Income investors' cup runneth over, it seems. On the heels of a frothy week full of dividend raises, last week was similarly filled with companies increasing their payouts. Again, we've got plenty of choices for stocks to feature in this installment of our series.
I've picked a trio of fundamentally sound companies across several different industries that are lifting their distributions -- substantially, in one case -- above 10%.
American International Group (AIG 0.56%)
For those demanding souls who aren't satisfied with a mere doubling of their stock's dividend, there's American International Group. The big insurer has blasted its quarterly payout into the sky, hiking it by 124% to $0.28 per share from just under $0.13.
Perhaps the company is making up for lost time. One of the worst basket cases (and biggest taxpayer-funded rescues) of last decade's financial crisis, it's been a remarkable success story since then, consistently posting annual net profit figures well into the billions of dollars.
AIG Revenue (Annual) data by YCharts.
The most recent quarter was no exception, with revenue of nearly $16 billion and net income coming in at $1.8 billion. Although the latter was down by a steep 41% on a year-over-year basis, this was largely due to a big one-time gain in the same period the previous year. A more accurate measure of performance was operating income, which at $1.9 billion was slightly higher than the year-ago result and beat analyst estimates.
American International Group, in other words, is a money-making machine these days. Free cash flow in each of the past two fiscal years has topped $5 billion, many times what the company requires to fund its dividends. There's little need to worry about the future of this payout, as enhanced as it is.
Said distribution is to be paid on September 28 to holders of record as of September 14.
Illinois Tool Works (ITW -0.28%)
This durable industrial not only likes to raise its payout, it's one of the few Dividend Aristocrats on the market -- the select group of companies that have lifted their dividends at least once annually for a minimum of 25 years running. Illinois Tool Works has managed to double that, doing the increase dance for a hard-to-beat 50-plus years. This latest in the company's extremely long stretch of hikes will see its quarterly payout rise 13% to $0.55 per share.
ITW Dividend data by YCharts.
The company has been comfortably in the black in terms of both profitability and free cash flow in recent years. So for investors attracted to the stock for that rock-steady dividend, it probably isn't a dealbreaker that both top and bottom lines haven't been dynamic lately.
Its latest reported quarter more or less met analyst expectations (revenue of $3.4 billion, net profit of $480 million; both down on a year-over-year basis), and thus didn't wow the market. What was a bit more encouraging was the company's uptick of its per-share earnings guidance, to $5.07 to $5.23, from the previous anticipation of $5.00 to $5.20.
So in the most likely eventuality, Illinois Tool Works will continue to do well. And if it does, free cash flow should stay far above water, leaving plenty of dosh to fund those happily predictable dividends. The company's payout, then, feels very secure to me.
Illinois Tool Works' raised dividend will be paid on October 6 to shareholders of record as of September 30.
Monsanto (MON)
This is a company that do-gooders love to hate, but many dividend investors like very much. That's because Monsanto keeps upping its quarterly distribution, a streak it's kept alive since the beginning of this decade. The latest hike is a 10% bump to $0.54 per share.
There's no reason the company shouldn't be boosting its payout. It posted impressive results in its most recent quarter, with attributable net income rising 33% on a year-over-year basis to land at over $1.1 billion. This was well above the average analyst estimate for profitability. Net sales, meanwhile, advanced by 8% to $4.6 billion.
In terms of free cash flow, Monsanto's got more than enough to reward its stockholders. In fiscal 2014, FCF topped $2 billion, more than twice what it paid out in dividends. A 10% raise isn't going to dent that level much, so investors probably shouldn't worry about the viability of the increased payout.
MON Dividend data by YCharts.
One development to keep an eye on, though, is the company's dogged pursuit of Swiss agribusiness major Syngenta, for which it's offered $45 billion. Current Syngenta management seems just as determined not to sell, but shareholders might tip the balance in the U.S. pursuer's favor.
If so, that'll put a crimp on Monsanto's finances. More likely than not, the company will fund the bulk of the acquisition via inexpensive loans on favorable terms. Regardless, it's something for investors to watch going forward.
Monsanto's new dividend will be paid on October 30 to shareholders of record as of October 9.
