Summer is best known as a time when the kids are out of school, families are taking vacations, temperatures are soaring, and prices at the pump shoot sky high. Apparently, summer is also a time for a select group of companies to unleash some gigantic dividend increases.
In early June, I took a look at seven brand-name companies that, since the beginning of the year, had at least doubled their dividend. Just since summer began, we’ve tacked on an additional five companies that have matched this feat — and summer isn’t even over yet for another two-plus weeks!
Source: Tax Credits, Flickr.
Now, I’m sure some of you could care less about dividend-paying stocks because you’ve watched the U.S. indexes soar well over 100% since their March 2009 lows. While many high-growth and transformative companies have indeed eclipsed the gains of the majority of dividend-paying companies, over the long run, the safety and compounding wealth netted from dividends and the underlying share price appreciation of dividend stocks – not to mention the nights of better sleep — will almost always trump the ebb and flow of the next hot technology or sector fad.
So why is a dividend stock so attractive?
1). It gives you two ways to profit from the company (share price appreciation and the dividend).
2). It provides (in most cases) a steady and predictable stream of income.
3). Based on your income, some dividends may be taxed at a considerably lower rate than ordinary income.
4). Dividend payments are a sign from management that increasing shareholder value is important, and that the company’s cash flow is stable enough to support a sharing in profits with stakeholders.
With that in mind, let’s have a look at five companies that were piling on the dividends this summer while you were busy perfecting your cannonball form.
| Company | Previous Quarterly Dividend | New Quarterly Dividend | Increase |
|---|---|---|---|
| Hess Corp. (NYSE:HES) | $0.10 | $0.25 | 150% |
| Oracle Corporation (NYSE:ORCL) | $0.06 | $0.12 | 100% |
| Anadarko Petroleum Corporation (NYSE:APC) | $0.09 | $0.18 | 100% |
| Harman International Industries Inc./DE/ (NYSE:HAR) | $0.15 | $0.30 | 100% |
| Cabot Oil & Gas Corporation (NYSE:COG) | $0.01* | $0.02* | 100% |
Source: Individual company press releases, * adjusted for split on Aug. 15, 2013.
As you can see, there’s certainly a bias toward the oil and gas industry when it comes to increasing shareholder stipends — and with good reason! The Obama administration is putting a priority on boosting domestic production in order to decrease U.S. dependence on foreign oil, and oil prices for West Texas Intermediate are back at a near two-year high.
Clearly, not all dividends are created equally, and some of these dividend hikes will prove more valuable than others; so let’s have a closer look behind each increase.
Hess
Hess Corp. (NYSE:HES)’ huge 150% increase in its dividend makes a lot of sense from a strategic perspective, and looks as if it’ll be a nice boost for shareholders. Earlier this year, Hess Corp. (NYSE:HES) made the decision to remove itself from the oil refining industry and focus solely on oil exploration and production. The sale of its refinery assets netted the company $3.5 billion in proceeds, which it can now use for general corporate purposes including paying out a revamped dividend. In addition, Hess Corp. (NYSE:HES) is also in the process of selling its energy marketing business to Direct Energy for a hair over $1 billion. With this hike, Hess Corp. (NYSE:HES)’ yield moves from just 0.5% to a more respectable 1.3%, and focuses the company on a faster-growing area of the oil sector.
CEO Larry Ellison, Source: Oracle PR, Flickr.
Oracle
OK, so I cheated on this one by 24 hours, since Oracle Corporation (NYSE:ORCL) doubled its dividend on June 20 instead of the official start of summer on the 21st… but ask anyone on the East Coast, or in the South, and they’ll tell you summer started long before June! While shareholders have to be loving Oracle CEO Larry Ellison’s renewed interest on improving shareholder returns, they have to be a bit concerned that this could be a sign that Oracle Corporation (NYSE:ORCL)’s high-growth days are long gone. The future of cloud-computing will represent a big opportunity for Oracle Corporation (NYSE:ORCL), as it recognized 50% growth in software-as-a-service revenue; however, its legacy hardware products, and Europe, continue to be sticking points for pessimists. Thankfully, with a record $13.6 billion in free cash flow generated last year, I doubt there’s too much to be concerned about over the long run, and shareholders will certainly enjoy their new 1.5% yield in the meantime.
Anadarko Petroleum
While not exactly knocking the socks off shareholders by boosting its yield from 0.4% to 0.8%, Anadarko Petroleum Corporation (NYSE:APC)’s management team decisively demonstrated in early August that shareholder interests are becoming a priority. Anadarko Petroleum Corporation (NYSE:APC) has a rather large position in the natural gas-rich Marcellus Shale, and this dividend increase should be a boost of confidence to shareholders that increased nat-gas production from this region shouldn’t harm its cash flow potential, despite the risks associated with excess demand weighing down nat-gas prices. With Anadarko paying out only 16% of projected 2013 EPS in the form of a dividend, it leaves a lot of room for future growth, and makes Anadarko Petroleum Corporation (NYSE:APC) a name worth watching.
Harman International
Audio equipment specialist Harman International Industries Inc./DE/ (NYSE:HAR) shocked investors in August when it not only doubled its quarterly payout to $0.30, from $0.15 (thus boosting its yield to nearly 2%), but also provided rather bullish guidance through 2016. According to Harman’s estimates, it projects revenue could grow from $4.3 billion in 2013, to $6.05 billion in 2016, with EBITDA margins improving from 10.5%, to 13%. Specifically, as higher-end car models become more attainable, and Harman International Industries Inc./DE/ (NYSE:HAR)’s technologies more innovative, Harman International Industries Inc./DE/ (NYSE:HAR) will be able to retain significant pricing power and pass it along to automakers in the form of higher prices — the perfect recipe for bigger profits and a fatter dividend for shareholders.
Cabot Oil & Gas
If there were a dividend dud to this bunch, it’d have to be Cabot Oil & Gas Corporation (NYSE:COG), which has me harking back to the days of Dr. Evil asking his henchmen to “throw him a bone.” Even with Cabot’s newly doubled dividend, the E&P company, which is primarily weighted toward its natural gas assets, is still only paying out a pitiful 0.2% yield. While better than nothing, Cabot Oil & Gas Corporation (NYSE:COG) should be willing to part with more following its stellar second-quarter results that saw production increase by 52%, and discretionary cash flow rise by a whopping 109%! Anadarko Petroleum Corporation (NYSE:APC) has quite a bit at stake with its nat-gas Marcellus Shale assets, yet it’s pumping out close to a 1% yield. Get with it Cabot Oil & Gas Corporation (NYSE:COG)!
The article 5 Companies Doubling Their Dividends This Summer originally appeared on Fool.com and is written by Sean Williams.
Fool contributor Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong.The Motley Fool owns shares of Oracle.
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