Investing in the first half of 2010 hasn’t been easy, with the broader stock market taking a tumble for the first six months of the year. Still, dividend investors have been cheered by the fact that high yield stocks continue to maintain or increase their payouts even in this difficult environment. When the market gets choppy, these dividend stock investors can rely on the regular dividends of their portfolio to offset some of the declines.
Last week, a number of noteworthy stocks boosted their dividend yields – including Best Buy (BBY) and General Mills (GIS) – while others like AT&T (T) maintained their quarterly dividend payout. Here’s an overview of the latest dividend changes on Wall Street:
Best Buy Boosts Dividend
On June 25, Best Buy (BBY) raised its quarterly dividend by 1 cent, to 15 cents a share, or by 7%. It’s payable on Oct. 26 to shareholders of record Oct. 5. BBY has paid a dividend each quarter since fiscal 2004, starting at 13 cents. In fiscal 2010, dividends totaled 56 cents a share, or $234 million.
BBY stock sees its growth coming from the addition of stores. Its U.S. stores were up to 1,069 in fiscal 2010 from 1,023 in fiscal 2009. Its revenue rise of 10.4 percent, to $49.7 billion in fiscal 2010, however, was driven primarily by the acquisition of Best Buy Europe in the second quarter of fiscal 2009. Comparable-store sales rose 0.6%
Will the next Super Bowl give yet another boost to giant HDTV sales? If there’s no double dip, maybe so. It seems the TVs are like cigarettes. No economic problems will keep consumers from buying them.
General Mills Dividend Yield Increases
General Mills (GIS) hiked its quarterly dividend by 14% last week to 28 cents. It’s payable on Aug. 2 for shareholders of record July 12. That amounts to a dividend yield of about 3% for GIS stock. The new annualized dividend rate of $1.12 a share represents a 17% increase over 96 cents paid in fiscal 2010.
The figures also reflect a 2-for-1 stock split on May 30, the last day of GIS’s fiscal 2010.
The GIS board also approved a share repurchase of up to 100 million common shares. Chief Ken Powell said the dividend reflects a “robust financial condition and excellent future growth prospects.”
The dividend announcement came a day before the Minneapolis-based company reported an 18 percent in diluted earnings per share, to $2.24. Net sales rose 1% and operating profit rose 8%, showing consumer staples sales have been strong despite an overall week economic environment.
Gross margins expanded to 39.7%, reflecting strong operating performance, effective cost-savings initiatives and supply-chain costs that were below prior-year levels, the company said.
Other things at work: Credit spreads on credit default swaps have widened 20% over the past three months for GIS. That compares with 29% for the consumer goods sector as a whole, according to Fitch Solutions. That and higher liquidity are indicating some strain for General Mills, Fitch said. But, “credit protection on General Mills is still pricing at ‘AA+’ levels, well above its Fitch Ratings’ ‘BBB+’ IDR,’ said Fitch Managing Director Jonathan Di Giambattista.
AT&T Dividend Yield Unchanged
AT&T Inc. has have kept its dividend steady at 42 cents a share, and now has a yield of 6.78%, up from 4.45% last year. It’s worth noting that T stock has been essentially unchanged for the last 12 months barring some brief moves into the upper $20s, so it’s not like the dividend yield increase is due to payout increases alone. Still, the hefty dividend rate is very attractive to income investors right now.
The next AT&T dividend is payable on Aug. 2 to stockholders of record July 9. In 2005, the dividend was around 32 cents a share. That’s growth of between 5 and 5.5 percent a year.
T’s book value is about $4.86, so it has been trading at five times earnings. That’s a good sign to some investors. However, its debt is a staggering $64.7 billion. Ouch.
Masco Holds Dividend Steady
Masco Corp. (MAS) kept its Q1 dividend at 75 cents, as the major maker of home improvement and building products continued to feel the effects of the deep new-housing slump. However the company, based in Taylor, Mich., does foresee a modest improvement in its markets.
Sales increased 3% in the first quarter, to $1.9 billion from a year earlier. Its breakout: Sales to key retailers rose 2%, international operations had a strong quarter. Gross profit margins and operating profit also improved significantly.
Masco reported a loss from continuing operations in Q1, though it narrowed to 2 cents from 24 cents in the first quarter o 2009. And it has a lot of cash on hand: $1.4 billion as of March 31. That bodes well for dividend investors, since this free cash means a cut is unlikely.
Without a new home buyer tax credit, sales of new homes and Masco’s as a result, could be hurt. But the company makes up part of that via home improvements, which Americans are making in lieu of buying new.
Lennar Maintains Quarterly Dividend Yield
Lennar Corp. (LEN) kept its quarterly dividend at 4 cents a share for Class A and B stock, payable Aug. 5 to shareholders of record July 21. That’s a yield of 1.1%
Lennar saw a year-over-year sales decline of 9% in its second quarter, but reported a profit of nearly $40 million, or 21 cents a share, versus a loss of more than $125 million a year earlier.
Lennar Homebuilding, however, recorded an operating loss of $29.5 million. But was a considerable narrowing, though, from a $116.5 million loss a year earlier.
Its gross margin on homes sales was 20.6%, pretty impressive in a slow sales environment where some builders are being forced to discount steeply.
But its cancellation rate was 17 percent, and more importantly its backlog of homes was up 21 percent, to nearly 2,500. Lennar Homebuilding has a cash kitty of $1.2 billion, so a dividend boost may be likely in the future if the housing market turns around.
