The Dow Jones Industrials (^DJI 0.32%) include 30 of the most influential companies in the world, and they share a common trait: all pay dividends. Indeed, distributions are so important to Dow stocks that you can typically count on most of the companies to raise their payouts like clockwork each year. November is traditionally when you can expect to see increases from Nike (NKE -2.62%), Merck (MRK -0.13%), and Disney (DIS -0.01%), but will the three Dow components follow through this year? Let's take a look at their dividend histories and prospects for future payout growth.
Of the three stocks, Merck has by far the biggest yield at 3.8%. Yet it also has the poorest prospects for dividend growth, as it only raised its payout by a single penny per share last year and kept its payout unchanged from 2004 to 2011. Considering that the company paid out more in dividends over the past year than it brought in from earnings, along with the drugmaker's patent-cliff challenges, Merck's stinginess isn't all that surprising. Last year, Merck announced its annual increase on Nov. 27; with the company seemingly trying to re-establish regular dividend growth, investors could see a very modest increase later this month to extend the streak to three years.
Nike is in the opposite position of Merck, having plenty of earnings for use in boosting payouts but having a low yield of just 1.1%. The athletic giant has done a good job of accelerating its dividend growth in recent years, though, with increases of 15%-17% in each of the past three years. With a payout ratio of just 28%, a raise to $0.24 or $0.25 per share each quarter wouldn't tax Nike's cash flow. An announcement somewhere around the Nov. 15 date on which it announced last year's boost could extend Nike's decade-long streak of increases another year.
Disney is unusual among dividend stocks in that it delivers one payout each year. Also carrying a low yield of slightly more than 1%, Disney announced a 25% dividend increase last Nov. 28, following up on a 50% increase the previous year and a 14% jump the year before that. A payout ratio of just 23% would easily justify a dividend jump to $1 per share annually, and the growth potential of its many entertainment franchises should keep those payouts growing well into the future.
