Many companies declare quarterly dividends alongside their earnings reports, giving investors just one more reason to keep their eyes peeled. And if a company made a good showing in the past quarter, often times they give some of that extra cash back to their loyal investors by increasing the payment.
So, it comes as no surprise that lately several industry leaders announced increases in their quarterly dividend payments. Some investors have taken the bait already, but my question is — is it time to buy? Let’s take a look:
The Payout: Britain’s oil giant BP PLC (NYSE:BP) hiked up its quarterly dividend by 14% to 8 cents per ADS. This is the first increase in over a year. Shareholders of record on Feb. 17 will receive the payment on March 30.
Does it Stack Up? Out of 55 companies in the Major Integrated Oil & Gas Industry, BP’s 4% dividend yield is the seventh-highest.
Is it Worth It? As appetizing as its dividend yield sounds, you’ll want to refrain from scooping up this stock. I consider BP a C-rated stock due to flat buying pressure and lukewarm operating margin growth. Also, this company has a shaky dividend history — after the Deepwater Horizon oil spill, the company suspended its 14-cent-per-share dividend payout and didn’t reintroduce it until a year later! BP is still locked in settlements over the spill and will be for some time.
The Payout: Western Union (NYSE:WU) also boosted its dividend, this time to the tune of 10 cents per share — representing a 25% increase. Shareholders of record on March 16 will receive this payment on March 30.
Does it Stack Up? Of the 419 companies in the Business Services Industry, Western Union’s 2.2% dividend yield is in the top 20.
Is it Worth It? This is another C-rated stock, so I recommend you hold off on this one for now. Even though Western Union has an attracted return on equity and cash flow, this is a run-of-the-mill company in the other six fundamental attributes I tested it for. And, buying pressure for this stock remains depressed.
The Payout: Hasbro (NASDAQ:HAS) increased its dividend by 20% and it now weighs in at 36 cents per share. Shareholders of record at the close on May 1 will receive this payment on May 15.
Does it Stack Up? Out of the six companies that make up the Toys & Games Industry, no other company can beat Hasbro’s 4% dividend yield.
Is it Worth It? Unfortunately, Hasbro’s fundamentals do not match up with its hefty yield; this stock is weak in terms of sales growth, earnings growth and operating margin growth. And, buying pressure for HAS remains at rock bottom. If you have this stock in your portfolio, I’d recommend you sell it, because it only scrapes by with a D-rating.
It seems, despite the attractive dividend yields, these stocks need more time to ripen before they’re ready to be picked. Although I’m a big fan of dividend stocks, I cannot stress how important it is to combine high yields with good growth prospects.
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