Like its predecessor, last week was a fairly slow and uneventful one for dividend raises. Several companies did declare higher payouts, but they were the exception rather than the rule. The market is taking its usual late summer nap, so it's no surprise there isn't a lot of activity in this respect.
Nevertheless, I scrounged up the usual trio for this installment of our series. Without further ado...
Department store operator Dillard's (NYSE:DDS) has elected to lift its quarterly distribution by 43% to $0.10 per share.
The good news followed some bad. Earlier this month Dillard's posted a Q2 that had some ugly numbers, particularly a bottom line that landed in the red to the tune of $17 million, against a $12 million profit in the same period a year ago. Both comparable-store sales and total revenue declined marginally. A notable uptick in inventory was to blame for the declines.
Yet Dillard's dividend burden remains fairly light. We can't calculate a reasonable payout ratio for Q2 given the bottom-line deficit, but if we stretch back a year, the current trailing 12-month figure stands at a very modest 7%.
Analysts clearly believe that Dillard's will get its act together and work through its inventory issues. On average, they're forecasting a per-share profit of $3.57 for this year, and $3.92 in the following frame. That's down substantially from the latest annual figure of $4.93, but still in the black. So from an income investor perspective, I think this dividend is safe for now, despite the company's struggles.
Dillard's new dividend will be distributed on Oct. 30 to stockholders of record as of Sept. 29. At the most recent closing stock price the new amount would yield 0.7%, well below the nearly 2% of dividend-paying stocks on the S&P 500.
Another double-digit raiser is packaged-foods purveyor Pinnacle Foods (NYSE: PF). The company is boosting its payout by 14% to just under $0.33 per share.
Hopefully, that'll calm investors who've experienced a bumpy ride with their company so far this year. A hoped-for merger with ConAgra Brands didn't materialize as many investors hoped, and some recent fundamentals haven't been impressive. In Q2, Pinnacle's net sales slipped by almost 2% on a year-over-year basis (to just under $745 million).
However, on an adjusted basis net profit for the quarter rose substantially, to $63 million ($0.53 per share) from the year-ago tally of slightly under $50 million. Management attributed much of this to the company's shift toward higher-margin products. Optimism is in the air despite that uninspiring revenue figure, as the company is forecasting EPS growth of around 19% for the full fiscal year.
If we plug the new dividend figure into the Q2 adjusted EPS, we get a figure of 61% -- perhaps a bit high, but not outrageous enough to worry about, in my opinion. Pinnacle's FCF, meanwhile, has lately been more than enough to cover the payout. I'd say this dividend is secure at the moment.
Pinnacle Foods will pay its next distribution on Oct. 9 to shareholders of record as of Aug. 29. It would yield a theoretical 2.1%.
First American Financial
Another member of the recent double-digit dividend raise club is First American Financial (NYSE:FAF). The company, which makes the bulk of its living by selling title insurance to homeowners, is lifting its payout by 12% to $0.38 per share.
As the housing market goes, so goes First American Financial. Luckily for the company and its stockholders, the market is still humming along. As a result, in the most recently reported quarter the top line expanded by 7% on a year-over-year basis to $1.45 billion.
Those pleasant market tailwinds, combined with effective cost savings, meant net income saw a more impressive leap (by almost 20%) to just over $122 million. Both line items handily beat the average analyst estimates.
Even with the beefy raise, First American Financial's dividend is well within its means; the payout ratio for the new distribution on the latest quarter's EPS is only 35%. The company's operating and free cash flow are robust, with the latter easily covering what it spends on dividends. The housing market isn't going to be buoyant forever, but I think the company's financials are strong enough to withstand a slump.
I'd count on this dividend at least being maintained over the next few years, then.
First American Financial will hand out its freshly raised dividend on Sept. 15 to investors of record as of Sept. 8. This would yield 3.2% on the latest closing share price.