Now that we're deep into the first earnings season of the year, a score of companies declared fresh dividends last week, while many others cranked their payouts higher. It's encouraging to see this trend develop. Dividend increases benefit shareholders because not only do they put more cash in investors' wallets, but they can also boost the share price when the good news is handed down.
Here's a trio of notable dividend-lifters for this installment.
Kinder Morgan (KMI -0.32%)
Investors are nervous about the future of dividends paid by companies heavily involved in the oil business. That's understandable, given how the price of the commodity has swooned in recent months. But this company, the largest energy infrastructure company in America, isn't worried. In fact, it was confident enough to lift its quarterly distribution by just over 2%. The new payout amounts to $0.45 per share.
What helps is that Kinder Morgan claims a piece of many pies. It operates pipelines and storage facilities that move and hold substances such as crude oil, coal, jet fuel, carbon dioxide, and even steel. So it doesn't have to depend on one industry or a single commodity to succeed.
Meanwhile, even if the oil price slump were to affect it, the company has plenty of financial padding. It had a good 2014, with revenue climbing 15% over the previous year and attributable net profit landing solidly in the black (if a bit down from 2013). It's maintaining a healthy level of free cash flow.
KMI Free Cash Flow Per Share (TTM) data by YCharts.
In the conference call discussing those results, CEO Richard Kinder said his company was "still comfortable" with its ambition to lift its payout at a compound annual growth rate of 10%. The company's performance seems to back up his words.
Kinder Morgan's new dividend is to be dispensed on Feb. 17 to shareholders of record as of Feb. 2.
Emerge Energy Services (NYSE: EMES)
Like Kinder Morgan, this master limited partnership is refusing to put its distribution on ice because of weaker prices for black gold. It has bumped its quarterly distribution by 2% to $1.41 per unit.
Emerge is an interesting, sideways play on the oil fracking revolution. The partnership makes most its coin by mining, producing, and distributing silica sand, one of the main materials used in the activity.
A lower oil price means a potential slowdown in drilling for frackers, which, in theory, would adversely affect Emerge. However, the firm's silica sand is almost always sold through long-term contracts, so the partnership's revenue and EBITDA (from which its payout derives) shouldn't take much of a hit in the near future. And that's good, because both metrics have been rising. The former advanced by just under 10% (to $296 million) in Q3, while the latter saw a 44% increase to $37 million.
EMES Revenue (Quarterly) data by YCharts.
It should be kept in mind, however, that Emerge's distribution coverage is essentially its EBITDA. Thanks to those long-term agreements, it should at least be maintained over the next few quarters, but this might change eventually if the oil prices stay low. As an income investment, then, the partnership is probably best for speculators.
Emerge's new distribution is to be paid on Feb. 13 to unit holders of record as of Feb. 5.
Alaska Air Group (ALK -0.99%)
It's hard to resist cheesy airplane puns when writing about airlines, but I won't go there. Suffice it to say that this scrappy carrier's dividend just lifted off, soaring by 60% to $0.20 per share. That's the highest level, on a split-adjusted basis, since the company started paying a distribution in mid-2013.
ALK Dividend data by YCharts.
On a fundamental basis, Alaska Air Group has been solid lately. The company notched its all-time best Q4 in terms of adjusted net income ($125 million, well above Q4 2013's $77 million). Its full-year adjusted 2014 bottom line was also a record at $571 million compared to the $383 million the carrier netted in 2013. Breaking the numbers down a bit, several line items moved in the right direction. Mainline passenger revenue grew by 9% on a year-over-year basis in Q4, while those widely influential fuel costs (the priciest expense for airlines) fell by the same amount.
The near future looks good for the company. It's continuing to roll out new routes from its key airports in the Northwest, it has a decent cash cushion, and that depressed oil price should continue to help its results. Its distribution, then, looks fairly secure for the time being.
Alaska Air Group's new dividend will be handed out on March 10 to shareholders of record as of Feb. 24.
