Construction and mining equipment maker Caterpillar Inc. (CAT) on Wednesday saw its price target boosted by analysts at Jefferies & Co.
The firm raised its target on CAT from $110 to $120, suggesting a 20% upside to the stock’s Tuesday closing price of $99.86. That change came after the company’s recent investor meeting in Texas.
Jefferies also maintained its “Buy” rating on CAT, noting positive market trends and the company’s positive recent guidance.
Caterpillar shares fell 63 cents, or -0.6%, in premarket trading Wednesday.
The Bottom Line
I have been recommending Caterpillar (CAT) as an aggressive dividend recommendation since Dec.7, when the stock was trading at $89.20. The company has a 1.76% dividend yield, based on last night’s closing stock price of $99.86.
Disclosure I am long CAT shares.
Sunday, March 6, 2011
What is a Good Dividend Yield?
Dividend yields have a bit of a "Goldilock's porridge" quality about them. Investors have to try different yields while searching for the ones that are just right. Pick one that's too low, and you'll be risking your money and not getting paid for taking on that risk. But pick one that's too high and you could get seriously burned.
Consider the case of Halliburton (NYSE:HAL), an oil and gas company with a market cap of over 40 billion. Halliburton's current yield is 0.75%, which is less than what you can get from a 2 year U.S. treasury bill. One of these investment options is backed by the full faith and credit of the U.S. government, and the other one is not (probably).
To qualify as a good dividend yield, it has to compensate investors for the extra risk of owning stocks instead of bonds or bank CDs, so the yield shouldn't be too low.
Consistency is a prized value in dividend stocks. So much so that the S&P 500 has a special class of dividend payers called dividend aristocrats which have raised dividends for at least 25 consecutive years.
But consistency can cut both ways. Take a look at Merck (NYSE: MRK), a pharmaceutical company with a mega-market cap of over 100 billion. It currently sports a hefty yield of over 4.5% which is no small potatoes when 10 year treasury bonds are paying around 3.75% and most bank savings accounts are at less than 1%.
But as with so much of investing, the important aspect of the dividend yield is all about the future, not the present. And that's where Merck comes up short. The company has been paying the same exact dividend for over six years, without a single hike since September of 2004! That's not the kind of consistency that dividend investors hope for. To qualify as a good dividend yield, it has to be growing.
In early 2008, Harley Davidson (NYSE: HOG) had a dividend yield of $0.33 per share, or over 6%. Investors who were selling Harley stock for fear of what the recession would do to motorcycle sales were right to keep the stock price down, and the dividend was slashed by 70 percent in the next quarter!
To be a good dividend yield, it must be sustainable and shouldn't be temporarily inflated by a low stock price. In other words, it shouldn't be too high.
Too Low
Investors love dividends. And they have every reason to. A dividend can be, among other things, evidence that a company is:
- financially secure;
- confident about future sales trends; and
- willing to share that stability and success with it's shareholders
Consider the case of Halliburton (NYSE:HAL), an oil and gas company with a market cap of over 40 billion. Halliburton's current yield is 0.75%, which is less than what you can get from a 2 year U.S. treasury bill. One of these investment options is backed by the full faith and credit of the U.S. government, and the other one is not (probably).
To qualify as a good dividend yield, it has to compensate investors for the extra risk of owning stocks instead of bonds or bank CDs, so the yield shouldn't be too low.
Too Steady
Consistency is a prized value in dividend stocks. So much so that the S&P 500 has a special class of dividend payers called dividend aristocrats which have raised dividends for at least 25 consecutive years.
But consistency can cut both ways. Take a look at Merck (NYSE: MRK), a pharmaceutical company with a mega-market cap of over 100 billion. It currently sports a hefty yield of over 4.5% which is no small potatoes when 10 year treasury bonds are paying around 3.75% and most bank savings accounts are at less than 1%.
But as with so much of investing, the important aspect of the dividend yield is all about the future, not the present. And that's where Merck comes up short. The company has been paying the same exact dividend for over six years, without a single hike since September of 2004! That's not the kind of consistency that dividend investors hope for. To qualify as a good dividend yield, it has to be growing.
Too High
In early 2008, Harley Davidson (NYSE: HOG) had a dividend yield of $0.33 per share, or over 6%. Investors who were selling Harley stock for fear of what the recession would do to motorcycle sales were right to keep the stock price down, and the dividend was slashed by 70 percent in the next quarter!
To be a good dividend yield, it must be sustainable and shouldn't be temporarily inflated by a low stock price. In other words, it shouldn't be too high.
Just Right
That puts the sweet spot of dividend yields these days at around 3-5 percent. There are plenty of large cap companies paying dividends in this range which have been raising their dividends over the last five years. Running a screen for these metrics yielded about 40 stocks for me. Here are a few picks from the bunch:
Unilever (NYSE: UL)
Market Cap: 84 Billion
Yield: 4.75
Dividend Growth Rate (5 year average): 17%
McDonald's (NYSE: MCD)
Market Cap: 80 Billion
Yield: 3.21
Dividend Growth Rate (5 year average): 29%
Clorox (NYSE: CLX)
Market Cap: 9 Billion
Yield: 3.23%
Dividend Growth Rate (5 year average): 14%
Disclosure I am long CLX, MCD and UL shares.
Thursday, February 24, 2011
Deere & Co. (DE) Declares $0.35 Quarterly Dividend
The Deere & Company (NYSE: DE) Board of Directors declared a regular quarterly dividend of $0.35 a share on common stock, $1.40 annualized.
The dividend is payable May 2, 2011, to stockholders of record on March 31, 2011. The ex-dividend date is March 29, 2011.
