What investor doesn't appreciate a company with healthy cash flows and a steady history of increasing cash dividends? Solid businesses know how to successfully grow dividends and boost shareholder returns. The following companies are creating value by doubling their quarterly dividends, but how sustainable are these returns? Let's take a look.
If you use a credit card, then there's a good chance you have this first company in your wallet. MasterCard (NYSE: MA ) is raising its quarterly dividend to $0.30 per share, up from just $0.15. The increase will cost the company an additional $76.2 million each year, which shouldn't be a problem since MasterCard has about $4.9 billion in cash.
The news comes about a week after MasterCard announced its fourth-quarter earnings that disappointed on profit because of merchant lawsuits. The credit card issuer did beat core earnings estimates, though, thanks to increased card spending. MasterCard is the second-largest payments processor after rival Visa (NYSE: V ) , but MasterCard's processing volumes should get a boost as more touch-and-go payments make it easier for shoppers to quickly pay for in-store purchases. The dividend boost still leaves MasterCard with a smaller yield than Visa.
Fertilize with dividend stocks
The world's largest integrated fertilizer company, PotashCorp (NYSE: POT ) , gave shareholders a raise recently. The fertilizer maker and seller will now pay a quarterly dividend of $0.14 per share, up from $0.07. The company has paid a dividend every quarter since 1990, which tells me it's a reliable and well-managed business. Even so, recent declines in the sector have taken their toll on the stock, although the company's fundamentals remain strong.
The shares now carry a dividend yield of 1.2%, which isn't very high if you're investing for the income. However, the doubling of its dividend is a good indicator that Potash is taking steps to put its shareholders first. And with a payout ratio of just 16% even after the increase, the company should have no problem boosting dividends in the future.
A bonus pick for higher-yield seekers
My last stock didn't double its dividend, but it's still doing right by shareholders. Men's Wearhouse (NYSE: MW ) kicked off the new year by hiking its dividend by 50%. Investors can now expect a quarterly dividend of $0.18 per share from the discount men's clothing retailer, up from $0.12. The stock claims the highest dividend yield of the three companies highlighted here, with a yield of 1.9%.
The spike in its dividend will cost the company an additional $12.3 million each year. Still, Men's Wearhouse is confident in its ability to generate sustainable free cash flow and continue raising dividend alongside profits.
There's more
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