Last week was an interesting one for dividend increases. One of the most famous companies on Earth not only lifted its disbursement, it also departed from a long-standing tradition in the way it is distributed.
This marquee-name company was joined by several other stock market mainstays in pushing their payouts higher. I won't keep you in suspense too long. The star company and its peers are:
Disney (DIS -0.45%)
As hard as it sometimes is to believe, for many years the entertainment giant only distributed its dividend in a single annual payment.
That changed last week, when "The House of Mouse" lifted said dividend by 15% to $1.32 per share, and split it into two semiannual payments of $0.66 apiece.
The company can afford the hike because it just keeps growing and making money. Its second-quarter revenue rose by 7% on a year-over-year basis, to $12.5 billion, while the bottom line advanced by 10% to a little over $2.1 billion. That's a 17% net margin, by the way.
This is the most recent in a series of good quarters for Disney, a run that has helped lift its share price by 37% in the past year.
That might be one reason for the dividend hike -- keeping the stock's yield afloat. That $1.32 is an improvement on the metric, but potential investors should be aware that it remains thin, at 1.1%.
Either way, I think the company is in fine shape financially. Its free cash flow last year was four times what it paid out in dividends, and that heavy profitability will only widen that gap, if anything. I think the new payout is not only safe, but is likely to increase once we swing into next year.
Disney's raised dividend is to be dispensed on July 29 to shareholders of record as of July 6.
Kroger (KR 0.56%)
Speaking of splits, America's largest supermarket chain operator is enacting a big one. A stock split, that is, at the rate of two for one. Meanwhile, Kroger also declared a 14% quarterly dividend raise to a pre-split amount of $0.21.
The fatter dividend is being paid by a fatter company. Kroger has grown to its present size largely through acquisitions. These have helped lift the company's results: First-quarter same-store sales rose by nearly 6%, with the top line coming in at just over $33 billion and net profit well in the black at $619 million.
The forward momentum is set to continue. On the back of those encouraging figures, Kroger lifted its forecast for fiscal 2015 same-store sales growth. It now expects to post an increase of 3.5% to 4.5%, up from the previous guidance of 3% to 4%. That's a big difference when you're talking many billions of dollars, and the stock promptly rose on the news.
KR Revenue (Annual) data by YCharts.
Successful supermarket chains are not known for being wild or reckless with their cash, and Kroger is no different. The over $1.2 billion it now has in the register is more than enough to comfortably cover the new dividend, along with a generous portion of the $500 million share repurchase program the retailer announced concurrently with the distribution raise and the stock split.
Kroger's upcoming dividend will be paid on Sept. 1 to stockholders of record as of Aug.14. Since the record date is after the stock splits "on or about" July 13, investors are to receive half of that $0.21, or just over $0.10 per share, in the payout.
DTE Energy (DTE 1.15%)
DTE has been a frequent, if somewhat inconsistent, raiser this decade. Its latest hike came last week in the form of a 4% lift in the quarterly payout to $0.73 per share.
DTE Energy operates in 22 states in the U.S., but far and away its top market is Michigan. It covers the Detroit metro area, and so is poised to benefit from that struggling city's expected recovery. At first blush, fiscal 2014's results seem to bear this out -- at over $12 billion, revenue was 27% higher on a year-over-year basis, while net profit improved by a muscular 37% to $905 million.
But much of that was due to an abnormally sharp winter that year. The company doesn't necessarily expect to see a higher bottom line this fiscal year, although it should land in the black nevertheless -- it is projecting operating earnings per share of $4.48 to $4.72 for fiscal 2015. The figure for 2014 was $4.60.
DTE Energy has a long and distinguished history of paying dividends. The company spends an awful lot on those payouts, though, and at times they exceed free cash flow. Indebtedness, meanwhile, is growing notably. So I'm not sure I'd count on the company maintaining its distribution.
DTE Dividend data by YCharts.
DTE Energy's dividend is to be paid on Oct. 15 to shareholders of record as of Sept. 25.
