4 Big Dividend Increases to Capture Now

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This year, S&P 500 companies are expected to pay a record $339 billion in dividends .  That's an 8.9% increase over the $312 billion in dividends paid in 2013.

But why settle for an 8.9% increase? If you're into dividend growth, think big - think double-digit big.  Four familiar, established S&P 500 members have already announced big dividend increases this year. When cobbled together, these companies provide a tidy yield on a well-branded selection of stocks. I could argue these stocks fit into any income-investor's portfolio.

I'll start with the eye-popper, Boeing (NYSE: BA ) (2.3% yield) , whose dividend payout rocketed 49% to $0.73 a share with the first-quarter payout.  The aerospace giant's management must have had an epiphany. Over the prior five years, annual dividend growth averaged a little over 4%.


Of course, to expect 49% annual dividend increases in perpetuity is to expect annual visits from Santa Claus. On the other hand, double-digit dividend increases through the rest of the decade is to engage reality. I say that because Boeing boasts a huge backlog of jet orders, valued at over $400 billion.  It also boasts a bulging cash account, which divides to $20 a share, that easily services a rising payout.

The Ford Motor Company ( F ) (3.3% yield) is another company embracing its dividend with gusto. Last month, Ford's board of directors approved a 25% hike in the quarterly dividend, to $0.125 a share.  This from a company that eliminated its dividend and nearly perished during the 2008-2009 recession.

Thanks to a government handout, a new management team, and a revamped portfolio of stylish vehicles, Ford has turned lemons into a first-rate dividend grower: Over the past 30 months, Ford has more than doubled its dividend payout.

I don't expect another 25% increase from Ford next year, but 8% - to - 10% annual increases is reasonable, at least for the next few years.

Like the Ford Motor Company, the Dow Chemical Company ( DOW ) (3.2% yield) had to reset the dividend clock after the last recession. Dow's quarterly dividend was slashed to $0.15 a share from $0.42.  Since then, the chemical giant has doggedly clawed back lost ground. The latest claw-back increased the quarterly payout 15% to $0.37 a share.

Again, expectations need to be tempered. Since Dow reestablished dividend growth in 2011, the rate of growth has sequentially trended lower.  But 10% annual increases, the historical norm, are entirely within Dow's payout capability.

Once the bell of the ball, Cisco Systems ( CSCO ) (3.4% yield) is today one of Cinderalla's nasty half-sisters. The company has simply been unable to gain traction: Sales across most of its divisions have either stagnated or declined.

Nevertheless, Cisco still has a lot to work with. The company controls 53% of the router market, and 59% of the Ethernet switching market.  Selling routers and Ethernet switches generates $47 billion in annual sales. These sales, in turn, generate a lot cash. Cisco sits atop a $47-billion cash account, which  covers the 11.7% dividend increase, and the full dividend itself, many times over.

To be sure, Cisco is going nowhere fast, but investors should expect to receive at least 10% annual dividend increases for years to come. Continual dividend growth, in turn, will eventually lead to share-price growth.

These four dividend growers are unlikely to set the world ablaze with their business prospects. But if you're an income investor seeking safe dividend growth, these companies could set your portfolio yield ablaze.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.




This article appears in: Investing , Investing Ideas , stocks

Referenced Stocks: F , DOW , CSCO

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