Dividend Increases Coming: K, NWL, TSCO, SPAN

Dividend increases are on the way as companies discuss earnings reports and make forecasts for the coming year. It’s been a good week for dividend increases with several companies announcing that they will boost their per-share payouts.

Kellogg Co. has announced plans to increase its dividends. Indeed, the dividend will be increasing by 6% to 43 cents per share. The dividend increase will take effect the third quarter of 2011. Also increasing its dividend is Tractor Supply Co. Not only is the company planning to increase its cash dividend to 12 cents a share, but it has also approved a $600 million stock buyback program.

Other companies announcing plans to increase their dividends include Newell Rubbermaid (a boost of 60%), Span-America Medical Systems (increase to 11 cents a share), Toronto exchange member Jean Coutu (increase to 6 cents a share), and Canadian Oil Sands (raise by half). Dividend stocks across a variety of sectors are raising dividends as profits improve and as forecasts appear cautiously optimistic.

If you are looking to add some diversity to your investment portfolio, it might not hurt to look at a few of the companies beginning to raise dividends. This is especially true of companies in sectors that are expected to see growth in the coming months and years.

Dividend Blog Roundup: Updating Your Investment Portfolio

Every so often, it’s a good idea to go through your investment portfolio and figure out what you can do to improve its performance. From your dividend stocks to some of your other holdings, what needs to go? And what should you get more of? Here are some ideas from different dividend bloggers:

  • Replacing Index Funds in Your Portfolio: Over at Oblivious Investor, Mike considers that maybe you want to get rid of some of your index funds. He offers a look at whether or not it’s worth the hassle, and when it might be worth it to go with index funds.
  • Step 4: Socially Responsible Investing: As you build your dividend portfolio, Matt at Dividend Monk suggests that you should consider the companies you include. Ask yourself what you feel comfortable owning, and whether you want your investments to match your values.
  • Expatriate Investors – What Your Financial Advisor Probably Doesn’t Know: Part II: Andrew Hallam, The Millionaire Teacher, points out that there are things that an expatriate needs to know when putting together an investment portfolio. Your financial advisor might not know these things. Read Part I, too.
  • Market Myth: Sell in May and go away: As you begin your rebalancing act, don’t fall into the trap of agreeing with certain myths. Jaymus at Realized Returns quickly debunks the myth that you should sell in May.
  • How To Use StockChase.com: The Passive Income Earner helps you use a great tool to your advantage. Use some basic tools to help you figure out what to include in your investment portfolio.
  • 10 Unknown Small Cap Stocks With Health Yields: Over at The Dividend Pig, you can learn more about some small caps that might be worth including in your portfolio. Some interesting suggestions for those looking for some new additions.
  • Saudi Arabian Oil: Breakeven Price Rising: If you are interested in oil for your portfolio, you might want to read what Beating The Index has to say about the rising breakeven price. A great analysis of oil in Saudi Arabia.

Why Dividend Portfolio Diversification is Important

When putting together a dividend portfolio, it is important to remember to diversity. In some cases, it can be tempting to chase the high dividend yields related to certain sectors. However, as many found out during 2008 and 2009, putting too many of your dividend eggs in one basket can create serious problems.

When a Sector Runs Into Trouble: Dividend Cuts

Some dividend sectors are popular due to their high yields. REITs, utilities and financials are good examples. Financials provide an especially apt example of the need for diversification in a dividend portfolio. Prior to the financial crisis, banks were viewed as Titans among dividend stocks. They paid reasonably high dividends (that always seemed to be rising), and they provide decent capital gains.

However, as trouble began brewing in 2007 and 2008, dividend increases slowed to a crawl. After the financial crisis, which hit banks quite hard, dividends were slashed in 2008 through 2009. For those heavily invested in bank stocks not only saw huge losses in terms of capital as stock prices dropped, but they also saw a reduction income as dividends dwindled away.

Of course, this is something that can happen in any sector. As a result, it is important to consider diversity in your dividend portfolio Consider ways to include dividend stocks from a variety of sectors, and consider including a health mix of dividend aristocrats. This way, if one sector verges on complete collapse, you aren’t as devastated by the results. You are especially vulnerable if you count on dividends for income.

Diversifying Your Dividend Portfolio

As you diversify, make sure that you are considering quality stocks, and that you include a mix that will help you meet your goals. Pull from different sectors of the market, and you can also add diversity with dividend funds and foreign dividend stocks. There are a number of ways that you can add a little diversity to your portfolio and still enjoy a stable income stream and limited risk.

