The importance of dividends in stock and portfolio performance cannot be focused on enough for investors looking to have a successful and solid portfolio. As we have written in the past, it is not necessarily the size of the dividend, but the quality. S&P 500 dividend payments surpassed their previous pre-crisis peak by the middle of 2012, and aggregate S&P 500 dividends per share were 22% above the peak by the end of 2013. The analysts at UBS expect S&P 500 dividends to grow at least 12% this year.
The UBS Dividend Ruler stocks list is one of the research reports that we keep close tabs on for additions, deletions, and updates on their top stocks to buy. In a new research piece, UBS points out that 2014 is shaping up to be yet another year of robust dividend growth, for both the S&P 500 and its Dividend Ruler stock list. As of the end of February, 13 companies on the stock list have raised their dividends by 11% on average.
We wanted to highlight stocks on the list that have already raised their dividends for shareholders this year.
British American Tobacco PLC (NYSE: BTI) announced just last month a 6% dividend increase. The company’s predictable cash flow translates into very consistent dividend growth. The stock got a nice lift when recent tobacco company merger chatter started making the rounds. Investors are paid an outstanding 5.9% dividend. The Thomson/First Call price target for the stock is posted at $123.50. The stock closed Tuesday at $107.12.
Coca-Cola Co. (NYSE: KO) is one of the most recognizable brands in the world, and the biggest shareholder is Warren Buffett. The company raised its dividend by 9%, its 52nd annual dividend increase. While sales growth has been sluggish recently, UBS believes the company is taking the right strategic action to reinvigorate revenue growth. Investors are paid a solid 3.2% dividend. The consensus price target is $43.83. Shares closed Tuesday at $38.49.
Diageo PLC (NYSE: DEO) is the world’s leading producer of branded premium spirits, wine and beer (Guinness Stout). This company has built an $80 billion market capital empire that leads the alcoholic beverage industry. This firm also owns 34% of the premium champagne and cognac maker Moet Hennessy. In January, Diageo announced a 9% hike to its interim dividend, driven by its forecast that long-term earnings would grow at a similar pace. Growth is underpinned by their market-leading global spirits brands and rising consumer wealth in emerging markets. Investors are paid a 2.1% dividend. The stock closed Tuesday at $122.96.
Dominion Resources Inc. (NYSE: D) has been on fire as investors’ demand for utilities has grown this year. The company raised its dividend by 7% in January, and the UBS team thinks that the company’s natural gas infrastructure should drive solid earnings and dividend growth. Investors receive a 3.5% dividend. The consensus price target is pegged at $$68.53. The stock closed Tuesday at $68.05 a share.
Nordstrom Inc. (NYSE: JWN) is one of the leading fashion specialty retailers based in the United States. Founded in 1901 as a shoe store in Seattle, today Nordstrom operates 260 stores in 35 states, including 117 full-line stores, 140 Nordstrom Racks, two Jeffrey boutiques and one clearance store. In February, Nordstrom raised its dividend by 10%. The company’s strong square footage growth profile and best-in-class e-commerce business should drive solid dividend growth going forward. Investors are paid a 2.1% dividend. The consensus price target is $64.68. Nordstrom closed Tuesday at $62.28.
Northeast Utilities (NYSE: NU) serves 3.6 million electric and natural gas customers in three New England states. The company notes that, “The region’s renewable and carbon mandates are not achievable under the current market framework.” That is why it is building transmission lines to connect hydropower in Canada to the northeast markets it serves, among other projects. The combination of transmission assets and renewable power will put Northeast Utilities in a solid position when it asks for rate hikes. Both tend to be viewed positively by regulators. The company raised its dividend 7% in February. Investors are paid a 3.6% dividend. The consensus price target is $46.27. The stock closed Tuesday at $43.36.
Occidental Petroleum Corp. (NYSE: OXY) drew huge investor praise and support when it recently announced that it was spinning off its California assets into a separate company. Occidental has faced calls from Wall Street and activist investors to split its U.S. business from its international operations, with analysts valuing the assets at a range of between $19 billion to $22 billion. The fact that the company is not an integrated is seen as a huge positive. Occidental raised its dividend by 13% in February. This marks the 12th consecutive year of dividend growth. Shareholders are paid a 3% dividend. The consensus price target is $107.20. The stock closed Tuesday at $96.41 a share.
United Parcel Services Inc. (NYSE: UPS) is expected to have the same global growth tailwind that will benefit rival FedEx. The company is a global leader in logistics, offering a broad range of solutions, including the transportation of packages and freight, the facilitation of international trade and the deployment of advanced technology to more efficiently manage the world of business. UPS raised its dividend by 8% in February, and highlighted the company’s strong free cash flow and commitment to delivering value to shareholders. Investors are paid a solid 2.7% dividend. The consensus price target is $108.74. UPS closed Tuesday at $98.31.
Strong dividend growth keeps these top names consistently delivering solid total returns. Companies that return capital to their shareholders also are showing a desire to pay them for their investment, rather than sit on mounds of cash as do many technology companies looking for acquisitions. That makes good sense for long-term investors.