The bull market is nearing its sixth year, and companies have increased their dividends and stock buybacks as the market keeps hitting new highs. Several Dow Jones Industrial Average (DJIA) components have recently raised their dividends, and 24/7 Wall St. has projected five more Dow stocks that should have dividend hike announcements before the Christmas break and before 2014 comes to an end.
Please note: This story has been updated to address each dividend hike announced.
We have analyzed and predicted many dividend hikes for years now, and these five dividend hikes should be imminent. Any lack of a hike, or a rate less than our expectations, likely would not be viewed positively by investors. One caveat to consider on these expected dividend hike announcements is that not all of them will be paid out in this calendar year. Still, we have predicted by how much each dividend should be expected to be raised.
Also included in this analysis are projected earnings per share for 2014 and 2015. These will allow investors to see how the new projected payout compares with the underlying earnings expectations. Unfortunately, that earnings breakdown does not include nor does it consider earnings that are generated overseas, so it also does not include a domestic cash analysis versus cash that is kept overseas that could support a dividend on top of earnings.
We are optimistic for these dividend hikes, but readers might want to have more realistic expectations this year than for a few of the massive dividend hikes seen at the end of 2013. While investors also love stock buybacks, the best news about dividend hikes measuring corporate performance and corporate governance is that a higher dividend generally implies that management sees core earnings strength enduring for years ahead.
It will be more than interesting how General Electric Co. (NYSE: GE) handles an expected dividend hike when you consider that the GE of 2015 and beyond looks much different than GE has in two decades. What acts as a wild card is Synchrony Financial (NYSE: SYF), because the spin-off is expected to be completed in 2015. That could mean that GE could keep its dividend the same and still be able to claim that it increased the payout when you consider the Synchrony shares and potential dividend there. General Electric is also the top yielder among DJIA conglomerates at about 3.3%, so there just is not much pressure on Jeff Immelt and his team to push that much more cash out the door to shareholders. Our guess is that the $0.22 per quarter common stock dividend will be raised to $0.23 per quarter — or $0.92 annualized per share.
UPDATE: The boost to GE’s dividend was right in line with our expectations.
General Electric shares are back under $26 again on lower energy prices, and its stock has a consensus analyst price target of $29.08 and a 52-week trading range of $23.69 to $28.09. The conglomerate currently has a dividend yield rate of 3.3%. GE expects earnings per share of $1.67 in the 2014 full year and $1.80 in the 2015 full year.
AT&T Inc. (NYSE: T) finds itself caught between a rock and a hard place due to several issues. It has raised its annualized dividend for 30 consecutive years and is one of the dividend aristocrats, yet AT&T is in the midst of a price war, it is making the acquisition of DIRECTV (NASDAQ: DTV), it is making changes to its portfolio and the hope is that its capital spending will be lower in 2015 despite expected spectrum bidding. The last dividend hike was barely 2% (to $0.46 from $0.45 per quarter). All that 24/7 Wall St. is expecting is another one-cent hike to an annualized rate of $1.88, which is somewhat supported by a positive analyst view from Credit Suisse.