If your investment strategy involves buying stocks with a high dividend yield, you may want to look carefully before you buy and bet on the income. Many dividend stocks with high yields have calculated their income payout based on previous dividends that are annualized out. This means that you’re buying based on past dividend investment trends, not on the future. A safer bet is to buy stocks raising their dividends and boosting yields like H.J. Heinz (HNZ), Lowe’s (LOW) and McKesson (MCK) have of late – among others.
To ensure your income focused trading strategy is in order and that you’re buying the best dividend stocks with a true yield you can count on, it’s safest to bank on stocks that are boosting their dividends now. Nobody wants to be caught holding a company that cuts its dividend or eliminates it altogether.
Here are six stocks that have boosted their dividends recently that are worth a look:
Dividend Yield Increase – Heinz
Iconic ketchup maker and food products company H.J. Heinz (HNZ) raised its dividend at the end of May from $1.68 to $1.80 per share, or an increase of about 7%. That boosts the dividend yield of Heinz to about 3.8% as of current valuations.
Heinz has done well recently thanks to strong brand loyalty and the stability of consumer staples sales in an uncertain economic environment for investors. The company’s revenue has grown about 10% in the past few years, from $9 billion in 2007 to $10.1 billion in fiscal 2009 — no small feat in the face of the worst recession in generations. Heinz earnings recently beat analysts expectations with EPS of 60 cents a share over forecasts of 59 cents, and the company is showing strength right now.
Dividend Yield Increase – Lowes
Home improvement retailer Lowe’s (LOW) raised its quarterly cash dividend last week by about 22% to 11 cents a share. The dividend boosts the company’s yield, and is payable Aug. 4 to shareholders of record July 21. Lowe’s has declared a cash dividend every quarter since going public in 1961, and this increase in yield makes this stock pick even more attractive to income investors.
Lowe’s recently reported a 2.7% increase in earnings to 34 cents per share on the quarter, topping estimates by nearly 10%. LOW stock revenue also grew by nearly 5%. Lowe’s has met or exceeded earnings forecasts in each of the last three quarters, and is optimistic about its next report that will hit Wall Street in August. Lowe’s dividend yield is now 1.9%.
Dividend Yield Increase – McKesson
McKesson Corporation (MCK), a health care company that offers medicines, pharmaceutical supplies and other products, bumped its dividend higher by 50% recently. Specifically, MCK increased its dividend yield by pushing its quarterly payout to 18 cents a share from 12 cents a share based on strong cash flow trends. The ex-dividend date is June 8 payable to shareholders on June 30.
McKesson recently fell just shy of earnings estimates in its first-quarter report. However its worth noting that MCK stock has seen improving EPS for each of the last four consecutive quarters. MCK stock now yields 1.1%.
Dividend Yield Increase – Quanex Building Products
Quanex Building Products (NX) announced recently that it will add 4 cents to its annual dividend, a 33% boost over the previous income payout. The second quarter dividend from Quanex will be 4 cents a share, payable June 30, 2010 to shareholders of record on June 16, 2010. NX also recently authorized a stock buyback of 1 million shares.
Though aluminum sheeting and other building products don’t seem like they would be in high demand amid a housing slump, Quanex is booming right now. The company has topped EPS estimates for four straight quarters with performances that range from a 57% beat to a stunning 1,700% earnings surprise! NX stock is up 20% year to date compared with a small decline in the broader markets. NX stock now yields 0.8%.
Dividend Yield Increase – Ryanair
As Europe’s largest no-frills airline, Dublin-based Ryanair (RYAAY) has managed to weather the recession fairly well thanks to its popularity among cash-strapped flyers. On Tuesday, Ryanair announced a return to profitability Tuesday and began paying its first-ever cash dividend to shareholders since the company went public in 1997.
Specifically, Ryanair will pay out 500 million pounds, which equates to 34 European cents per share, in October. What’s more, management said it may return another 500 million pounds to shareholders through either a one-time dividend or share buyback by the end of 2013. After announcing that its May passenger traffic was up 17% this year over last, it’s reasonable to expect that Ryanair will have the cash for such a move if these trends continue.
Dividend Yield Increase – Williams Sonoma
Williams-Sonoma Inc. (WSM) announced at the end of May that it will execute a $60 million stock buyback plan. Coupled with this, Williams-Sonoma raised its quarterly dividend another 15%, bringing its total dividend increase for the year to 25%. Best of all for those that are looking to buy in to WSM stock, the boost comes immediately after a May 23 dividend so there is a huge window of buying opportunity before the next dividend is paid out in late summer.
In its recent earnings report, Williams-Sonoma posted a bigger-than-expected fiscal first-quarter profit. Specifically, WSM stock came with earnings per share that were nearly double what were forecast, with EPS of 23 cents on an estimate of 12 cents! The showing marked four straight quarterly earnings surprises for Williams-Sonoma, and the housewares retailer expects continued success going forward. WSM now yields 2.2%.
As of this writing, Jeff Reeves did not own a position in any of the stocks mentioned here.