Dividends and Possible US Rising Yields

| douglowry2

There are many ideas in the world of investing and some are reported in the financial press. It is up to you to narrow the field to see which companies fit into your portfolio. One method to being more right with dividend producing companies is to ensure you start with those making money and have the possibility of raising their dividends.

In the April 16th edition of the Globe and Mail, 20 possible companies that may raise their dividends were profiled. Ian McGugan (imcgugan@globeandmail.com) wrote:

To identify promising firms, Craig McGee, senior consultant at CPMS Morningstar Canada, looked for companies that are paying dividends and that have recently hiked their payouts, but still have sufficient earnings and cash flow to further expand their yield.

First, the total of each stock’s expected regular dividends on common stock for the next four quarters had to be greater than $500-million (U.S.).

Second, each stock’s expected yield had to be greater than 3 per cent.

Finally, the change in expected versus trailing dividends for each stock had to be greater than 1 per cent.

Mr. McGee looked for the 20 companies with the lowest payout ratios, based upon both their expected earnings per share (EPS) and their cash flow per share (CFPS). A low payout ratio indicates a firm is dishing out a relatively small amount of its earnings or cash flow as dividends.

He calculated expected dividends by taking the most recently announced dividend and multiplying by the number of payment periods in a year.

What we found

The 20 companies listed would seem to be in a good position to raise dividends. Remember, though, that earnings and cash flow can vary from year to year so payout ratios should be treated only as a guide, not as an inflexible number. Do your own research before buying any of the stocks listed here.The companies are

Chevron, BBT, JM Morgan Chase, Occidental Petroleum, Freeport McMoran, Northrup Grumman, Microsoft, Cisco Systems, Newmont Mining, Ratheon, General Dynamics, Intel, GE, NextEra Energy, duPont, Lockheed Martin, PPL, Verizon Communications, Pfizer, and Sempra Energy.

You may notice all are large companies from energy, banking, military, communications, and drugs. Safety and possible dividend increases are good things to be narrow your field to.

There are more questions than answers, till the next time – to raising questions.

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