Post-recession earnings growth is lifting spirits in executive offices and boardrooms -- and it's going to weigh shareholders' pockets down a little bit more. According to analysis by Bloomberg, not one stock in the S&P 500 is expected to lower its dividend this quarter -- a first since 2004. Even former growth darling Starbucks
Four dividend workhorses
Four stocks made an outsize contribution to the increase in total dividend dollars: With their April dividend raises, IBM
Company |
Dividend Increase |
Dividend Yield |
---|---|---|
IBM |
18.2% |
2% |
Johnson & Johnson |
10.2% |
3.4% |
Procter & Gamble |
9.5% |
3.1% |
ExxonMobil |
4.8% |
2.6% |
Source: Standard & Poor's.
With the exception of ExxonMobil, the percentage increase in the dividend amount is well ahead of what investors should expect in terms of annualized price appreciation on the S&P 500 over the next five to seven years. The dividends on these stocks are about as secure as they come, and the stocks' valuations on 2011 expected earnings-per-share all look reasonable -- investors could do a lot worse than to own these dividend stalwarts.
Amounts are higher, but the dividend yield remains low
Despite the positive news, not all dividend-related data is encouraging: At 1.81%, the dividend yield on the S&P 500 is barely above the five-year low it achieved on April 28th (1.75%). That's consistent with an observation I have been repeating for some time now: The extraordinary stock market rally that began in March 2009 has lifted stocks into "overvalued" territory. All the more reason to stick with well-priced, defensive names and sectors: The top three sectors by dividend yield remain telecommunication services (6% on April 28), utilities (4.4%) and consumer staples (3%).
Interested in more high quality dividend stock ideas? Tim Hanson identifies six stocks that the Motley Fool's top dividend-focused analysts are watching.