2010 is turning out to be the year that big companies return to hiking dividends. In just the last week we have seen dividend hikes from Archer Daniels Midland Company (NYSE: ADM), Boardwalk Pipeline Partners, LP (NYSE: BWP), Colgate-Palmolive Co. (NYSE: CL), Hasbro Inc. (NYSE: HAS), Hershey Co. (NYSE: HSY), L-3 Communications Holdings Inc. (NYSE: LLL), and Time Warner Inc. (NYSE: TWX).
We have covered these with an outlook for what lies ahead for each these companies in their dividend rates and as a starting point for other big companies we think will hike their dividends.
Archer Daniels Midland Company (NYSE: ADM) continued with its policy of an annual dividend hike. The new dividend of $0.15 is up from $0.14 per quarter. We went back to see its policy of dividend hikes, and this has gone on for years. The yield based on Friday’s price is 1.96%, which some sites are rounding up to 2.00%. There is more than enough dividend coverage, and as far as whether the dividend hikes will continue… let’s just say that ADM could probably double its dividend in the coming years. At $30.61, its 52-week trading range is $23.13 to $33.00.
Boardwalk Pipeline Partners, LP (NYSE: BWP) is another recent distribution increase from late last week. As a reminder and as with the field of LPs in oil and gas, this is a distribution rather than just an outright dividend. It may seem odd that a natural gas interstate pipeline sees enough clarity to hike a distribution after the volatility we have seen in the Nat-Gas markets, but this actually just brings the dividend closer to the distribution yields of many oil and gas pipeline LP peers. This bump from $0.48 to $0.50 per quarter gives an implied yield of 6.9%. At $28.99, its 52-week range is $19.15 to $31.44.
Colgate-Palmolive Co. (NYSE: CL) is an easy dividend hike because its consumer products make it close to recession-proof. The surprise wasn’t that a dividend hike came, it was by how much. The bump was 20% to $0.53 per quarter. We have over a decade of dividend hikes here and this is actually not the highest payout raise. Also announced was a 40 million share buyback plan, which comes to about 8% of the outstanding shares. The new yield is 2.67% and at $79.26 it has a 52-week trading range of $54.51 to $87.39.
Hasbro Inc. (NYSE: HAS) has decided that the toy business is likely to hold its own, and that the company can hold its own in a competitive field. It raised its dividend by a surprising 25% to $0.25 per quarter. The new effective yield is now 3.25% At $30.80, its 52-week trading range is $21.14 to $32.75. The company still has more than ample dividend coverage, and this may put pressure on Mattel to bump its annual dividend later this year.
Hershey Co. (NYSE: HSY) may have been an obvious dividend hike. After all the noise that was made over whether it would or could participate in a Cadbury-Kraft deal and after being classified as a dead money stock for years this just made sense. This brings up the issue that the company might not be about to pounce on another opportunity despite the company’s intention to look formergers. Its quarterly dividend will now be $0.32 per quarter for a 3.45% (3.427% actually). It had paid $0.298 per quarter over the last ten quarters. At $37.35, its 52-week trading range is $30.27 to $42.25. Five years ago this was a $60 stock.
L-3 Communications Holdings Inc. (NYSE: LLL) is not a usual stock to visit for dividend hikes in the minds of most investors, at least not on the surface. The defense sector company is into surveillance and reconnaissance systems. The amount the dividend was raised also seems high as it was a 14% payout boost to $0.40 per quarter from $0.35. The company has actually been raising its dividend by a handy amount for what is effectively each of the last six years. After looking at an $8.15 expected earnings per share figure for 2010, there is no reason to believe that the payout growth is going to slow down. There is also still much room to catch up to some aerospace/defense sector peers. The new yield is 1.9% based on an $84.24 share price, and the 52-week trading range is $57.12 to $90.36.
Time Warner Inc. (NYSE: TWX) may be in a nomans land when it comes to analyzing dividends now that it has spun AOL out of its operations. But the media giant hiked its dividend by about 13% to $0.2125 per quarter for an annual $0.85 payout. At $27.03, the yield here is now 3.1%. We also have an adjusted 52-week trading range of $17.81 to $32.85. We’ll have to double-check this, but that 3.1% looks like a sector high for dividend yields.
The obvious notion here is that many companies are hiking their payoutd. This might not be a return to the gold boom days, but companies are lifting their payouts now. Stay tuned Monday for our new list of large companies we expect to making big dividend hikes this year. You can also join our free email distribution list that goes out each morning with key analyst calls, day trader alerts, dividend changes, IPOs and secondary offering, Buffett and other guru news, and more.
JON C. OGG