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3 Stocks That Should Amp Up Their Dividends — And Soon!

Too much of these companies' cash is sitting on the sidelines

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Western Union

WesternUnion185 3 Stocks That Should Amp Up Their Dividends    And Soon!It’s admirable to see a company save some cash for a rainy day. Sometimes, however, there’s not a lot of purpose in doing so.

Enter Western Union (WU), which reliably makes good money, but keeps a little too much of it.

It would be easy to assume the Western Union business model was a low-margin affair, leaving little room for dividends, let alone dividend growth. The money transfer business is surprisingly potent, though, with this company’s operating margins approaching 25%, and net margins near 18%.

And to be fair, it gives a decent chunk of it back. In 2010, it paid out 25 cents in dividends from the $1.36 per share it earned (18%). 2011’s dividend payout was 31 cents of the $1.84 the company earned per share (17%). And in 2012, Western Union’s dividend reached 42 cents per share, or 25% of earnings of $1.69.

Were it a tech or a pharmaceutical company, those payout ratios wouldn’t raise an eyebrow. For a cash cow like Western Union though, what could it possibly do with that hoard to actually grow the business? WU is sitting on a whopping $1.77 billion in cash, which is nearly 20% of the company’s market cap.


Article printed from InvestorPlace Media, http://investorplace.com/2013/07/3-stocks-that-should-amp-up-their-dividends-and-soon/.

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