Investing

The Great Dividend Hikes Of 2011 Are Underway (CCL, OKE, FINL, JPM, WFC, BAC, CSCO, AAPL, GE, UTX, MMM, WPO)

The third on the banking list is Bank of America Corporation (NYSE: BAC) in the dividend reinstatement game. CEO Brian Moynihan has pledged to return to a higher dividend, but this will not likely be at the same rate of the two above.  The current payout is a paltry $0.01 per quarter and that compares to a $0.64 per quarter at the peak.  Thomson Reuters has estimates of $1.48 EPS for 2011, but BofA is well above the old 10% deposit threshold limit and it has more of a mortgage mess due to Countrywide. Still, BofA might be able to get its quarterly rate up to $0.04 or $0.05 at first with a promise of a higher dividend coming through time.

In the world of technology, there are two big ones.  One is for sure (we think) and one is hypothetical.  Cisco Systems, Inc. (NASDAQ: CSCO) is one a dividend we expect to hear about at the earnings report due in February.  John Chambers has capitulated to pressure to begin payouts and that means that shareholders can start getting that cash rather than just using all that money to make small acquisitions and to offset dilution of stock options from employees and the companies it bought. The Thomson Reuters estimates for earnings are $1.61 EPS in Fiscal July 2011 and $1.83 EPS for Fiscal July 2012.  The last indication was a 1% to 2% yield, so we will split the difference and give a static projection of $0.06 per quarter declared.

Apple Inc. (NASDAQ: AAPL) is now one that a dividend has to be considered regardless of the past stance where Steve Jobs has said that he is holding that cash for strategic growth opportunities.  The new factor is the health of Steve Jobs.  We wish him luck in his health battle of course.  At issue is what the “Job-less” management team would do if Steve Jobs suddenly cannot return to the daily grind or if things get worse for him and he has to leave permanently.  Sorry to bring that up, but it is a possibility that we can’t just ignore.  The new team might decide that unloading a large portion of its near-$60 billion cash arsenal would act as a huge cushion for shareholders who might not be as enthusiastic about the shares any longer.

General Electric Co. (NYSE: GE) already boosted its dividend in 2010, twice.  The second was a surprise on fast it came.  Earnings are due on Friday and the estimates for 2010 are $1.12 EPS and $1.29 EPS for 2011.  At issue is the continued improvement of GE’s financial operations and what will be at least one round of cash from Comcast in the NBC-Universal deal.  GE is buying back stock again and is trying to normalize its dividend.  As its stock rises, so will its dividend.  Take heed on the timing.  We would be utterly shocked if a hike comes in the first of 2011.  This would come again towards the end of the year in our mind and we’d look for that $0.14 payout to go to $0.15 or $0.16 per quarter if earnings visibility continues to improve.  Our guess is that the hike will come either at the same time or after the company repays Berkshire Hathaway for its preferred investment during the recession.

Another conglomerate is United Technologies Corp. (NYSE: UTX).  The company keeps raising its dividend payouts through time and it rolls in dividend hikes roughly after each five quarters. We have had four quarters of $0.425 and the prior payout was $0.385. If it keeps a steady and reasonable dividend hike rate, that could go up to $0.46 per quarter or $1.68 on an annualized basis.  This was actually just listed as one of our Large Caps at All-Time Highs from this morning.  The current yield is only 2.1% and 2011 estimates are $5.33 EPS from Thomson Reuters. The timing of this should be one more quarter.

3M Co. (NYSE: MMM) is yet another dividend grower that we expect to hear from shortly with news of a dividend hike.  Its annual dividend hikes have come regularly (only 52 years according to the company) and that means that the payout news is probably due at the earnings release next week.  The $0.525 per quarter is likely to go to $0.54 and that is still only one-third of its earnings expectations for the year as Thomson Reuters has 2011 estimates at $6.11 EPS.  Word has been out that George W. Buckley is leaving and the announcement could be meant to offset any impact there.

You might wonder if there are more dividend hikes other than just banking, tech, and conglomerates coming on the horizon.  The answer is a resounding “YES!” on that front.  More dividend hike projections for 2011 will be made from us in the coming days.

During the writing and editing process of this piece, even Washington Post Co. (NYSE: WPO) boosted its quarterly dividend to $9.40 per year from $9.00 per year paid out at $2.35 per quarter rather than $2.25 per quarter.

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JON C. OGG