Most investors have discovered that earning less than 1% per year in short-term Treasuries or even less than 2% out in the 10-year Treasury is no fun. Longer-dated Treasury bonds also are proving that investors are taking on valuation risks they had not considered. So 2012, after 2011, has been a great year for dividend and income oriented investors. Almost every company with earnings quality is hiking its dividend to entice investors to go into stocks rather than Treasuries.
It seems as though there is a belief that the bulk of the big dividend hikes generally come during the first few months of a year, when companies are issuing their new longer-term guidance. That is only partially true, and investors have to know that many dividends get announced in the second half of the year, or even in the final quarter of each year. Now that Cisco Systems Inc. (NASDAQ: CSCO) has really hiked its payout and now that Dell Inc. (NASDAQ: DELL) has finally succumbed to our call to begin a big payout, we wanted to see which other big dividend hike expectations should be coming down the pipe between now and the end of 2012.
24/7 Wall St. expects some of these hikes to be significant and some of them may be imminent. Be advised that not every one of these payouts should be chased just because the dividend is on the rise. Some caution might even be prudent in some of these because their implied current dividend yields have contracted with a low-rate or no-rate policy from Ben Bernanke. Many are also at premium P/E ratios now as well.
These are the 12 big dividend hikes expected by 24/7 Wall St. between now and the end of 2012.
Altria Group Inc. (NYSE: MO) is due to get a dividend hike any time now, particularly since it had a very positive debt tender to lower its cost of capital. Literally it could be in the coming days, if its history is any barometer. We have been shocked at how much investors have chased this one, but our take is that the enthusiasm, until lately, has to be in anticipation that the $0.41 per quarter dividend will go up to $0.44 or even $0.45. Altria has to raise its payout, by our take, because its yield is now only 4.7%. Does it seem fair to get paid the same by Big Tobacco with its sin business (and long-term business risks) as you get from the two largest telecom players in America?
By the way, the old international play via Philip Morris International Inc. (NYSE: PM) is due for an imminent dividend hike as well. So far, its dividend hikes have been announced in the first half of September.
American Electric Power Co. (NYSE: AEP) only hiked its dividend 2% last year. But AEP remains very shareholder friendly, is an active lobbying company and is still on our list of favorites if we had to buy a utility stock after the formation of a dividend bubble. The $0.47 per share quarterly hike could be raised to $0.50 per share, for more than a 6% dividend hike, without paying much more than 60% of its earnings out. But it is diversifying away from fossil fuels and has cap-ex costs coming. Perhaps it can jump on the debt refinancing bandwagon to help out its bottom line.It has had three hikes in a row after hitting the hike-pause button during the recession, and AEP has paid a cash dividend on its common stock every quarter since 1910.
Amgen Inc. (NASDAQ: AMGN) may be the largest biotech company listed on a stock exchange, but the reality is that Amgen is now more like a pharmaceutical giant which is managing to still grow. The last dividend hike was in December and that went to $0.36 per quarter from $0.28 per quarter. Shares have risen by about one-third since the last dividend hike, so failing to raise the dividend would arguably be a dividend cut for new investors compared to a year ago. Amgen might prefer to pay down part of its $21+ billion in debt, but it may be forced into a hike. One word of caution here: the announcement might come in December but it might not get paid until later on the first quarter of 2013.
General Electric Co. (NYSE: GE) has had three consecutive quarters of a $0.17 payout. The problem in expecting a dividend hike is that GE has bumped its dividend up four times since June of 2010, and the $0.17 dividend payment of today compares to a peak dividend of $0.31 per quarter from back before the wheels came off the economy. What is different today is that GE is now finally getting a dividend from its finance unit again, and its shares have had a hard time going and staying much above $20.00. If GE is going to bump up its payout, then it is a signal that earnings growth will support paying out 50% of its pretax income.