Be sure to do your research and analyze the stocks you include. You want good quality stocks in your dividend portfolio, ensuring that you have solid choices that are unlikely to see big drops in payouts at the first sign of trouble. If you have a little extra room for the risk, though, it might not be a bad idea for your diversity to include some good growth dividend stocks with a little more risk. Just make sure that you are balanced out elsewhere so that if your bet turns out to be a bad one, you aren’t devastated.

Dividend News: Plenty of Profits — Are More Dividend Increases on the Way?

Today, with the stock market closed for the Good Friday holiday, it’s a good time to reflect on the events of the past week, and on earnings season. First quarter earnings reported by a number of companies have so far been rather positive. Included in the earnings bonanza was dividend aristocrat Johnson & Johnson, a company that beat estimates and increased it forecast for the coming year.

Other companies also reported solid earnings, including Intel and Wynn Resorts. Banks also showed good profits this week, including Citi, which is recovering from its near collapse following the 2008 financial crisis. Indeed, as Citi shareholders questioned the plans of Citi executives, a promise was made: A higher dividend in 2012. The company cited profitable quarters all through 2010, and a good profits in the first quarter of 2011 as evidence that its plans were working.

Last week saw a number of announcements related to rising dividends, and the prospect of improved profits and cautious optimism that recent housing market and employment news will mean a pick-up in the economic recovery has many hoping that more good news is on the way.

However, before anyone gets too excited about the return of increasing dividends, it is important to note that there are still some hurdles to overcome. U.S. companies and foreign companies may be turning profits right now, but the situation is far from stable in the financial markets. The euro zone remains on the verge of a meltdown, high oil prices are likely to hinder economic recovery, and we can’t ignore the budget battle brewing as politicians try to remain popular while solving the nation’s budget woes ahead of the 2012 election year.

The positive earnings news of this past week may have caused investors to forget the downgrade to the U.S. sovereign debt outlook at the beginning of the week, but it is something that still needs to be considered going forward.

Big Cap Tech Dividend Plays: MSFT and INTC

Microsoft and Intel are two stocks that haven’t moved much in the last 1-5 years. Intel has just been stuck on 20 since the summer of 2009 while Microsoft cant seem to do anything to get some positive momentum going. Despite the overload of recommendations I see on CNBC from day to day these stocks have never taken off into new territory.

Intel reported great earnings yesterday and had a big pop in their stock price. Their results have a lot of people questioning the PC slowdown and wondering if companies are starting to reinvest in their infrastructure to refresh old PCs and servers. After a few years of making due and pushing out normal PC refresh cycles to cut costs there is a good chance that companies are looking to make hardware changes.

Depending on which report you read, Windows 7 only makes up 33% of the PC market share. XP is very close to that at about 32%. That is a big change from the end of 2010 where Windows 7 only made up 22% of market share. Windows 7 is on the rise. If the demand in increases, so will the stock price of Intel and Mr. Softy. Microsoft still owns over 80% of the PC market, Apple has less than 15%.

Intel is more exciting to me than Microsoft though because they are moving hard into the mobile space with their chips for smartphones and tablets. As this mashable article states, the mobile chip market is dominated by ARM but Intel expects to make big moves with their Medfield processor for mobile devices in the next 12 months.

Intel – INTC

Intel’s CEO said on CNBC yesterday that they are a growth company again with 20% gains in revenue each year for the last 2 years. While the American market is mature they are seeing a lot of growth internationally. What will happen if the American market comes alive and Intel is able to take market share from ARM in mobile devices? It could be off to the races for Intel.

Intel has increased its dividend for 7 straight years and has a 3 year dividend growth rate of 12.25%. The payout ratio is a very low 32% and it has a P/E ratio just under 10, which is much lower than AMD’s P/E of almost 14 or of Texas Instruments at 13. The dividend yield is 3.3%. Their returns over the last year are the only thing keeping it out of our top 100 dividend list. That might change soon.

The pop after the earnings report yesterday could start a new trend on the one year chart.

Microsoft – MSFT

Microsoft has fat pockets with a cash/share ratio of 4.24 and dividend yield at almost 2.5%. Their payout ratio is only 25% and their 5 and 3 year dividend growth rates are about the same at around 11.5%. They have a lot of cash and the dividend looks safe but is the stock going to go up? It’s hard to say for sure, but if the PC refresh season is upon us there is a good chance it will.

So many companies avoided Vista, but Windows 7 is no Vista. Also, many of those old PCs that are running XP are just that, old. It makes sense to me that even where people are happy with XP they are coming due for a hardware refresh soon and when they do replace those old PCs they won’t be putting XP on them.

Here is a one year chart for Mr. Softy. Notice the improving support levels. The bottoms just keep getting higher as the year progresses.

