This past week was one of turmoil, with big down days followed by big up days on news from Greece and China. It is easy for investors to lose sight of what fundamentally is supposed to drive markets when the financial and the main stream media keep warning you of the next financial catastrophe. Since the start of July, there have been five key U.S. dividend hikes that were simply too large or too important to ignore.
24/7 Wall St. has shown the five dividend hikes which stood out the most to us and added color on each. Yield data and historical pricing trends have been noted on most as well.
Duke Energy Corp. (NYSE: DUK) is perhaps the most important utility in America. It is certainly the largest by market cap at more than $51 billion. This week it hiked its common dividend by almost 4%, to $0.825 from $0.795, to bring its dividend yield back up to just over 4.4%, based on a $74.37 close. What investors have to consider is that utilities have fallen out of favor to the point that Duke now is down over $15.00 from its 52-week high. The significance here is that if the largest utility has to raise its dividend, then the rest have to play along.
Enterprise Products Partners L.P. (NYSE: EPD) delivered yet another hike in its distribution, with the payout raised to $0.38 per unit from $0.375. The number may not look big on the surface, but this is its 44th consecutive distribution increase, and at $60 billion, Enterprise is among the most important master limited partnership and infrastructure players in oil and gas. With shares at $30.53, its yield-equivalent (return of capital on top of income) is now 5.1% — and Enterprise’s units are down almost $11 from their 52-week highs.
NiSource Inc. (NYSE: NI) is big into power via gas and electricity, and then there is the Columbia Pipeline Group separation to consider. NiSource declared its first post-Columbia separation dividend at $0.155 per share, to be paid in August. This is a 3.66% yield, based on a $16.91 closing price. What stands out here is that this looks lower than prior payouts, though NiSource said that it is consistent with its intention to increase the combined (NiSource and Columbia Pipeline Group) dividend. JPMorgan even upgraded NiSource after that. The company has now committed to target an annual dividend growth rate of 4% to 6%, and Columbia Pipeline Group committed to a 15% average annual dividend growth rate.
Paychex Inc. (NASDAQ: PAYX) announced that it would hike its dividend by 11%, to $0.42 from $0.38 per share. The new yield will be just over 3.5%, based on a $47.78 close. Despite a trading range of $40.10 to $51.72 in the past year, the consensus analyst price target of $47.07 was not very indicative of growth. The payrolls and HR outsourcing giant also said that it returned $552 million of net income to shareholders in the past year, which is a whopping or 82% of that net income. With street expectations of consistent 8% or 9% earnings growth, does Paychex know something the street doesn’t?
Walgreens Boots Alliance Inc. (NASDAQ: WBA) raised its dividend at the end of this last week, to $0.36 from $0.3375 per share. The move may not seem huge, but this is with the merger integration still relatively fresh. The new $1.44 annualized payout (versus $1.35 prior) and the $93.11 closing price (after hitting an all-time high of $93.79 on Friday) gets this yield up to almost 1.6%. The company voluntarily avoided a tax inversion to avoid scrutiny and pressure, and this looks as though it will act as a larger lift-off catalyst for a much larger dividend hike in 2016, when its earnings per share are expected to jump almost 20% to $4.51 from $3.77.
Dividends are not the only drivers of stocks. There are many other issues to consider. Still, the one thing to consider in all these five stocks is that as a whole they have very little exposure to China and Greece.