These 3 Big Companies Just Raised Their Dividends

Three stocks feeling the investor love add to the euphoria by hiking their distributions.

Jun 23, 2014 at 8:19AM

Are the pleasant summer temperatures making companies sunny and optimistic? If the slew of dividend raises last week is any indication, the answer is a resounding "yes."

By my count, over a dozen publicly traded firms lifted their distributions last week. I don't have space to talk about all of them, but three that particularly caught my eye are fairly hot on the stock exchange just now. Here's a closer look at the trio.

DTE Energy
The city of Detroit has seen better days, more often than not serving as a cautionary example of urban decay. But not all of its denizens are down-at-heel. Power utility DTE Energy (NYSE:DTE), headquartered in the blighted city, is an exception.

The former Detroit Edison has done a good job turning up the power on both its top and bottom lines, which have climbed consistently over the past few years. Investors have jumped on the stock, popping it to all-time highs this year -- a considerable feat, considering that the company has been listed since 1970.

Despite that, DTE Energy is playing it somewhat safe in lifting its payout by 5% or so to $0.69 per share. As the firm points out, its average annual dividend increase tends to be around that level, so this isn't a wide deviation from habit.

All told, the new $0.69-per-share distribution amounts to a total of around $122 million the company will pay its stockholders next quarter. This is not substantially higher than the $116 million of its most recent quarter, and it's still well below the $234 million in cash and short-term investments it had on its books then.

DTE Energy's freshly juiced dividend will be dispensed on Oct. 15 to shareholders of record as of Sept. 15.

W.P. Carey
Well, this is quite a track record. W.P. Carey (NYSE:WPC), a real estate investment trust that somewhat atypically for the sector holds assets both abroad and in the U.S., has enacted a modest dividend raise. The REIT will hand out a distribution of $0.90 per share, less than 1% higher than the preceding payout of $0.895.

The thing is, though, that this will mark the company's 53rd dividend hike in a row. 50-plus increases over about a dozen years have a way of adding up fast. That $0.90 is now well more than double what the company was paying when it became a serial raiser back in 2001; in those not-so-distant days it dispensed a bit over $0.42 per share. 

Since the company's funds from operations (a key metric in the REIT world, essentially earnings with depreciation and amortization added back) have see-sawed quite a bit over the past few quarters, its payout ratio has likewise soared and dipped. Meanwhile, that dividend keeps growing, as does the acquisitive firm's number of shares outstanding.

This could potentially be a mix too potent to keep stirring. Matching W.P. Carey's most recent quarterly total dividend payout against its FFO number yields a figure of 83%. Although that's in line with other recent quarters, it sure is high -- and perhaps unsustainable if the company is hit with a lasting downturn.

W.P. Carey is a dynamic, successful player in the REIT space, but those constant distribution hikes aren't necessarily as safe as houses. Dividend investors should approach this one with caution.

The REIT's pumped-up dividend is to be paid on July 15 to shareholders of record as of June 30.

This medical-device maker is not averse to spending money. One day after Medtronic (NYSE:MDT) sealed the deal on its nearly $43 billion purchase of Covidien (NYSE:COV) earlier this month, it announced a 9% increase in its quarterly dividend to $0.305 per share.

In some respects, it didn't have much of a choice -- it has a reputation to protect, after all. It's a dividend aristocrat, one of those exceedingly rare companies that have raised their payout annually for at least 25 consecutive years. Over the past decade, that distribution has climbed from just over $0.08 per share to the present level.

Besides, in terms of payout ratio (the dividend rate divided by per-share earnings) Medtronic is actually coming in on the low end of the scale. When mashed into the company's most recent quarterly EPS, the payout ratio is 27%; since the beginning of this decade, that figure has generally hovered in the low- to mid-30% range. So Medtronic's new payout -- and its continued status as an aristocrat -- looks secure.

For those wanting to invest in such royalty, Medtronic's upcoming dividend will be distributed on July 25 to shareholders of record as of July 3. 

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Eric Volkman has no position in any stocks mentioned. The Motley Fool recommends Covidien, and owns shares of Medtronic. 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 Motley Fool has a disclosure policy.

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