Another week, another bunch of dividend raises. Among the generous companies doing the raising over the past few days were several titans in their respective industries: Cisco Systems (CSCO 2.85%) from IT, utility NextEra Energy (NEE 0.60%), and the operator of those ubiquitous brown delivery trucks, United Parcel System (UPS +1.53%).
These large companies have a great many shareholders, who were undoubtedly glad to hear they would be getting a little more cash from their investments. Let's dig in to the particulars of the new distributions, and the fundamental performance underpinning them.
Cisco Systems
This veteran tech company has been paying a quarterly dividend more or less consistently since early 2011. Over that time, it's been happy to raise the payout, and last week, it announced a fresh increase. The distribution will be $0.21 per share: 10% higher than the preceding amount.
Cisco's on a high just now. The company shot past analyst estimates in its just-reported Q2, managing to lift net profit by a steep 68% on a year-over-year basis to $2.4 billion. Revenue was also up, if not so precipitously, by 7% to $11.9 billion.
That was good enough to juice the company's stock price by 10% on the day results were announced. This propelled the shares to their highest level in over seven years.
But a sharply higher price, of course, means a notable reduction in dividend yield. It's now 2.9%, which is low for the stock's past year of trading. But it's still well above the average for the dividend-paying stocks of the S&P 500 index, so it's a better payout than many notable companies are distributing these days.
Meanwhile, Cisco has a war chest of nearly $4.8 billion in cash and equivalents, around $500 million more than it'll need to pay a year's worth of the new dividend.
Said distribution will be paid on April 22 to shareholders of record as of April 2.
NextEra Energy
This sprawling power producer is another company that likes to lift its distribution. It's been doing so habitually for over two decades. This latest boost amounts to 6%, landing at $0.77 per share.
NEE Dividend data by YCharts.
The company probably could have cranked it higher if it wanted to. Its Q4 saw double-digit increases in key fundamentals -- revenue zoomed ahead by 29% on a year-over-year basis to $4.7 billion, while adjusted net profit was 10% higher at $458 million.
If all goes according to plan, more increases are on the way. The company's projecting adjusted per-share earnings of $5.75-$6.25 for fiscal 2016, up from this year's anticipated $5.40-$5.70. The tally for 2014 was $5.30.
In terms of cash management, NextEra Energy had nearly $2 billion in free cash flow last year, well in excess of the under $1.4 billion it'll have to pay for a year's worth of the new payout. Steadily increasing that distribution is clearly important to the company, and it has the financial means to do so. Its dividend, then, seems rather safe to me.
NextEra Energy's new dividend is to be paid on March 16 to shareholders of record as of Feb. 27.
United Parcel Service
This company is happy to point out that it's either maintained or raised its quarterly dividend for over 40 years, starting well before it launched its IPO in 1999. The latest lift was declared last week, a 9% increase to $0.73 per share.
Not every financial figure has been rising for UPS, however.
In Q4 -- its money quarter because of the holiday season -- the company hired an army of temporary workers to handle the extra volume (and perhaps to quell criticism for not doing this sufficiently in 2013's Santa season). This helped increase its operating expenses by almost 16% on a year-over-year basis to $15 billion.
Unfortunately, the top line didn't rise as much, advancing only 6% to a bit shy of $16 billion. As a result, net income dove by over 60% to $453 million.
UPS Net Income (Quarterly) data by YCharts.
To help rectify this disparity between revenue and bottom-line performance, the company says it'll charge customers more for the extra costs it incurs during peak periods. That's a chancy strategy that could put the squeeze on both top and bottom lines.
Even so, I don't think the dividend will come under threat; UPS is still a cash printing machine, generating over $5 billion in free cash flow in the three years prior to fiscal 2014. Dividends have cost it from $2 billion to nearly $2.3 billion in that time. Considering that, the current payout feels secure.
UPS's upcoming payout is to be distributed on March 10 to stockholders of record as of Feb. 23.