Dividend Blog Roundup: Strategic Investing

There’s a lot going on in the world right now — and in the financial markets. Having a strategy can help you make sense of the madness, and help you enjoy better returns. If you are looking for some helpful direction as you put together an investing plan, these blog posts can help:

  1. Book Review: Dig This Gig: Make a plan to invest in yourself. At the Aleph Blog, a book about inventing your dream blog is reviewed. One of the best investments you make can be in yourself, and living the life you want.
  2. Best Gains of 2011: Over at Fund My Mutual Fund, this short post brings up a very important strategy. Using the recent drop in the S&P 500, TraderMark suggests that you buy the dip.
  3. 5 Easy Steps to Navigate Earnings Season Better than the Pros: You can give your returns a boost if you know what to do during earnings season. Blain at Stock Trading To Go offers you some practical, actionable advice to making the most of earnings season.
  4. 5 Key Advantages of Trading in the Forex Market: Have you thought about adding forex trading to your investing strategy? If you have been hesitating, Kenny at Market Club is ready to help sway you. He lists some of the advantages of the currency market.
  5. Where Have the Strategic Bidders Gone??: Robert Salomon studies the lack of strategic buyers in the mergers and acquisitions market. What is causing this lack? Salomon looks at one view of the situation — and why he disagrees.
  6. How The Future Will Dramatically Change Your Retirement and Everything Else, Part 1: Head on over to The Wise Buck to see the writing on the wall with regard to your retirement. Get ready for changes to retirement, and be ahead of the curve. We’re excited to see parts 2 and 3.
  7. Michael Burry’s Subprime Speech at Vanderbilt: Inside the Doomsday Machine: As you prepare your investing strategy, it can help to have a look inside the doomsday machine that resulted in the latest financial crisis. Market Folly offers a look at this speech, and links to other helpful resources.

The Highest Dividend Yields aren’t Always the Best

Sometimes, when building a dividend stock portfolio, it can be tempting to chase the highest dividends yields. However this is not always the best idea. Indeed, many recommend that a yield target of 4% to 6% is ideal, and even that 2% to 3% is acceptable. That can sometimes seem a little low, especially when you consider that there are yields of more than 8% – and even yields of more than 13%.

One of the reasons that some companies offer such high dividends is to encourage others to invest in shares. There are some smaller companies or start up companies that offer high yields in order to try and get more investors. If you are looking for something short term, this might not be a bad idea in some instances. You could see high yields, and make money. However, if you are looking for a long term investment or stable income, higher yields aren’t always the best answer.

Issues Associated with High Dividend Pay Outs

There are some issues that you have to be aware of when you see high dividend pay outs. When a company pays high dividends, it is paying a portion of its profits. Making high dividend payments cuts into the cash that a company has available. Companies may not be able to sustain such high payments for an extended period of time. If you are counting on dividend payments for regular income, you might be disappointed if the company can’t sustain high pay outs for a long period of time.

Another problem is that sometimes high dividends are used as a way to attract investors – even though the company isn’t stable. Sometimes, high dividend yields can be a cover for a company that is crumbling. You could find yourself invested in stock that turns out to be worthless later.

Finally, you might be wary of dividends that fluctuate. You might see high dividends for a couple years, and then see a dividend cut later. If dividends fluctuate regularly, it can be difficult to set up a regular income portfolio. High dividend stocks, even those that fluctuate, can be interesting additions if you are looking for growth instead of income (especially if you reinvest), but you may not be able to rely on them for regular income.

Screening Dividend Stocks

A good way to filter out bad dividend payers is to look for stocks that have a solid dividend history of raising dividends. Our safe dividend list has stocks that have been raising their dividends for 25 years or more. You should also pay attention to the payout ratio and dividend growth rate. We like stocks that have a payout ratio under 60 and a dividend growth rate of 5% or more. Take a look at the top dividends list for more info.

Even if you do use high yield dividend stocks as part of your strategy, it is wise to be careful, and to keep an eye on the news about the companies involved so that you can sell your stock at signs of trouble.

Dividend News: Dividends on the Rise — Except for BAC

It looks as though this week was a good one for dividends. Dividends around the world, from Russia to the U.S., are on the rise, thanks to the belief that holding onto cash may not be necessary as signs of economic improvement show through. Left out of the party, though, is Bank of America. The Fed rejected BAC’s proposal for a dividend increase. Other financial services companies, though, including Swiss Reinsurance Co. have approved a dividend increases, and Russia’s Sberbank wants to embark on an aggressive dividend increase campaign to span the next few years.

