7 Companies Doubling Their Dividends This Year

Although we've seen a modest retracement from our all-time highs set two weeks ago, the markets have yielded seven straight months of gains to investors. A combination of an improving jobs market, rising home prices, and ongoing record low lending rates is creating a slow but steady recovery and giving investors ample reason to be optimistic about the future.

In fact, things have been so good – with all three indexes up double-digits year-to-date -- that income stocks have sort of been lost in the mix, but they shouldn't be.

We know for a fact that peaks and troughs are a natural part of the economic cycle and dividend income can be quite the sustaining factor to one's portfolio in both good and bad times. Today I propose to look at seven companies that have doubled, or more than doubled, their dividend so far this year and see if they offer a compelling investing thesis beyond just their big dividend boost.

Source: Individual company press releases.

Southwest Airlines
Southwest has certainly never been a slouch in the airline industry, maintaining profitability even during tough times and gaining market share through its passenger-friendly "bags fly free" program.

Source: Josh Beasley, Wikimedia Commons .

In an effort to return more cash to shareholders, the company quadrupled its dividend in May to what amounts to an annual yield of 1.1%, and it boosted its existing share repurchase program to $1.5 billion from $1 billion.

While clearly a standout in its sector, I can't help but be concerned about the catch-22 that constantly threatens to take down the airline industry. If the economy is booming, then oil prices are likely to rise and fuel costs will cripple margins. Conversely, if the economy is weak, fuel costs remain low, but traffic rates drop. This is a capital intensive and low margin business that still doesn't excite me, even with a quadrupling in its dividend.

Helmerich & Payne
Contract driller Helmerich & Payne definitely got the attention of investors this week when it more than tripled its annual payout from $0.60 to $2.00. The new yield of 3.2% puts it among drilling's elite companies.

Though Helmerich & Payne operates rigs offshore and overseas, the vast majority of its drilling rigs (88% to be exact) are land rigs based in the U.S. With such an abundance of shale natural gas and oil found over the past decade and the Obama administration keen on making America more energy independent, you can rest assured that Helmerich & Payne is going to be a busy bee for years to come.

Regions Financial
Following March's latest round of stress tests on the nation's largest financial institutions, Regions Financial approved a tripling in its quarterly payout to $0.03 from $0.01 as part of its plan to return cash back to shareholders. 

Over the past year, a lot has gone right for Regions with the bank completely repaying its TARP loans and focusing its efforts on traditional banking practices (e.g., loans and deposits) rather than relying on riskier derivative instruments to make money. Going this route has allowed Regions to build up ample liquidity and put the bank in good shape to deliver improved results in the future. At just 82% of book value as of yesterday's close, I suspect there's still room to run for Regions.

Ford
Ford has been flexing its muscles since 2009 with the introduction of the EcoBoost engine, which utilizes turbochargers for extra power while using less fuel the remainder of the time, and by infiltrating the rapidly growing Chinese car market. CEO Alan Mulally has clearly worked wonders in his effort to return Ford back to its glory days.

Those glory days became a bit more real when Ford, in January, doubled its quarterly payout to $0.10 from $0.05. This payout is still very sustainable at less than 30% of its forecasted EPS this year, leaving plenty of room for R&D, paying down debt, and possibly even increasing its payouts in the future. With the F-Series truck still running circles around Silverado and Sierra, and Ford making waves in China, this is a company with potential written all over it. 

Source: Robert Scoble on Flickr.

MasterCard
MasterCard may have drastically boosted its payout in February, but it hardly made a dent for income seekers with the stock yielding just 0.4%. Investors will likely forgive that low yield, though, with shares up better than 340% since early 2009 and MasterCard also initiating a $2 billion share repurchase program.

The question of whether or not MasterCard can march higher seems like a no-brainer to me: absolutely!

As a payment processing facilitator, it isn't exposed to debt defaults and still has metaphorically and literally a world of opportunity ahead of it. With 85% of global transactions still being handled in cash, emerging markets represent a multi-decade growth opportunity for MasterCard.

National Oilwell Varco
Much like we saw with Helmerich & Payne, National Oilwell Varco, a supplier of rig equipment for land and offshore drill rigs, has a moat of opportunity ahead of it thanks to huge land-based shale deposits in the U.S. and recently tapped deepwater oil fields in the Gulf of Mexico.

Because of National Oilwell's robust cash flow, it was able, in May, to double its quarterly payout to $0.26 from $0.13 and effectively boost its annual yield to a respectable 1.5%. The dividend alone is still probably not enough to excite income seekers, but the company's role in supplying practically everything for offshore and some land-based drillers is more than enough to get me excited about its prospects over the coming years.

Allison Transmission
Allison -- a maker of medium to heavy-duty transmissions for the energy, defense, and commercial markets -- bumped its dividend up to $0.12 per quarter from $0.06 just a year after initiating a dividend. The new payout jumps Allison's yield up to 2% and pushes its payout ratio over 50% based on this year's forecast of $0.92 in EPS.

While a nice way to give back to shareholders, I admit to being a bit concerned about the possibility of budgets cuts weighing on its defense and energy sector orders. Allison even alluded to weakness in those markets in its most recent quarter despite sticking to its full-year forecast. I'm not quite sold on this dividend just yet and would recommend investors be extra cautious around Allison.