It seems that investors suddenly have grown to dislike dividend-paying stocks, if you have been watching many of the riskier, high-dividend and high-payout sectors while interest rates have been on the rise. The notion that investors are turning away from dividends is simply silly and likely is being over-reported at a time when there is little dividend news. The summer is a slow time for dividend news, but 24/7 Wall St. is featuring five big-cap stocks that could double their dividends.
For starters, these should be considered companies that can “at least” double their dividends. Some of these industry giants are way behind their peers. This group is much different from our self-named Dividend Sinners, which refuse to pay dividends. We considered companies that already were paying dividends and have ample resources to grow their payouts. We included cash balances, cash flow, percentage of income paid out and dividends from rivals.
We also chose only one stock from each sector, and these had to be in the S&P 500 Index so that we kept a tally of the large companies. If companies who refuse to pay dividends are Dividend Sinners, and if companies raising their dividends year after year are considered Dividend Aristocrats, then these companies should maybe be considered Dividend Misers.
These are the five companies that should at least double their dividends: Cigna Corp. (NYSE: CI), FedEx Corp. (NYSE: FDX), Mastercard Inc. (NYSE: MA), Oracle Corp. (NASDAQ: ORCL) and Textron Inc. (NYSE: TXT).
Cigna Corp. (NYSE: CI) is supposed to be one of the health care insurance survivors, yet it is a true dividend laggard. The yield here is a mere 0.1%, and our take is that the company can double its payout multiple times over. The $19 billion insurer pays a $0.04 dividend, which is only paid annually rather than quarterly. Cigna raised its earnings guidance back in May to a range of $1.735 to $1.865 billion, or $6.00 to $6.45 per share for this year. With more than $3 billion in cash, this company’s earnings payout ratio is too small to even count. Here are the approximate yields from rivals: industry-giant UnitedHealth is closer to 2%, WellPoint is close to 1.9% and both Aetna and Humana are about 1.3%. Cigna does at least pay a dividend, and the company may be saving its cash for an acquisition, but at some point its investors likely will face health care reform exposure by looking elsewhere. Cigna could double its dividend, followed by another two doublings of its dividend, and its yield would still lag peers.