One of the most satisfying experiences for an investor is when a stock they own gets its dividend lifted. Not only does this put more money directly into the lucky investor's pocket, it often raises the share price because the market is willing to pay that much more for the extra payout. So in the ideal case it's a double win for the shareholder. Or even more, if the company's long-term fundamentals are strong enough, it could keep adding to its distribution.
With that in mind, we're picking out three notable dividend raises that occurred within the last week. Three famous stock market names from different industries elected to lift their distributions by notable amounts. Without further ado, they were:
For many consumers, supplemental insurance specialist Aflac (NYSE:AFL) is famous for its TV commercials featuring an accident-prone duck that insists on squawking the company's name.
To many income investors, however, the firm is no joke. It is one of the dividend aristocrats, an exclusive club of S&P 500 component stocks that have hiked their distributions for at least 25 years in a row.
On the back of better-than-expected Q3 results, Aflac elected to boost its common stock payout by 5% to $0.39 per share.
That amount totals around $176 million for the company's 450 million or so shares outstanding. That's well under the net profit of $706 million for the quarter, and a fraction of the $2.7 billion in cash and equivalents the company was carrying on its books at the end of the quarter.
Aflac has typically kept its payout ratio (the percentage of earnings it distributes as dividends) rather low, and there's no sign it'll change that habit. Expect the insurer to keep its dividend aristocrat status going forward; most likely its distribution will keep sloping upwards in the future.
Aflac's just-declared dividend is payable on December 1 to shareholders of record as of November 19.
Engineering giant Honeywell International (NYSE:HON) isn't quite in the dividend aristocrats category, but it seems as if it would like to be. Last Friday the sprawling firm declared a fresh quarterly common stock dividend of $0.5175 per share, an increase of 15% over its predecessor. In doing so, it didn't hesitate to point out that it's raised its distribution ten times since 2005.
The just-declared dividend represents a payout ratio of around 42% on the EPS figure of Honeywell's most recently reported quarter. Over the past decade, the company's ratio has tended to fluctuate; that particular percentage is on the low end of the firm's 10-year range, which tops out at around 60%.
Besides, in terms of cash on hand the company is quite flush. It currently boasts one of the strongest cash positions (at $6.4 billion at the end of September) it's had in quite some time. The new dividend will cost it $405 million, a small chunk of that total. So the firm's dividend looks pretty solid now, and well-funded enough to keep that annual raise streak going.
Honeywell's enhanced payout will be distributed on December 10 to holders of record as of November 20.
Casino operator Wynn Resorts'(NASDAQ:WYNN) tends to be generous with its dividend. As it's been doing well lately, it has just lifted its common stock payout by 20% to $1.50 per share, and is tacking on an extra dividend of $1.00.
In its Q3 results handed down last week, Wynn's Las Vegas operations made up for a general slump in its key market of Macau. All told, the firm recorded a 9% year-over-year increase in net revenues and a 5% rise in attributable net (to $191 million, or $1.88 per share).
Wynn has been a fanatical dividend payer over the years. It likes to hand out the bulk of its profit, and then some, in the form of distributions. This quarter is no different. But as a casino operator with a bottom line that can fluctuate, that payout can be inconsistent.
The company's stock is expensive and dividend yield (currently 3.2% if we don't count that extra disbursement for the quarter) isn't exceptional, so these shares may be too risky for those looking to be more consistently rewarded for holding such an up-and-down company.
Both the new $1.50 dividend and its $1.00 addition are to be handed out by Wynn Resorts on November 25 to shareholders of record as of November 12.
The payout parade
As you can see, not all dividend raises are created equal. The new distributions of Aflac and Honeywell look solid and sustainable, while the fundamentals of both companies leave open the possibility for more hikes in the future. The prospects for Wynn Resorts, in this writer's humble opinion, are murkier.
In any given week, it's likely that at least a few companies will be lifting their distributions. Investors should always take care not to be seduced into a stock by a dividend hike alone; we should always take a good, hard look at underlying fundamentals to determine whether such a raise is sustainable.