranded food products to the foodservice and commercial baking industries. The company raised quarterly distributions by 8.20% to 33 cents/share. This marked the ninth consecutive annual dividend increase for General Mills. Yield: 3.50%

Duke Energy Corporation (DUK), together with its subsidiaries, operates as an energy company in the United States and Latin America. The company raised quarterly distributions by 2% to 25.50 cents/share. This marked the eighth consecutive annual dividend increase for Duke Energy Corporation. Yield: 4.40%

Darden Restaurants, Inc. (DRI) operates full service restaurants in the United States and Canada. It operates restaurants under the Red Lobster, Olive Garden, LongHorn Steakhouse. The company raised quarterly distributions by 16.30% to 50 cents/share. This marked the eighth consecutive annual dividend increase for Darden Restaurants. Yield: 4%

W. P. Carey & Co. LLC (WPC), together with its subsidiaries, provides long-term sale-leaseback and build-to-suit transactions for companies worldwide and manages a global investment portfolio. The company raised quarterly distributions to 56.70 cents/share. W. P. Carey & Co has raised dividends for 15 years in a row. Yield: 4.90%

Full Disclosure: Long HIFS

Relevant Articles:

Hingham Institution for Savings (HIFS) Dividend Stock Analysis
Three Dividend Strategies to pick from
National Bankshares (NKSH) Dividend Stock Analysis
Replacing appreciated investments with higher yielding securities

4 Comments – Post Your Own

#1) On July 03, 2012 at 1:43 PM, sagitarius84 (< 20) wrote:

These cash machines generate so much in excess cash flow that they are able to successfully reinvest in their business, while also paying higher dividends every year. Which solid income paying securities are you investing in?

Report this comment
#2) On July 03, 2012 at 9:42 PM, HarryCarysGhost (99.72) wrote:

KO, VZ.... thoughts,,,

Report this comment
#3) On July 04, 2012 at 11:09 AM, HooDaHeckNose (96.42) wrote:

VZ and T payout ratios scare the crap outta me. Very tempting yields but I don't see how the dividends are sustainable without huge revenue increases.

Report this comment
#4) On July 05, 2012 at 9:52 PM, HarryCarysGhost (99.72) wrote:

HooDaHeckNose-

My freind truthisntstupid explained it to me like this, since I had similar concerns over VZ-

Harry, 94% is probably right.
It sounds right. VZ's free cash flow, remember, is much, much, higher than its earnings according to Generally Accepted Accounting Principles.
But in VZ's case you're better off relying on the percentage of free cash flow required to cover that dividend. Because VZ operates in such a capital-intensive industry that it will always have mountains of depreciation expense which lowers its earnings according to GAAP. But you know depreciation is a noncash expense.
A person might even wonder how sustainable that is...whether they'll ever reach the point at which much of their equipment is fully depreciated.
But the beauty of a capital-intensive business like VZ or T is that they're constantly having to upgrade and make new investments, new capital expenditures. They're continually booking new accruals and deferrals. That dividend should continue to be safe for many years. Maybe many many years.
I'm assuming you're familiar with free cash flow, and why it's often much higher than earnings.

Report this comment

Featured Broker Partners


Advertisement