How Dividends Change the Game for UnitedHealth Group Inc. (UNH): The Home Depot, Inc. (HD), American Express Company (AXP)

How far did UnitedHealth climb?
It’s still one of the weakest payouts in the Dow, with only five of the 30 blue chips offering a thinner yield. But UnitedHealth Group Inc. (NYSE:UNH)’s policy has more room to grow than any of its fellow bottom-dwellers.

The company covers its dividend costs with just 15% of its annual income today. The three lowest-paying stocks consume far larger slices of their income pies at the dividend table.

Data from S&P Capital IQ.

What’s going on?
All of these companies have their reasons for not paying larger dividends, of course.

Home Depot is more concerned with cost savings and revenue growth than straight-up shareholder service at the moment. The home improvement retailer has been through a few tough years, but it has surged back to growing both sales and earnings. For Home Depot, this is not the time to make a dramatic dividend move, but rather to reap the rewards of efficiency lessons learned in the last five years.

Bank of America slashed its dividend by 98% during the subprime crisis of 2008. Even if the bank wanted to increase its payouts today, it would have to gain regulatory approval first. A recent payout boost at fellow crash-hampered megabank Wells Fargo & Co (NYSE: WFC) has raised hopes that B of A might get that crucial nod of approval soon, but you never really know what the Fed is going to do.

American Express has nearly as much headroom for dividend increases as UnitedHealth Group Inc. (NYSE:UNH) does, but it prefers to return cash to shareholders in the form of share buybacks. There’s nothing terribly wrong with that approach, but companies are rarely great at investing in their own stock, and buybacks do nothing for investors who prefer regular income over higher stock prices.

The article How Dividends Change the Game for UnitedHealth originally appeared on Fool.com and is written by Anders Bylund.

Fool contributor Anders Bylund holds no position in any company mentioned. Check out Anders’ bio and holdings or follow him on Twitter and Google+. The Motley Fool owns shares of Wells Fargo and Bank of America. Motley Fool newsletter services have recommended buying shares of Wells Fargo, UnitedHealth Group, American Express, and Home Depot.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.