Unusual Dividend Tracking (CAT, CLX, MSFT, TGT, TSCM, VMC, ACAS, IAF)

Dividends in general are used as the historic underlying measurement of companies and their abilities to stay profitable at current levels.  Today and last night we have seen some rather unusual dividend news or “in addition to the dividend news” from the likes of Caterpillar Inc. (NYSE: CAT), Clorox Co. (NYSE: CLX), Microsoft Corp. (NASDAQ: MSFT), Target Corp. (NYSE: TGT), TheStreet.com, Inc. (NASDAQ: TSCM), and Vulcan Materials Co. (NYSE: VMC).  American Capital Ltd. (NASDAQ: ACAS) takes the cake for unusual dividends, and the payout at the Australia Equity Fund Inc. (AMEX: IAF) closed-end fund also borders one the unusual.

Caterpillar Inc. (NYSE: CAT) gave a forecast last night that still shows an expected rebound.  Otherwise, the $50 billion mark in sales within five years would not have been forecast.  That $0.42 dividend was maintained, yet Caterpillar was one of the companies in late 2008 which we and many felt was at-risk for cutting the quarterly payout rate.

Clorox Co. (NYSE: CLX) raised its dividend by almost 9% to $0.50 per share from $0.46 and said it is on track to show numbers in-line with previous guidance for fiscal 2010.  The range of $4.00 to $4.15 EPS compares to $4.16 estimates.

Microsoft Corp. (NASDAQ: MSFT) is not an unusual dividend at $0.13, because at current share prices that represents only about 2.2%.  What seems unusual on the surface is that the company announced that shareholders representing at least 25% of shares can call a special meeting.  That formal notion will come up for vote at the shareholder meeting in November.

Target Corp. (NYSE: TGT) must not care too much about its recent proxy fight nor must it be too concerned about retail sales ahead.  The retail giant hiked its dividend to $0.17 from $0.16. Analysts are projecting $2.85 EPS for fiscal January 2010, so the company’s dividend coverage ratio is over 4 and more than sustainable.

TheStreet.com, Inc. (NASDAQ: TSCM) is still easily able to maintain its $0.025 quarterly dividend.  This comes to a 5% yield today, and is interesting because the few analysts which follow this one are expecting the losses to continue both this year and next.  Either the company thinks it will lose less money than Wall Street expects, or it does not mind picking away at its $76+ million in cash.

The most unusual dividend in the entire week has been the mystery at American Capital Ltd. (NASDAQ: ACAS), where a massive dividend of $1.07 was declared.  This will either be paid in cash or in stock.  The stock is up over 20% today, but based upon a $2.76 close yesterday this one is now paying a whopping 38% yield.  After today’s gains, the yield is still north of 30%.  Be advised, this dividend is higher than the entire earnings estimates for 2009 and 2010 and the company still has significant debt.

Vulcan Materials Co. (NYSE: VMC) cut its dividend in half, but said it was increasing its shares by about 10% via a $500 million estimated share offering.  This has taken a 6% bite out of the shares today.

There is also the case of the Aberdeen Australia Equity Fund Inc. (IAF), which just declared a quarterly distribution of $0.23 for the quarter.  While this still would get close to 10% in yield and while its dividends fluctuate wildly from quarter to quarter, this is actually the lowest payout since late-2006 and marks the fourth consecutive dividend cut.  With a 52-week range of $5.15 to $16.77, it seems this fund has been a serious dividend yielding instrument for the investors in the $200 million closed-end fund.

Jon C. Ogg
June 11, 2009