Russia’s Sberbank wants to raise its dividend aggressively. The bank is also looking at acquiring Austria’s Volksbank International. Sberbank is Russia’s largest lender, and wants to increase the dividend from 15% to 20% or 25% in the next few years. At the same time, Swiss Reinsurance, the second-biggest reinsurer in the world, has elected Renato Fassbind (former Credit Suisse CFO) to its board. Additionally, the 2010 dividend was approved, boosting it from 1 franc per share to 2.75 Swiss francs.

Other dividends increases are taking place in the U.S. and in Europe. Dow Chemical Co. is increasing it dividend to 25 cents a share for Quarter 2. The company credits strong earnings reports, indicating that things are improving. “Solid execution” by the maker of Otis elevators has prompted a dividend increase from 42.5 cents to 48 cents for United Technologies. Additionally, the new dividend for European company Repsol AGM is 1.05 euros per share — a significant boost from last year. At the general shareholder meeting, the chairman of Repsol also laid out a plan for future growth, called Horizon 2014.

After being rejected by the Fed to provide a dividend increase, BAC is trying to figure out its next step. Still embroiled in foreclosure scandal, the company is trying to attract investors. BAC insists it will resubmit a dividend increase proposal later this year. JPMorgan Chase, on the other hand, was given approval to raise its dividend from 5 cents a share to 25 cents a share. However, JPM CEO Jamie Dimon insisted that another increase probably won’t be seen for a little while.

With companies around the world raising dividends, it might be time to look into foreign dividend stock options.

Dividend Blog Roundup: Basically the Basics

Looking for some posts to help you get started with dividend investing? If you want to be a successful dividend investor, you need to have a firm grasp of some of the basic concepts. This week, we present some blog posts from around the web world of dividend stock blogs:

  1. Budgeting Problems? Use a Credit Card: You can’t build an income portfolio if you don’t have the spare money in your budget. The College Investor helps you solve your budget problems with help from credit cards (used responsibly, of course).
  2. The Usefulness of Asset Allocation: This is a slightly older post from Dividend Monk. However, it is very helpful for those who want to learn the “why” behind asset allocation. Learn how asset allocation can work for you.
  3. How we rebalance the Slow and Steady portfolio: Once you have the asset allocation figured out, you might need to rebalance on occasion. Monevator points out that you need different strategies for different portfolios. This post is about the Slow and Steady portfolio.
  4. How To Screen Dividend Stock Investments: Before you get started, it can help to have an idea of how to choose the best investments for you. The Passive Income Earner offers helpful advice and insights on choosing dividend stocks.
  5. Price to Earnings Ratio: One of the most basic concepts in stock investing is price to earnings ratio. Realized Returns offers you a primer on P/E, and discusses the merits of this measure as it is used in picking stocks.
  6. Using Bonds For Passive Income: If you are looking to move a little beyond dividends for income, you can consider bonds. Buy Like Buffett gives you an overview of bonds, and then tells you how to use them to cultivate income.
  7. Gold and Inflation: One of the goals you should have when it comes to protecting your portfolio is keep track of inflation. Expected Returns offers an interesting — and helpful — look at the link between gold and inflation.

Dividend Stock Investing: Going Foreign

Many investors fail to think of foreign stocks as they formulate an investing plan. However, investing in some well-chosen foreign stocks can be a good way to diversify your portfolio, and look for more earnings from different sources. Before investing, though, it is a good idea to do some research. Just investing in something because it seems like a solid choice, or because someone else gives you a tip, is rarely a good idea. You want to vet your foreign dividend stocks the same way that you vet U.S. dividend stocks.

Where to Find Foreign Dividend Stocks

Finding dividend stocks from other countries might be a little more difficult than identifying dividend stocks in the U.S. However, there are a few ways to go about looking for foreign dividend stocks:

  1. Start in the U.S.: You don’t have to go to foreign exchanges to find stocks from other countries. There are nearly 900 foreign stocks trading on U.S. exchanges. A little more than 1/3 of them pay dividends.
  2. See what you can find in foreign dividend ETFs: One of the best places to look for investing ideas is to look in funds. Dividend funds in the U.S. can provide you with a list of potential companies to invest in. The same is true of foreign dividend ETFs. Check out what is held in different ETFs, and you will find some possibilities. Of course, once you have the company names, it is up to you to research your choices, and decide which ones to invest in.
  3. Subscriptions: Of course, you can always make use of subscriptions and special newsletters. Take a look at our list of foreign dividend stocks.

As always, you want to make sure that you are performing your due diligence. There are plenty of smart dividend investments overseas that can provide you with a way to earn a stable income from dividends, while also adding an element of diversity. Remember: There is a whole world of investments outside the U.S. You might do well to explore other opportunities available to you.