It’s no secret that investors love dividends. Having a high dividend yield is one thing, but companies that manage to keep increasing their dividend payouts to shareholders are often the most desirable. There has been an analogy for many years that dividends account for close to half of all shareholder total returns over time.
With earnings season in full swing and with the stock market still close to an all-time high, 24/7 Wall St. has looked at eight solid dividend hikes by mostly multi-billion corporations that have been announced during the second half of July. Some announcements came along with earnings, and some companies have been hiking dividends for years.
It’s important to consider what dividend hikes mean, particularly at this time. Dividend hikes generally are a signal by a company’s management that they have earnings power that will sustain its dividend for years into the future. This is a time when the global growth story has slowed and when the United States and China are in a trade war. It’s also at a time right before Federal Reserve Chair Jerome Powell and the members of the FOMC are expected to embark on cutting interest rates.
For a reference point on all these hikes, note that the yield on the 10-year Treasury was last seen at 2.08% and the yield on the 30-year Treasury was at 2.60%. The median dividend of all S&P 500 members was at 1.86%, while the median dividend of the S&P 500’s 414 dividend-paying stocks was last seen at about 2.20%.
These are not all the dividend hikes that have been announced, but these stood out above and beyond others.
Aqua America Inc. (NYSE: WTR) announced on July 25 that its board approved its quarterly common share dividend to be raised to $0.2343 per share. The September 2019 dividend payout will represent a 7% hike, by $0.0153 per share from the $0.219 prior cash dividend. The water utility said that this represented its 29th dividend increase in the past 28 years.
The company has a stated long-term targeted dividend payout ratio in the range of 60% to 70% of earnings from operations, and the new annualized dividend rate of $0.9372 per share represents a 2.25% dividend yield. That yield may be low for utilities in general, but it’s about a 0.5% higher yield than the dominant American Water Works.
Hershey Co. (NYSE: HSY) announced on July 25 that its quarterly dividend of $0.773 on the common stock was an increase of about 7% from its prior payout. Despite chocolate and candy not seeming to be the biggest growth engine, Hershey announced with earnings that its 2019 adjusted earnings would be up by 6% to 7% per share rather than the prior 5% to 7% range. The new $3.092 per share annualized payout will generate a yield of 2% based on the last closing price of $152.98.
On July 18, Molson Coors Brewing Co. (NYSE: TAP) announced that it was raising its common dividend per share to $0.57 from $0.41 per share. Despite big corporate beer facing pressure in recent years from the rise of craft beers and changing consumer preferences, this is a 39% hike to its dividend payout. The $2.28 per share annualized payout represents a 4% dividend yield, based on Friday’s close of $56.59. Molson Coors shares are still down over 20% from their 52-week high, and the shares are down about 50% from their highs of late 2016.