General Electric began its dividend recovery in mid-2010 and it has technically raised its payout three times since mid-2010. The $0.15 payout now compares to a $0.31 payout before Jeff Immelt and crew decided to chop the dividend down by two-thirds so that it could save cash and liquidity during the recession. Our take is that a normalized dividend goal in the new climate is ultimately $0.20 per quarter per share and it is going to take years to recover back up to that $0.28 before the final dividend hike to $0.31 in late-2007. GE’s yield today is 3.7% and its payout is close to 40% of expected income in 2012. The $16.10 price compares to a consensus price target of $20.80.
Home Depot has been raising its dividend despite some serious economic challenges during and long-after the recession. The current payout of $0.25 will have been paid out for four consecutive quarters at the end of November so another hike, if it comes, would come as an announcement in early 2012 if the payout is hiked. The payout here is close to 40% of income and the stock at $38.00 is very close to the consensus price target of $39.80.
Hewlett-Packard is in a state of flux right now and it already raised its payout from $0.08 to $0.12 as the first real dividend hike in years. HP has only two quarters of a higher payout behind it and our take is that the company may only marginally raise its payout under Meg Whitman in 2012 as it gets its house back in order. With shares around $27.50, the stock has bounced handily and the consensus price target is just over $30.60. Making earnings predictions is difficult during a turnaround or restructuring of this size, but HP’s payout is barely 10% of its expected earnings. Room to Raise? Yes! Should it? Maybe.
International Business Machines was a surprise $10 billion (and then some) Buffett holding and Big Blue has just paid out its third quarter of $0.75 in dividends. The company has been aggressive in its payouts and in its buybacks. The Old Man of Omaha believes more dividend hikes are coming this way, which would be welcomed by new buyers since the dividend yield is only 1.6% since the $187 price compares to a 52-week high of $190.53 and since its consensus price target is $195.30. IBM’s current $3.00 annualized payout is barely 20% of the 2012 expected earnings and the company is looking to grow earnings to $20.00 per share by 2015. Buffett thinks higher payouts are on the way whether there will be a new CEO or not.
Intel has been very aggressive in boosting its quarterly payouts to shareholders and if you include the first cycle payout hike in early 2010 after the recession it has already hiked its quarterly payouts three times. Intel pays out about one-third of its expected income. Intel’s most recent price of $25.00 is after Warren Buffett disclosed a large stake and the consensus price target is close to $26.80 on the stock. Even though shares are now within 1% of a 52-week high, Intel still offers a 3.4% dividend yield as of today.
Johnson & Johnson may have had problem after problem in quality control, but the consumer products, drug and medical products maker is almost three-quarters into its $0.57 per quarter in payouts. The current payout ratio is under 44% of expected 2012 earnings and it seems that making acquisitions will have to be bolt-on deals going forward rather than transformative deals. With shares around $64.60, the consensus price target is currently about $72.85 and the current dividend yield is about 3.5%.
JPMorgan Chase is already three straight quarters into its $0.25 payout per quarter after it had to slash its payout to $0.05 after previously having been at $0.38 before the recession peak. It will be years before we see its dividend reach $0.28 again, but this one may easily able to raise its payout compared to peers. Jamie Dimon also has hinted at higher payouts ahead but we still think it will be a gradual raise rather than a return to its old payout instantly. The company’s old pattern was a raise of about 10% to 15% in the past before the recession, and the current payout ratio is still well under 25% of expected income. Do analyst price targets count in banks? Not by our take today.
Kraft Foods is one which has had the same $0.29 per quarter payout since mid-2008. The food giant’s payout now seems to depend on how its restructuring progresses and with that we are taking a pass on making any bold dividend predictions about Kraft. The $1.16 annualized payout on a static basis represents about 45% of expected 2012 earnings before considering any restructuring.
McDonald’s just gave its long-term update to show how intends to keep growing through time in same-store and total sales and in income. The Golden Arches also just boosted its dividend in September by 15% to $0.70 per quarter for an implied dividend yield of right around 3.0%. The $94.00 price compares to a consensus target of nearly $100.40 and its income payout is about 50% of expected income in 2012.
3M Company is soon to be at its fourth consecutive payout of $0.55 per quarter and this conglomerate has raised its payouts before, during and after the recession whether other conglomerates did the same or not. At $81.30, the consensus price target is $90.41 and the $2.20 annualized payout of today is only about 35% of expected 2012 earnings. With a 2.7% yield, we would look for a dividend hike to be incremental rather than massive in the months ahead.