This commentary was sent to subscribers of Dividend Stock Advisor at 11:58 a.m. on Feb. 2. Click here to learn about this newsletter and portfolio service for income investors.
Three notable companies initiated dividend payouts in the past 24 hours.
First, Old Dominion Freight Line (ODFL) said Thursday that it will begin paying a quarterly dividend of $0.10 a share (0.5% yield). Investors at the close of trading on March 1 will qualify for the payout on March 20. The truck shipper's initial annual payout represents just 10% of expected 2017 earnings of $3.98 a share.
The company is expected to average 12% annual earnings growth over the next two years, which should allow management to steadily growth the dividend. Even so, the stock has gained 55% over the past year and recently traded around $86.65, so the new starter payout will likely not spark much investor interest.
Next, Piper Jaffray (PJC) initiated a quarterly dividend of $0.3125 a share (1.7% yield) today. Investors at the close of trading on Feb. 14 will qualify for the payment on March 13. The investment brokerage's initial annual payout is equal to 22% of expected 2017 earnings of $5.63 per share.
Management also posted better-than-expected quarterly results today. Piper shares have moved 125% higher over the past 12 months and recently traded around $75.30. As a result, the new dividend represents just another positive sign from management.
Finally, Tenneco (TEN) said overnight that it will begin paying a quarterly dividend of $0.25 a share (1.45% yield). Investors at the close of trading on March 2 will qualify for the payment on March 23. The initial annual payout from the auto parts manufacturer is equal to 15% of expected 2017 EPS of $6.47. Management also pledged to repurchase up to $400 million of stock over the next three years.
Speaking of management, Tenneco announced today that Brian Kesseler will become the new chief executive officer on May 17. Kesseler has been the company's chief operating officer since January 2015 and is replacing Gregg Sherrill, who led the business for 10 years.
The stock has gained 88% over the past year and recently traded around $69.00. Given this is an internal promotion, we believe the executive transition should be relatively smooth. The dividend and buyback serve as another way that Tenneco is rewarding shareholders.