Don't look now, but we're fast approaching the holiday season. For many, thoughts turn to gifts given and received.
And what gift do income investors consistently wish their companies would give them? A dividend raise, of course. Over the past few weeks, numerous dividend stocks have announced payout hikes.
Read on for three heavyweights that have declared meaningful dividend raises in advance of the end-of-year festivities.
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1. Texas Instruments
Perhaps it's a sign of our times that it's no longer unusual for a tech stock to hike its dividend payout. Certain big companies in the sector have been on the market long enough now and have managed to prove that they can generate both profits and cash reliably enough. Case in point: Texas Instruments (NASDAQ: TXN).
The powerhouse analog chipmaker raised its quarterly payout by 17% to $0.90 per share a few weeks ago. This relatively generous raise is entirely in character for a company that consistently beefs up its distribution by a healthy amount around this time every year.
It has a pretty good reason to feel flush. Although the company was affected by the U.S.-China trade dispute, it is holding up better than some of its tech sector peers. Net profit was down in its most recently reported quarter, but not by a scary amount (it fell by 7%), while margins have lately been in the mid-30% range. Trailing 12-month free cash flow, meanwhile, inched up by 3% in said quarter, giving some room for that dividend hike.
Texas Instruments' upcoming payout is to be disbursed on Nov. 18 to stockholders of record as of Oct. 31. At the stock's most recent closing price, the new dividend would yield 2.8%.
2. A.O. Smith
Like Texas Instruments and its analog semiconductors in the tech industry, A.O. Smith (NYSE: AOS) -- with its water heaters and boilers -- isn't operating in the most cutting-edge segments in its business.
What this veteran manufacturer is doing, though, is returning cash to its stockholders on a regular basis. It does this by consistently generating high cash flow, which in turn comes from slow-but-sure market-share gains in its core activity of boiler manufacturing. This helps make up for a market that is generally quite steady and not exactly high growth.
A.O. Smith also aims to grow by increasing its presence abroad, particularly in China. That's a tough call these days given the macroeconomic difficulties in that country -- a slide in China sales is dinging overall revenue and profitability. Still, the company remains in the black and has more than enough free cash flow to keep pushing its dividend higher.
Last week, A.O. Smith bumped its dividend by 9%. It will now pay a quarterly distribution of $0.24 per share. This will be handed out on Nov. 15 to investors of record as of Oct. 31, and it yields over 2%.
Some of the best sources for dividends over the years have been utility stocks since they tend to produce very steady and predictable financial results. They also tend to throw off a lot of cash.
So say hello to Ameren (NYSE: AEE), a provider of electricity and gas throughout 64,000 square miles of Missouri and Illinois. In what constitutes a healthy raise for the typically very cautious and conservative utility sector, the company lifted its quarterly dividend -- the sixth year in a row it has done so -- by 4% to just under $0.50 per share.
Due primarily to a summer that was milder than last year's, electricity consumption -- and therefore revenue and profitability -- were down in the company's most recently announced quarter. Yet if we zoom out a bit, we see that the company has managed to increase its margins into double digits of late. It seems that what Ameren terms its "significant investment in energy infrastructure" is paying off.
There is still plenty of time to take advantage of its dividend raise, as it doesn't kick in for quite a while -- the first payout of the new amount will be dispensed on Dec. 31 to stockholders of record as of Dec. 11. It would yield 2.6% at the current share price.
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