Companies institute or raise dividends for several reasons. One, the most striking example of which is Apple Inc. (NASDAQ: AAPL), is to return money to shareholders from balance sheets laden with cash. Another major reason is that a company’s stock has not risen much for several years. A new or higher dividend makes shares in these public corporations more attractive, particularly in climates like the current one in which fixed income yields are relatively low.
Yet another set of public firms with dividend issues are those that have posted lower-than-expected earnings and will struggle to meet forecasts over the near term. These companies add dividends or move them higher to hold current and perhaps nervous investors and, on limited basis, bring in new ones who have an appetite for short-term risk.
Five large companies have reported earnings that disappointed Wall St. In most cases, their shares have suffered. These public corporations are left with few options to make themselves attractive other than to raise dividends. And each has the cash to do so.