Investing

13 Fresh Dividend Hikes and Stock Buybacks Too Big to Ignore

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It is no secret that investors love when companies pay solid dividends and when they announce strong stock buyback plans. What they love even more is when companies increase their dividends and stock buyback plans. Some investors get close to half of their total returns from dividends and buybacks over time.

24/7 Wall St. has tracked many dividend hikes and increased stock buyback authorizations over time. The raw number of dividend hikes and stock buyback expansions in 2018 has been more than impressive, and they are being driven by tax reform and repatriation of overseas cash. It turns out that taking corporate taxes down to 21% from 35% means that an additional 14 cents of every dollar earned can be used toward expanding a company, making acquisitions, increasing wages, building up a balance sheet or rewarding shareholders with more dividends and stock buybacks.

Even in mid-December, 247 Wall St. tracked 20 fresh stock buybacks that could send $100 billion back to shareholders. That tally is now set to grow much further with the continued stock buybacks announced just during the week of February 16.

These were 13 stock buyback and dividend hike announcements from the week of February 16 that were simply too large to be ignored. Some of these stories have links to expanded coverage on their buyback and dividend plans, or to earnings, and some to expanded analyst coverage on the heels of the solid news.

Aaron’s Inc. (NYSE: AAN) managed to beat earnings estimates and raise 2018 guidance, and it trades at a deep price-to-earnings (P/E) ratio discount to the market. Its shares were at one point up 190% or so after earnings on Thursday’s trading session, but Aaron’s authorized a new $500 million stock repurchase plan. It may have a low dividend yield, but that is roughly 15% of its $3.1 billion total market capitalization.

AbbVie Inc. (NYSE: ABBV) had previously announced that its taxes would be dropping, and it planned a pension boost, a capital spending boost and to increase its dividend and buybacks. AbbVie just delivered on a dividend hike to $0.96 from $0.71 and will now yield well over 3%. It also targeted a new $10 billion stock buyback plan, topping the $5 billion plan announced a year earlier.

AllianceBernstein Holding L.P. (NYSE: AB) managed to attract $19.1 billion in active net inflows and increase its average fee rate by 2.7%, impressive considering the trend toward exchange traded funds and to lower investment management and service fees. AllianceBenstein also generated positive active net flows in every client channel and asset class and in nearly every region in 2017. The new distribution in March will be $0.84 per unit, up 25% from a year ago, and it is up even higher from the prior quarterly payout. If that payout remains continuous, it would be a yield of 12%.

Applied Materials Inc. (NASDAQ: AMAT) received many analyst target hikes ahead of earnings and after earnings. But what stood out was that it doubled its dividend to $0.20 per quarter. That still only takes the yield closer to 1.5%, so we consider this a major dividend catchup, perhaps with even more to come in the years ahead. Applied Materials also added $6 billion to its stock buyback ambitions, versus a $58 billion market cap.

Arch Coal Inc. (NYSE: ARCH) beat earnings and issued 2018 guidance, and after nearly tripling its net income Arch Coal approved an increase in the company’s quarterly dividend to $0.40 per share from $0.35 per share and showed that it had continued to buy back shares in the fourth quarter. Isn’t coal supposed to be on its way out? This is still just a 1.7% yield, but it stands out due to the continued pressure on coal, even if this is targeting met-coal.

Celgene Corp. (NASDAQ: CELG) approved a new $5 billion stock buyback plan on Valentine’s Day. This is considered an add-on plan and helped drive shares up another 3% or so, and the $5 billion compares to a $71.6 billion market cap. The company did not signal at all that this plan would prevent it from further seeking to build and diversify its product portfolio, which means it can still be a biotech acquirer. Celgene has over $12 billion worth of cash and investments on the books, but it also has close to $16 billion in long-term debt.

Cisco Systems Inc. (NASDAQ: CSCO) managed to score multiple analyst target hikes before and after earnings, and its shares are now effectively at highs not seen since the 2000 dot-com bubble. Cisco showed how tax reform and repatriation would benefit the company, with a $67 billion capital return coming to shareholders. Cisco raised its quarterly payout to $0.33 from $0.29, and it added $25 billion to the buyback plan for a total remaining authorization of about $31 billion for buybacks alone.

Coca-Cola Co. (NYSE: KO) is managing to show improvements again in its move away from the core Coca-Cola sugar-water soft drinks. While a dividend raise to $0.39 from $0.37 per quarter might not sound off the charts for a company doing so much business overseas, this was Coca-Cola’s 56th straight year to hike its dividend. Coca-Cola’s new dividend yield will be about 3.46%, still blowing away the 10-year and 30-year Treasury yields.

Lear Corp. (NYSE: LEA) must expect strong trends in automotive seating and systems ahead. The company authorized an additional increase in its stock repurchase plan up to $1.5 billion, versus a $12.6 billion market cap. Lear only yielded 1% or so for investors, but it did raise its dividend by 40% to a $0.70 quarterly payout that will now take the yield up to almost 1.5%.

Melco Resorts & Entertainment Ltd. (NASDAQ: MLCO) is back in its Macau and Asian growth, seeing its net income rise to $0.17 per American depositary share (ADS) from $0.09 a year ago, and the pressure from China seems to have dwindled. Melco Resorts lifted its quarterly dividend by 50%, up to $0.135 from $0.09 per ADS, with a new yield of almost 2%.

Phillips 66 Co. (NYSE: PSX) made a significant buyback of $3.3 billion or so of its common stock this past week, but it was from Warren Buffett and Berkshire Hathaway rather than from open market transactions. Buffett and Berkshire Hathaway still remain a top holder of shares, and Buffett said this stake sale was to get it under the 10% SEC ownership hurdle for disclosure and regulatory purposes. Phillips 66 has a $46.6 billion market cap.

Restaurant Brands International Inc. (NYSE: QSR), the parent of Burger King and Tim Hortons, wants to be a serious dividend player. It just more than doubled its U.S. payout to $0.45 per share from $0.21. The company also forecast that it is now targeting that as remaining at a $1.80 per share payout for 2018, so its $59 share price now generates a 3.05% yield.

Wendy’s Co. (NYSE: WEN) had a strong week and closed up over 4% after earnings on Friday at $16.39. The company raised its dividend 21%, up to $0.085 from $0.07 per share per quarter. The company also added on a new $175 million stock buyback plan, versus a current market cap of $3.9 billion. Its new yield is almost 2.1%.

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