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Tickers in this Article: DOW, NVS, DBD, NSC, HCBK
2009 is shaping up to be another lousy year for investors, especially those seeking dividends to supplement their income or support their retirements. In the first 50 days of this year's first quarter, according to Standard & Poor's, 26 companies have cut their dividends. In doing so, this removed $16.6 billion in payouts from investors' pockets. This is on top of the record-setting $15.9 billion from Q4 2008. At the beginning of February, S&P forecasted that dividend payments would decline 13.3% for the entire year of 2009 to about $214 billion in total payouts, the worst decline since 1942. This doesn't bode well since "Wizard of Wharton" Dr. Jeremy Siegel's research showed that during the 132 years between 1871 and 2003, 97% of stock market returns were through dividends. (Dividends may not seem exciting, but they can certainly be lucrative. Be sure to check out The Power Of Dividend Growth.)
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It's Not All Gloom And Doom
But even as Dow Chemical (NYSE:DOW) slashes its dividend by 64%, there is a glimmer of hope. S&P's Capital IQ reported that 1,744 corporations actually raised their payouts in 2008. In fact, during 2008, companies were almost four times as likely to raise their dividends than cut them. By placing the spotlight on companies that produce hefty amounts of free cash flow, we can eliminate some of the worry about dividend cuts. Below are five large-cap stocks from various industries that recently raised their payouts. Each yields at least 4% and produces large amounts of free cash flow.

Four Above 4% Plus Abundant Free Cash Flow
Novartis AG (NYSE:NVS)
The Swiss pharmaceutical manufacturer is preparing itself for the trifecta of long-term trends that is affecting healthcare. An aging population, combined with an increasingly sedentary and unhealthy lifestyle, is pushing up demand for its products. Add in growing emerging markets and you have a recipe for success. Novartis seems to be avoiding the "Patent Cliff" that is affecting many of its pharma peers with highest number of FDA-approved drugs from 2000 to 2008. Novartis may pick up market share through its investment in generic drug manufacturer Sandoz as competitors' drugs lose protected status. The company reported net income for 2008 at $8.2 billion. Free cash flow, for the producer of such drugs as headache medicine Excedrin and eczema treatment Elidel, clocked in at $7.65 billion. This prompted management to raise its 2009 payout by 25% from 1.60 a share in Swiss Francs to 2.00. This represents the 12th increase since the company's founding in 1996. The company yields around 4.4%.

Diebold (NYSE:DBD)
While you may not know the company's name, odds are you have used products by Diebold - the world's leading producer of automatic teller machines. As banks and other financial institutions find ways to cut costs, often with payroll reductions, they move to more automated solutions. Diebold is also a leader in new ballot machine technologies and supplied many of the new touchscreen voting machines this past November. Recently the company celebrated its 150-year anniversary. Diebold has another reason to celebrate - its free cash flow increased 109% in 2008 with $281 million on its balance sheet. Shareholders are rejoicing as well. Diebold increased its annual payout by 4%. It currently yields 4.5%.

Norfolk Southern (NYSE:NSC)
As the operator of one of the largest railway networks in the country, 21,000 miles in all, Norfolk Southern is poised to take market share away from traditional trucking companies as we move toward a greener future. The company boasts that each of its trains can remove more than 300 truckloads of freight from our highways, reducing greenhouse gases and fuel demand. Given the bullishness of the current administration toward "green" initiatives, this certainly bodes well for Norfolk. Coming off a record-setting year, as income before taxes increased 17% for the quarter, Norfolk's board increased the dividend by 6%. The railroad now yields 4.1%. This yield is supported by the company's hefty cash position of $618 million and the $1.2 billion in free cash flow it produced in 2008. In addition, Norfolk is undergoing a massive capital expenditure reduction plan that will shave $144 million in 2009.

Hudson City Bancorp (Nasdaq:HCBK)
Not all financial companies dove headfirst into crazy exotic mortgages. While making conservative lending decisions, HudsonCity has flourished in the current credit mess. Full year 2008 earnings clocked in at a record $445.6 million with non-performing loans at a low 0.43%. This gives the financial company the distinction of being the best-performing bank in the S&P 500 for 2008. Management is confident enough in Hudson's future to raise the dividend by 56% - the fifth consecutive quarter it has raised it. The bank's shares currently yield a healthy 5.2%.

Bottom Line
While the financial headlines seem to point to total devastation each day, there are rays of hope. Plenty of responsible companies are still rewarding shareholders with ever-increasing payouts. We just need to sift through all the gloom and doom. As investors, we should focus our attention to these sorts of equities.

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