Last week, investors reaped a fat autumn harvest of dividend raises. Issuers hiking their payouts came from a wealth of different industries, from investment banking to auto sales to real estate.
Several also are in the manufacturing and energy fields, and those two sectors are represented in my selections this week. The third raiser, however, is from a business few publicly traded companies operate in at the moment. Read on to find out the details.
1. Honeywell
Some companies are unpredictable with their dividend raises, while others make their bumps regularly. Big industrial conglomerate Honeywell (HON 0.30%) is very much an example of the latter. Just as it has over the past several years, it's marking autumn with a hike in its quarterly dividend. This year, that means a 15% raise to just under $0.60 per share.
HON Dividend data by YCharts
The company is lifting its payout despite a 5% year-over-year drop in sales in its most recently reported quarter (to $9.6 billion). Much of that decline, however, was due to unfavorable currency movements. As Honeywell is based in the U.S., its bottom line is getting hit by the recent strength of the dollar.
Yet that bottom line is indisputably rising: It advanced by 8% to nearly $1.3 billion for the quarter. The disparity between that growth figure and its revenue counterpart clearly demonstrates that the company is squeezing more profit out of its sales. That's a very encouraging development, and a strong indication that Honeywell is not merely doing fine, it's thriving.
In my view, investors shouldn't worry much about the sustainability of the dividend; Honeywell knows how to make money and is good at it. And with that widening profit margin, it'll continue to have plenty of dosh to keep rewarding its shareholders.
Honeywell's upcoming dividend payment is to be made on Dec. 10 to investors of record as of Nov. 19.
2. Valero Energy
Crude oil prices are wreaking havoc on many players in the energy sector, but not refinery specialist Valero Energy (VLO 0.98%). This is because while crude prices have cratered since last year, those for popular refined products like gasoline haven't sunk nearly as much. That means wider profit margins for smart refiners, which adds to the cash pile available for dividends.
Brent Crude Oil Spot Price data by YCharts
The good times have given the company the financial muscle to push its quarterly payout a generous 25% higher to $0.50 per share.
The company's third-quarter net profit rose by 30% on a year-over-year basis to almost $1.4 billion, handily beating analysts' estimates. Also exceeding projections was revenue, even though that line item dropped by 34% to under $30 billion.
Meanwhile, with that bottom line fueling growth in cash flow, the company has plenty of scratch to cover its well-enhanced dividend. Over the past five years, the company has paid out, at most, 27% of free cash flow in distributions. It not only has enough for the current distribution, but if it keeps performing this well, it'll be able to lift it nicely in future periods too.
Valero Energy's new dividend is to be paid on Dec. 17 to shareholders of record as of Nov. 23.
3. StoneMor Partners
At the risk of sounding cynical and morbid, death can be a good business. For proof, look at the success of end-of-life services provider StoneMor Partners (STON), a consistent distribution payer that has declared an $0.01 bump in its quarterly payout, to $0.66 per unit.
Investors could be forgiven for expecting more, though. After all, StoneMor Partners recently delivered its highest-ever quarterly revenue figure, at nearly $81 million, a sturdy 13% increase on a year-over-year basis.
STON Revenue (Quarterly) data by YCharts
Although its bottom line loss deepened (to almost $5 million, from the year-ago quarter's $100,000 or so), the company's distributable cash flow -- a more meaningful indicator, as that's where the partnership pays those dividends from -- rose by 25% to just over $19 million.
This amount basically matches what the partnership hands out in total to its unit holders. Meanwhile, it likes to bulk up through buyouts of peers, and needs to keep some cash on hand for purchases. After its second quarter ended, for example, it announced it had reached deals to buy one cemetery and four funeral homes for a total of $6.6 million.
So although this latest raise in the payout isn't generous at first glance, it's well in line with the partnership's financial position, and gives it space to keep improving fundamentals through those buyouts.
StoneMor Partners' new distribution will be dispensed on Nov. 13 to unit holders of record as of Nov. 6.
