7 Stocks That Did the Right Thing in 2011

In a flat market, dividends meant the difference between losing money and making money for many stocks this year. But even as investors remain fearful about the economy and the prospects for the markets in 2012, it's reassuring to see that a number of companies believe strongly enough in their future ability to generate consistent profits that they've decided to start paying dividends -- either after a long break or for the first time ever.

Below, I'll share the names of seven promising stocks that treated their shareholders better this year by starting to return some of their capital in the form of dividends. But first, let's take a broader view of what 2011 was like for dividend-paying stocks.

A good year for dividends
Although the final figures aren't yet out, 2011 is shaping up to be an excellent year for dividend investors. Among S&P 500 stocks, dividends in the third quarter of 2011 rose by 15% to $59.2 billion, the highest level since 2008. Combine this with strong buyback activity as well, and it seems companies have gotten a lot better about returning capital to shareholders in the past three years.

But it's even more impressive to see companies taking the plunge to restore past payout practices or initiate a new dividend. While it may be easy for a stock that already pays dividends to add a penny or two to its payout, starting a new dividend from scratch involves a true commitment that will last for years to come.

Who pulled the trigger?
A quick screen for stocks that didn't pay dividends in 2010 but did in 2011 came up with several dozen results. But after weeding out some companies that made only token dividend payouts in order to focus more on higher-paying stocks, these were the stocks that wound up at the top of my list:

Stock

Current Dividend Yield

Ford (NYSE: F  ) 1.9%*
Hecla Mining (NYSE: HL  ) 1.6%
Titanium Metals (NYSE: TIE  ) 2.0%
Cisco Systems (Nasdaq: CSCO  ) 1.3%
Royal Caribbean (NYSE: RCL  ) 1.6%
Cypress Semiconductor (Nasdaq: CY  ) 2.2%
Amgen (Nasdaq: AMGN  ) 2.3%*

Source: Yahoo! Finance. *Ford and Amgen have announced new dividend policies but haven't yet paid them.

Stocks from across all industries were among those initiating or reinitiating dividend payments this year. But the stocks above reveal some broader themes:

  • Many investors have long seen technology stocks as somehow being exempt from the general rule that large companies should return money to shareholders via dividends. Even huge companies like Apple still insist on retaining all their spare cash, even when it adds up to huge unused hoards. Cisco and Cypress joined those bucking that trend this year, and some think Apple could be next.
  • Another area where dividends were largely unseen was in mining. Miners often needed as much capital as possible to start their operations, and with high debt levels, dividends were typically unavailable. But with metals prices remaining above long-term average levels even after recent pullbacks, Hecla and Titanium were just a couple of the mining companies that started or boosted dividend payouts this year.

But perhaps the most interesting of the stocks above is Ford, which is in a different class from the rest. Most of the stocks on the list have accumulated cash for quite a while before their dividends. Ford, on the other hand, has been chafing at the bit to get a dividend started after a five-year hiatus. Given that the company hasn't yet regained its investment-grade bond rating, some saw the move as premature. Ford's determination to make payouts anyway shows just how important dividends are in today's investing world.

Get your dividends
With so many companies getting on the dividend bandwagon in a dicey economy, any true recovery could start an even bigger stampede. That's good news for those who need more income from their portfolios and opens a world of opportunities for smart dividend investors.

If you just can't get enough dividends, we've got some stock ideas you'll want to take a look at. Read The Motley Fool's latest special free report on dividends and learn about 11 stocks that will give you exactly what you're looking for. But don't wait -- get your free copy while you still can.

Fool contributor Dan Caplinger always tries to treat you right. You can follow him on Twitter here. He doesn't own shares of the companies mentioned in this article. The Motley Fool owns shares of Cisco and Ford and has created a bull call spread position on Cisco. Motley Fool newsletter services have recommended buying shares of Titanium Metals, Cisco, Cypress Semiconductor, and Ford, as well as creating a synthetic long position in Ford. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Fool's disclosure policy always does the right thing.


Read/Post Comments (5) | Recommend This Article (34)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On December 29, 2011, at 5:36 PM, adambaines wrote:

    Very insightful and nicely written article. Another examples worth citing might be AUY. AUY may have a particularly small dividend, but the fact that they raised it twice in the course of the year is a signal that the company is indeed confident of future growth and profitability.

    Thanks!

  • Report this Comment On December 29, 2011, at 7:50 PM, JohnnyYuma13 wrote:

    So F did the right thing with a whopping 1.9% dividend woopee! so now I dont feel so bad that I'm down 25% since buying F or even buying LUV down 37% not to mention RVBD down 43% I hope the Fools recommendations do a bit better in 2012

  • Report this Comment On December 29, 2011, at 7:51 PM, cajunbabydoc wrote:

    EBIX put in a 1% dividend and is finally showing signs of life too. Short squeezes are a good thing

  • Report this Comment On December 29, 2011, at 8:48 PM, Camacam wrote:

    Zimmer Holdings (ZMH) initiated an $.18 quarterly dividend payable in March. The company has had an ongoing stock repurchase program.

    I wish more Fools realized that companies establish dividend amounts and that the market determines the yield. No Board of Directors sits around trying to determine what its company stock should yield.

    The yield should be seen as an input to price. Higher yielding stocks usually have fewer growth prospects than lower yielding or non paying companies

    If a stock which has been yielding about 2.5% begins trading to yield 3.5% you should question why the market is demanding a higher yield now. If the dividend is jeopardy? If dividend growth continue?

    Food for thought.

  • Report this Comment On December 30, 2011, at 1:46 AM, garifolle wrote:

    I guess that you are right, considering the poor market conditions of 2011, trying to retain investors with a good dividend is good.

    Still it did not prevent investors to turn toward treasuries that made better then equities and commodities.

    But on the long run, is that not a sign that the companies have too much cash, and reduce their R&D and their production because they know they will not have enough income to attract the investors?

    I think of TIE which seems to have a good business with BA. BA in the past 3 months went up more then 18%, the DOW went up ~10%, while TIE lost more then 3%.

    I have a hard time to understand why a dividend of 2% might attract me to a stock that looses more value then it pays dividends.

    I know we are getting paid to wait, but I'd rather be paid by capital increase.

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