The 8 Greatest Dividend Gains For 2011 (AWK, CSCO, XOM, FDX, GE, HPQ, JPM, WMT)

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Corporation are now sitting on billions and billions of dollars in their corporate treasuries.  They are keeping their share prices higher by returning capital to shareholders.  Most are certainly not hiring large numbers of workers. Companies began reinstating their dividends or raising their dividends in 2010.

Have you noticed how the Dow Jones industrial average is back at 12,000 again?  That is due to the dividend hikes, and more are on the way.

Close to one-third of long-term investor gains should come from dividends if you follow classic investing philosophy.  Dividends are now more popular than ever as investors seek out a steady flow of money as a hedge against the volatile stock markets.

Here are the eight greatest dividend increases you may see in 2011:

1. American Water Works Company, Inc. (NYSE: AWK) This has been a dividend growth stock in 2010 and that should easily continue in 2011 and the years beyond.  The current $0.88 annualized payout compares to earnings expectations for 2010 of $1.52 EPS and $1.62 EPS for 2011.  The dividend hike is not likely to be seen before the summer of 2011.  The current $0.22 quarterly payout is likely to rise up to $0.23 or $0.235 this year.  At $25.89, this one seems to hit new 52-week highs each week and it unfortunately has rarely given many great pullbacks for new investors to jump in at a bargain price.

2. Cisco Systems, Inc. (NASDAQ: CSCO) is almost certain to begin paying a dividend this year.  CEO John Chambers finally capitulated in 2010 for the calls to begin paying one.  It is very possible that the announcement could come around the upcoming quarterly earnings report due in February.

The indicated range was for a dividend yield of 1% to 2%.  Cisco generally prefers to buy back its stock to “return capital”which has done nothing in the last decade for the stock.  A recent $10 billion buyback plan was on top of what had  been $72 billion in share buyback authorizations.  It had spent a whopping $67.5 billion of that solely on share buybacks.  The only help is that it offset employee and acquisition stock option conversions in stock and the dilution that would have caused.

3. Exxon Mobil Corporation (NYSE: XOM) should be paying shareholders more than it is considering that it is America’s largest oil giant.  The company acquired XTO to expand its natural gas portfolio and it continues to repurchase stock by the billions.  The XTO acquisition was all in stock, so the company still has more than $45 billion between its cash and its long-term investment portfolio.

Exxon’s two most recent dividend hikes were only by two-cents per quarter.  The current $0.44 dividend comes to $1.56 per year, which generates a yield for new investors of 1.95%.  It is odd that oil companies are not larger dividend sources considering just how profitable they are.  Its third quarter sales were over $95 billion alone and it listed operating income of $12.9 billion with net income of $7.35 billion. The next Exxon dividend hike may not come before the second quarter as it has only has three quarters of the $0.44 payout.

4. FedEx Corporation (NYSE: FDX) may lag rival UPS by far, but most consider FedEx the go-to shipping carrier for rush items and overnight mail.  Amazingly, FedEx lags greatly in its dividend yield compared to United Parcel Service or UPS.  The wild card is that FedEx has had labor issues over unionization and possible higher compensation costs.  This  may be the single largest factor in the FedEx dividend decision, but at some point FedEx has to normalize this payout discrepancy.

FedEx has great growth opportunities as globalization continues, but this low dividend has been one of the single largest turn-offs to new investors who want income on top of capital gains. The company had raised its dividend by only a penny each year, but then came the recession and it kept its dividend at $0.11 per quarter for two years.  The company has now had three quarters of a $0.12 quarterly payout and that generates a paltry yield of only 0.50% versus a 2.6% dividend for UPS nvestors.  Founding CEO Fred Smith is going to realize that the dividend is embarrassingly low and needs to be doubled.