In a time when everyone is shouting that the sky is falling, markets are crashing and the economy is bust, there are still companies quietly going about their business and, yes, even raising their dividends. You heard it right: even while the entire financial services sector was racing against itself to slash dividends and sell off deadwood units and investments, the following companies found the cash and (can we say this?) the courage to up their shareholders' ante. Here are three companies that pay handsome dividends, have recently upped their payouts, and have some momentum behind their share price. (For more, see How and Why Do Companies Pay Dividends?)
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39 Years of Consecutive Dividend Hikes
Black Hills Corp. (NYSE:BKH) is a diversified operator in the electricity and energy sectors. Its customer base is scattered throughout Canada and the RockyMountain region, with the majority residing in South Dakota, Wyoming, Colorado and Montana. In the last eight weeks, the company's shares have appreciated by nearly 50% and currently pay an annual dividend of 7%. Black Hills reported outstanding year-over-year earnings this last quarter, increasing 57% from 44 cents per share in the first quarter of 2008, to 68 cents for 2009. The recent addition to the dividend marks 39 years of consecutive increases for the company. Black Hills chairman and CEO, David Emery, felt it necessary to apologize to shareholders for such a marginal increase in a January 30, 2009, news release following the company's Q4 earnings report. "During these economic times, we believe a more conservative increase is appropriate," he said.
A Defensive Focus
In a move that had many investors scratching their heads, REIT HCP Inc. (NYSE:HCP) recently raised its annual dividend to $1.84 per common share, making for a hefty 8.6% yield. But what in the world was a real estate operator doing raising its payout in this environment? Were they mad? HCP's focuses on properties serving the healthcare industry, and that focus has proved to be a defensive one. In the last six months, the stock price has appreciated by almost 50% as earnings remained steady.
Dialing in on Strong Dividend Yields
Warwick Valley Telephone Company (Nasdaq:WWVY) is a micro-cap telephone, internet and video service provider operating in the New York/New Jersey border area. The company recently increased its dividend by 10%, to 88 cents annually, offering current investors a 7.2% yield. Interested investors should also note that the company trades with a reasonably low P/E of just 10.87. Equally important however, WarwickValley is a very thinly traded issue (roughly 3,000 shares a day), and investors should also take that into account when considering a purchase. The stock has increased by roughly a third since the dividend increase was announced.
The Bottom Line
In normal times, rising dividends are a sign of a strong cash position and confidence on the part of management that business is good and will continue to be so. But when times are tough, dividend raises take on heightened importance, and stock pickers should look closely at companies that are willing to demonstrate this additional commitment to shareholders. (For more on dividends, read Dividends Still Look Good After All These Years and Dividend Facts you May Not Know.)