It certainly doesn't feel like it, given the near record number of share buybacks ongoing and the relatively low payout ratios for S&P 500 companies, but the first quarter of 2014 was a record quarter for income investors.
Source: Steven Depolo, Flickr.
For the quarter, according to statistics from S&P Dow Jones Indices, 1,078 companies raised their dividends, breaking the previous record of 1,069 set in the first quarter 35 years ago! All told, an additional $17.8 billion was paid out in Q1 2014, a 22.9% increase over last year, with increases outnumbering dividend decreases by a margin of greater than 10-to-1.
As you might imagine, some companies really stood out from the crowd with regard to the percentage of increase in their quarterly payout. Here are five such companies that boosted their payouts during the past quarter by a minimum of 200%.
Carlyle Group (CG) -- up 775%
Specialty investment firm Carlyle Group, which focuses on leveraged buyouts, equity investments, and leveraged financings, just to name a few of its services, was the big winner for income investors with an announced payout of $1.40, up 775% from its previous payout of $0.16 per share.
Strong growth in its investment portfolios was the primary driver behind the surge in payouts, with pre-tax distributable earnings more than doubling to $401 million and net income per adjusted share of $1.64 trouncing Wall Street's expectations of $0.91 per share. William Conway, the CEO of Carlyle, noted that strong performance in its carry funds and risk-adjusted returns in its hedge funds provided all the pop Carlyle needed. It would certainly seem, based on this past report, that further growth is expected.
Bank of America (BAC -1.74%) -- up 400%
Look away from the hideous first-quarter earnings report that was laden with charges and caused Bank of America to miss Wall Street's estimates by $0.10 and instead focus on the fact that shareholders, like me, will now be receiving $0.05 for each share as opposed to the $0.01 per share that we've been getting for years.
This is a big step for Bank of America, which has dramatically improved its liquidity since the recession by shedding non-core assets and investments, and is attempting to refocus on the basics of banking; namely deposits and loans. Overall, Bank of America saw deposits rise by $38 billion in its recently reported quarter, delivered total loan balances growth of 11% globally, and pushed its tier 1 ratio under Basel 3 (a measure of liquidity) to 9.3%. In other words, if another recession were to strike, Bank of America would be ready. Once it can clear the last of its legal hurdles, shares could really be ready to take off.
Vulcan Materials (VMC 0.27%) -- up 400%
Although its dividend boost came on none other than Valentine's Day, Vulcan's new $0.05 payout, a 400% increase over the $0.01 it had been paying out previously, still has a long way to go before it even gets remotely close to its pre-recession payout of $1.96 per year.
Vulcan, the nation's largest producer of construction aggregates, concrete, and asphalt, had struggled with weaker home prices and erratic government spending for the better part of a decade.
Source: Vulcan Materials.
With lending rates staying near historic lows, both residential and commercial construction has rebounded, helping Vulcan's profits bounce. According to Vulcan's 2014 outlook, issued in early February, it anticipates all segments of its operations -- residential, commercial, highways, and other public infrastructure -- to demonstrate year-over-year growth for the first time in a decade! However, with QE3 slowly on the way out and government spending still tight I'm not sold that Vulcan will be able to meet its goal of returning even more capital to shareholders in the immediate future.
Danaher (DHR -1.47%) -- up 300%
Danaher, a developer of technical instruments, diagnostics, and clinical tools for the environmental, life sciences, and technology sectors, certainly boosted investor morale when it announced a quadrupling of its quarterly payout from $0.025 per share to $0.10. Of course, investors should keep in mind that this boost only brought its yield up to 0.5%.
Despite the less than stellar yield, Danaher's top and bottom line is showing signs of improvement which could lead to beefier payouts in the future. In its first quarter results reported last week Danaher delivered an 8% increase in EPS on 5% growth in sales, while also reaffirming its previous full-year EPS guidance. What we're seeing is the combination of tight cost controls coupled with business segment diversity coming together to help push Danaher as a whole higher. At 17 times forward earnings and with a growth rate of 5% it's not a screaming value, but it's certainly watchlist-worthy.
Silver Bay Realty Trust (NYSE: SBY) -- up 200%
Finally, Silver Bay Realty Trust, a renovation, leasing, and management company of single-family properties which it rents out, boosted its payout from $0.01 to $0.03 last quarter, which isn't half bad considering how recently the company was formed.
Source: Silver Bay Realty Trust, fourth-quarter presentation.
Although its 0.8% yield might turn off prospective income seekers, they should keep in mind that Silver Bay has qualified as a REIT, meaning it'll be required to return 90% or more of its profits in the form of a dividend, and that it'll also get preferential tax treatment. Silver Bay's business is just in the process of ramping up, with revenue growth expected to near 60% this year and 25% next year. Furthermore, as QE3 winds down, lending rates may rise giving Silver Bay added rental pricing power as higher rates push on-the-edge homebuyers back into renting. All told, even at 31 times forward earnings, Silver Bay Realty Trust looks to have a bright future.
