Dividend stocks may have come under some pressure of late, but this is due to the demand for high dividends getting a bit crowded and ahead of the election. It also does not help that the taxation of dividends may be substantially different for those who can afford to buy stocks based on whether Obama or Romney wins as President. We have seen a continued trend for companies raising their dividends regardless of what the tax rates may be and we expect that to continue from the strong companies ahead.
24/7 Wall St. is still expecting five big dividend hikes, where investors can expect a higher payout announcement before year-end. Our screened large companies should generate dividend hikes from Amgen Inc. (NASDAQ: AMGN), AT&T Inc. (NYSE: T), General Electric Co. (NYSE: GE), Oracle Corp. (NASDAQ: ORCL) and The Walt Disney Co. (NYSE: DIS). We have outlined when we expect each hike, as well as how much the hike likely will be and what that translates to now.
Amgen Inc. (NASDAQ: AMGN) is due for another dividend hike before the end of the year. It may be a bit dangerous to expect too much of a hike, and we would caution that the payout may not come until February of 2013, even though the dividend declaration is likely to take place during mid-December. It is important to keep in mind that Amgen is one of the very few large biotechs that pays a dividend, and our take is that Amgen’s prior hike to $0.36 per quarter from $0.28 is not likely to be repeated, by the same dollar amount nor by the same percentage. Still, a $0.40 payout would generate a yield of close to 2% here, and we are comfortable with that.
AT&T Inc. (NYSE: T) has lifted its dividend year after year for its common stock holders. This has traditionally been announced in mid-December, and it seems likely that this will be the case again. We believe that the declaration may come in December, but the formal payout may not formally take place until right after the first of the year. Keep in mind that AT&T’s common stock is now yielding about 5%, so AT&T does not have to get too ambitious on its payout adjustment. AT&T has been raising its dividend by one cent each year, so the new payout will probably be $0.45 per quarter.
General Electric Co. (NYSE: GE) has seen its growth normalize, but it still has been able to generate high return on capital, and the biggest conglomerate is now receiving a dividend from GE Capital again. We are looking for a normalized dividend hike in a December announcement rather than any large step-up dividends, now that its yield has normalized after it picked its dividend up from the recession. GE’s dividend hike likely will be paid in late December, and its current yield is about 3.2%. The $0.17 payout per quarter is likely to move to $0.19 in this coming hike, but keep in mind that the prior dividend peak, when GE shares were much higher, was $0.31 per share.
Oracle Corp. (NASDAQ: ORCL) is underperforming large software players now with its dividend of only about 0.8%. Larry Ellison recently has all but publicly sworn off making any new large acquisitions for the next couple of years. What he did do was indicate that the dividend would rise gradually and steadily through time. Unfortunately, that $0.06 per common share payout is just incredibly unimpressive, and Oracle is worth close to $150 billion now. With its earnings estimates at $2.65 per share for 2013, and with more than $30 billion in cash and short-term liquidity, Oracle genuinely needs to get with the ballgame here by raising its payout. With an annual shareholders meeting due shortly, we have Oracle on dividend hike alert, even if Mr. Ellison may not capitulate just because he needs to. As Oracle is the least predictable and is behind on the dividend game, Oracle is the least certain of these five big dividend hikes.
The Walt Disney Co. (NYSE: DIS) just announced that it is spending some $4 billion to acquire Lucasfilm for the rights to the Star Wars franchise. This will not get in the way of a dividend hike, by our take. We would note that after Disney’s 50% payout boost to $0.60 per share in 2011, the next almost certainly will not be of the same magnitude. Our take is that the dividend will still go up by 25% or so, and that will allow it to yield about 1.5% for shareholders, based on today’s share price. One last reminder here is that Disney pays out an annualized dividend rather than quarterly.
Once again, these dividend hikes are based on when the companies are likely to announce their hikes.
JON C. OGG