Three major firms recently announced that they would increase their annual shareholder distributions for the upcoming quarter. For starters, German technology firm SAP AG (ADR) (NYSE:SAP) announced that it would increase its dividend to 85 euro cents per share and recommended that its shareholders adopt the proposal as-is. Meanwhile, struggling U.S. PC and hardware maker, Hewlett-Packard Company (NYSE:HPQ), disclosed a modest increase of about 10 percent. Finally, weapons systems manufacturer Raytheon Company (NYSE:RTN) revealed an identical increase for the coming fiscal year.
Taken together, these dividend increases offer surprising reassurances from once-struggling firms. For technology industry veterans, Hewlett-Packard’s increase might be particularly surprising. After all, the company continues to recover from its botched Autonomy takeover and has lost much of its market value over the past several years. Regardless, investors who wish to profit from these dividend increases have several ways in which to do so.
About Hewlett-Packard, SAP and Raytheon
Palo Alto, California-based Hewlett-Packard is a major technology firm that designs and sells PCs, laptops and other hardware. In recent years, the company has lost significant market share to smaller, nimbler competitors as well as firms that have positioned themselves to take advantage of the rapid growth in mobile broadband technology. However, Hewlett-Packard Company (NYSE:HPQ) is a highly diversified operation. In addition to its personal computing services, the company also offers a range of business solutions like outsourcing, technology infrastructure, IT services, and large-scale storage and networking systems. The company also offers a range of accessories like printers and cartridges. Finally, Hewlett-Packard maintains an in-house financing department to handle its operations. Hewlett-Packard Company (NYSE:HPQ) employs well over 300,000 people and had gross 2012 revenues of over $118 billion.
Walldorf, Germany-based SAP is a technology services firm that specializes in creating software and infrastructure solutions for commercial enterprises. The company produces fixed hardware and large-scale computing solutions as well as cloud-based and mobile programs. Many of its solutions focus on the ongoing management and sustainability of the business operations and IT needs of its clients. In addition, SAP AG (ADR) (NYSE:SAP) devotes significant resources to “life cycle management” and offers significant support to its solutions’ users. SAP had gross revenues of around $21 billion.
Waltham, Massachusetts-based Raytheon is a diversified firm that makes a wide range of defense systems and aerospace products. The company’s signature products include remote intelligence systems, sensors, weapons control systems, and military-grade communications systems. Raytheon Company (NYSE:RTN) also builds hardware like missiles, missile defense arrays, ballistic weapons and other high-impact devices. It maintains significant satellite and space-based surveillance operations to support its core functions as well. The company generally contracts with public agencies, branches of the U.S. military, and foreign governments and military organizations. In 2012, the company took in about $24.5 billion in revenues.
Hewlett-Packard’s Dividend Increase
Hewlett-Packard Company (NYSE:HPQ) has announced that it will increase its total dividend payout by 10 percent. This will increase its quarterly dividend from 13.2 cents to 14.52 cents. Due to the timing of the announcement, the increase will not affect the dividend that the company is already scheduled to pay on April 3, 2013. Instead, it will take effect on the date of the company’s next regularly scheduled dividend payout. After the move, HP will yield about 2.5 percent.
SAP’s Dividend Increase
Although the move still technically requires shareholder approval, it seems certain that SAP AG (ADR) (NYSE:SAP) will increase its annual dividend by 10 euro cents to 85 euro cents per share. Due to foreign tax withholding and exchange rate issues, holders of SAP’s U.S. ADRs may receive slightly less than this amount. However, North American investors will still see a windfall from this move. SAP cited strong sales and better-than-expected revenue projections as catalysts for its move. Once the increase goes into effect, SAP AG (ADR) (NYSE:SAP) will yield about 1.2 percent.
Raytheon’s Dividend Increase
Like HP, Raytheon will increase its annual dividend by 10 percent. This translates to a quarterly dividend increase of 5 cents. According to the company’s announcement, this move will take effect at the company’s next regularly scheduled dividend payout on May 2, 2013. After the increase, Raytheon’s stock will yield nearly 4 percent.
Long-Term Outlook and Possible Plays
Each of these dividend increases is notable in its own way. For instance, Raytheon’s move comes despite lingering questions about the effects of recent U.S. defense budget cuts on the major companies that regularly contract with the military. Indeed, Raytheon’s stock fell by nearly 10 percent during recent political wrangling on the subject. However, it has since recovered much of its value and now sits near its one-year high. As such, investors seem sanguine about the potential for serious budget-related damage.
Meanwhile, Hewlett-Packard Company (NYSE:HPQ) has endured a number of setbacks in recent years. Since early 2011, the company’s shares have lost nearly half of their value. At one point, the company’s stock had suffered a two-year loss of more than 65 percent. However, HP now appears to be on the road to recovery. It is likely that this dividend increase is designed to bolster investors’ growing confidence that the company can mount a full recovery.
In sum, SAP AG (ADR) (NYSE:SAP) seems to be in a stronger financial position than either Hewlett-Packard Company (NYSE:HPQ) or Raytheon. However, there are convincing cases to be made for investing in all three of these companies. Investors who wish to profit from these recent dividend increases would do well to take a look at each firm.
The article Which Big Companies Are Increasing Dividends? originally appeared on Fool.com and is written by Mike Thiessen.
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