Diary of a Dividend Diva: Sifting Through the Payout Boosts

 | Aug 23, 2013 | 9:00 AM EDT  | Comments
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Stock quotes in this article:

wlk

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vci

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dis

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wpo

Continuing our theme of looking at dividends during the heart of dividend-payment season, we also need to consider companies that are raising their payouts. A dividend alone creates a natural floor for stocks in rough times, but rising dividends signal management's confidence in the outlook for the business, such that the total return on the stock could be substantially more than the income. A number of studies have shown the attractiveness of dividend-growth stocks as an asset "subclass." 

Despite the sluggish economy, a handful of companies have raised their dividends materially over the past year. The table below lists the largest increases. 

Big Recent Dividend Boosts as of Aug. 22, 2013

The list is a table for further research, as the reasons behind the raise can be many and varied. Some are actually special dividends, so the raise is one-time in nature -- although still a strong signal from management regarding a positive outlook.

For others, the raise is nice, but it only took the yield from "very low" to "low," so it may not be that useful. For instance, Westlake Chemical (WLK) more than doubled its dividend, but it only yields a paltry 0.75%. 

Names that raised the dividend and are sitting in the "sweet spot" of yield -- 4% to 6% -- are the most interesting. The raise is a positive, but the yield does not signal undue risk. For example, Valassis Communications (VCI) moved itself into the league of attractive income names. Disney (DIS) looks great now, and Washington Post (WPO) would, too, if Jeff Bezos wasn't taking it out!

Most of the financial names here look strong, as well. Still, beware of volatility in the group, given suspicions about boosted earnings from accounting maneuvers.

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