Investing

4 Dividends and Buybacks That Should Not Be Ignored

As corporate earnings season takes flight, many companies are announcing along with their earnings new plans to increase dividends or repurchase shares. 24/7 Wall St. has collected and compiled dividend and buyback announcements within the past week that should not be ignored by investors. While these should not be ignored, it is not intended to mean that they were all above expectations. In fact, two of the four might be considered disappointments.

Procter & Gamble Co. (NYSE: PG) said, following an announcement on Friday, that 2015 would mark the 59th consecutive year in which the company raised its dividend. It also marks the 125th consecutive year that a dividend has been paid. Unfortunately, some investors might have felt at least a little disappointed in the hike. The question is whether the investors should be happy enough with what they were given.

P&G announced that the increase in the quarterly dividend would move from $0.6436 to $0.6629 per share. This represents a mere 3% dividend hike from 2014 — less than half the 2014 dividend hike of 7%.

24/7 Wall St. recently named P&G as one of six major companies that it expects to raise their dividends this earnings season. So why should investors be happy, even with a much lower dividend hike than they may have been used to?

Shares of P&G were trading at $81.00 at the close of Friday’s session. The stock has a consensus analyst price target of $91.50 and a 52-week trading range of $77.29 to $93.89.

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Johnson & Johnson (NYSE: JNJ) has raised its common stock dividend. What investors need to know here is that its tradition of dividend hikes is now on a streak that has lasted for more than 50 consecutive years.

The board of directors increased the payout by 7.1%, from $0.70 per share to $0.75. This will generate an annualized dividend payout hike to $3.00 per share from $2.80. The new $3.00 annualized per share payout would be just over half of the $5.97 in earnings per share of 2014.

The $3.00 per share, based on roughly 2.78 billion shares by Google’s count, would also generate a payout of roughly $8.3 billion in dividend payouts on a static annualized basis. The company’s operating income was $20.9 billion in 2014, while cash flow from operating activities was $18.47 billion in 2014.

Johnson & Johnson shares were changing hands at $101.08 at the end of the week, in a 52-week trading range of $95.10 to $109.49. The consensus analyst price target is $109.25.

This week, Costco Wholesale Corp. (NASDAQ: COST) announced that it was increasing its dividend and adding a large share buyback plan that looks, on the surface, stronger than what most investors might have anticipated.

Costco’s board of directors reauthorized a common stock repurchase program of up to $4 billion with an expiration date in April 2019. What investors should know is that the new plan effectively replaces the prior $4 billion buyback program. Where the plan gets interesting is that the expiring plan was set to end later this April, and it had an unused authorization remaining of about $2.5 billion.

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The board also declared a quarterly cash dividend on its common stock, raising it from $0.355 to $0.40 per share. This is now to be $1.60 per share on an annualized basis, which generates a yield of about 1.1%.

This dividend hike does not feel like a home run, but when you add in that the company is buying back more stock it may look a bit better.

Shares of Costco closed trading at $148.12 on Friday. The consensus price target is $154.90, and the 52-week trading range is $111.61 to $156.85.

Groupon Inc. (NASDAQ: GRPN) looks like it is pulling out a huge win in a stake sale of its South Korean e-commerce business, Ticket Monster. By doing this, Groupon is planning to return capital to investors.

Groupon announced that it entered into an agreement to sell 46% of its controlling stake in Ticket Monster to the global investment firm KKR and Hong Kong-based Anchor Equity Partners. The transaction is valued at $360 million.

The proceeds from this sale are expected to be put directly into a new share repurchase plan. Groupon announced that its board of directors approved a new $300 million share repurchase program, subject to the closing of the Ticket Monster sale.

Shares of Groupon closed at $7.12, in a 52-week trading range of $5.18 to $8.43. The consensus price target is $8.89.

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