Now that we're just a few weeks away from the latest earnings season kickoff, several big-name companies have elected to raise their dividends.
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More than likely, you've heard of all three of my selections -- so let's just get right down to it:
Microsoft
Tech giant Microsoft (MSFT +0.43%) has boosted its quarterly payout once every year like clockwork since the beginning of the decade. It's now declared an 8% boost to $0.39 per share for 2016. The company also launched a fresh, $40 billion stock repurchase program.
Lately, the company has done quite a good job of selling its Azure cloud service, with revenue in that segment growing enough to make up for slumps in sales of Windows software and smartphone hardware.
As ever, Microsoft is a cash-producing machine. Free cash flow in its most recently completed fiscal year rose by 8% to almost $25 billion. That's plenty of cash for both the share repurchases and the enhanced dividend. No one should worry about the viability of this new payout.
MSFT Net Income (Annual) data by YCharts
Microsoft's upcoming dividend will be handed out on Dec. 8 to shareholders of record as of Nov. 17. At the most recent closing share price, it would yield 2.7%. That eclipses the current 2.1% average of dividend-paying stocks on the S&P 500.
Microsoft's new stock repurchase program does not have an expiration date, and may be terminated at the company's discretion.
Lockheed Martin
Another member of the raise-once-per-year club is defense industry stalwart Lockheed Martin (LMT 2.30%). This year's model is a 10% lift in the quarterly dividend to $1.82 per share.
LMT Dividend data by YCharts
Additionally, the company announced a $2.0 billion increase in its existing share buyback program. That brings the total amount to roughly $4.3 billion.
Shelling out the extra cash this year will not be a challenge -- Lockheed Martin did well in its most recently reported quarter, with convincing beats on the top and bottom lines. Both figures were higher on a year-over-year basis, too.
Meanwhile, the company recently sold its information systems and global solutions unit to Leidos. The way the deal was structured had the double effect of reducing Lockheed Martin's share count -- by nearly 9.4 million shares, about 3% of the total outstanding -- and reaping a $1.8 billion cash payment from the acquirer. The company pledged to use those proceeds to repay debt, but also to fund dividend payments and/or stock repurchases. It stayed true to its word.
The benefits of that deal and recent fundamental performance, plus general increases lately in both operating and free cash flow, bode well for the future of the dividend. I'd count on more raises in the coming years.
Lockheed Martin's new payout is to be dispensed on Dec. 30 to investors of record as of Dec. 1. It would yield just under 3% at the current share price.
U.S. Bancorp
As with Microsoft and Lockheed Martin, this dividend raise was not a surprise. Banks the size of regional powerhouse U.S. Bancorp (USB +2.56%), after all, are effectively required to submit their capital allocation plans to the Federal Reserve every year as part of that body's annual stress tests.
U.S. Bancorp passed its test, and with that got its quarterly dividend raise plans approved. Last week, its board signed off on the proposed 10% increase to $0.28 per share, making it official.
Although the company recently shaved some of its long-term profitability estimates on the back of strong headwinds like low interest rates, it's still managing to post some encouraging numbers.
USB Net Income (TTM) data by YCharts
In its Q2, the bank grew its bottom line slightly compared to the same period the previous year. More encouragingly, it widened its deposit base by 8%, and increased its average total loans by roughly the same figure.
Like many banks, the company is fairly cautious about its dividend, keeping it (plus spending on share buybacks) comfortably under the level of free cash flow. I can't imagine that'll change anytime soon with this steady performer, so I'd anticipate more raises going forward.
U.S. Bancorp's freshly raised dividend will be distributed on Oct. 17 to stockholders of record as of Sept. 30. It would yield a theoretical 2.6% on the most recent closing share price.