Yield on the dividend is 1.6%.
Disclosure I am Long DE shares.
The dividend is payable May 2, 2011, to stockholders of record on March 31, 2011. The ex-dividend date is March 29, 2011.
Yield on the dividend is 1.6%.
Disclosure I am Long DE shares.
Seadrill (SDRL) Increases Quarterly Dividend to $0.675; Yields 7.3%; Declares Special $0.20 Dividend
Seadrill (Nasdaq: SDRL) has declared a quarterly dividend of $0.675 per common share, $2.70 annualized. The dividend is a 44.4% increase from the current rate of $0.4675.
Yield on the dividend is 7.3%.
The Board also declared a special dividend of $0.20 per share.
Yield on the special dividend is 0.5%.
Disclosure I am Long SDRL shares.
Yield on the dividend is 7.3%.
The Board also declared a special dividend of $0.20 per share.
Yield on the special dividend is 0.5%.
Disclosure I am Long SDRL shares.
Colgate-Palmolive (CL) Increases Quarterly Dividend 9% to $0.58
Colgate-Palmolive Company (NYSE: CL) has declared a quarterly dividend of $0.58 per common share, $2.32 annualized. The dividend is a 9% increase from the current rate of $0.53.
The dividend is to be paid on May 16, 2011 to shareholders of record as of April 26, 2011. The ex-dividend date is April 22, 2011.
Yield on the dividend is 3%.
Disclosure none.
The dividend is to be paid on May 16, 2011 to shareholders of record as of April 26, 2011. The ex-dividend date is April 22, 2011.
Yield on the dividend is 3%.
Disclosure none.
Monday, February 21, 2011
In Bull Markets, Utility ETFs Still Have Benefits
Although the stock market has come back strong, you’ve still got good reason to think about utility exchange traded funds (ETFs) and the benefits they can offer any portfolio.
The electric utilities sector holds many dividend plays that will help cushion a growth portfolio from its occasional dips, writes YCharts for iStockAnalyst. As the the market makes gains, investors pull money out of utilities for riskier plays, which has left many utilities undervalued.
Disclosure I am long XLU shares.
The electric utilities sector holds many dividend plays that will help cushion a growth portfolio from its occasional dips, writes YCharts for iStockAnalyst. As the the market makes gains, investors pull money out of utilities for riskier plays, which has left many utilities undervalued.
- Utilities are safe, no-surprise plays. These companies used to operate as government-endorsed monopolies that control the whole chain of production through distribution. Now, deregulated electric utilities are competing for customers, and many operate in non-regulated businesses, like trading energy futures or building power plants on speculation. As a result, utilities may cut their dividends since earnings didn’t meet expectations.
- For the investors who are still looking to utilities, a company’s willingness and ability to consistently payout dividends are among the top draws.
- Utility ETFs are experiencing an influx in interest from boomers as they make the transition to fixed-income investments for their retirements, according to the Wall St. Cheat Sheet. Rising energy consumption and a stronger economy also adds strength to the utilities sector.
- Utilities Select Sector SPDR Fund (NYSEArca: XLU). XLU is highly liquid and a good way to diversify into U.S. utilities. It also boasts a 4.7% dividend.
- iShares S&P Global Utilities Sector Index Fund (NYSEArca: JXI). JXI is a global utilities play. Though not as liquid, the fund could better be served as a long-term play. It has a respectable 2.95% dividend.
- First Trust NASDAQ Smart Grid Infrastructure (NASDAQ: GRID). GRID provides exposure to the clean-energy utilities plays. It should be noted that the fund does trade at a rather low volume.
- ProShares Ultra Utilities Fund (NYSEArca: UPW). UPW is a leveraged 2x daily bull, maximizing the daily moves of the underlying index.
- ProShares UltraShort Utilities Fund (NYSEArca: SDP). SDP is a leveraged 2x daily bear, a good way to play the sector if it falters short- or long-term.
Disclosure I am long XLU shares.
PowerShares to Change Tickers on Small-Cap ETFs
Invesco PowerShares and Select Sector SPDRs have reached a deal that would further differentiate their lineup of sector exchange traded funds (ETFs)
A settlement has been reached under which PowerShares will voluntarily change the ticker symbols of its nine S&P SmallCap Sector ETFs. The changes are aimed at making the PowerShares S&P SmallCap Sector ETF tickers more distinguishable from the Select Sector SPDR tickers.
The PowerShares SmallCap Sector ETFs will begin trading under the new tickers in late March 2011; everything else about the funds will remain the same. The new tickers are as follows:
Disclosure NONE.
A settlement has been reached under which PowerShares will voluntarily change the ticker symbols of its nine S&P SmallCap Sector ETFs. The changes are aimed at making the PowerShares S&P SmallCap Sector ETF tickers more distinguishable from the Select Sector SPDR tickers.
The PowerShares SmallCap Sector ETFs will begin trading under the new tickers in late March 2011; everything else about the funds will remain the same. The new tickers are as follows:
- Consumer Discretionary was XLYS, will become PSCD
- Consumer Staples was XLPS, will become PSCC
- Energy was XLES, will become PSCE
- Financials was XLFS, will become PSCF
- Health Care was XLVS, will become PSCH
- Industrials was XLIS, will become PSCI
- Information Technology was XLKS, will become PSCT
- Materials was XLBS, will become PSCM
- Utilities & Telecom Services was XLUS, will become PSCU
Disclosure NONE.
Semiconductor ETFs Power Up
Semiconductor exchange traded funds (ETFs) are getting a boost from sector component Micron (NYSE: MU), but the sector may face headwinds as the short sellers and technicalities are a factor.
The semiconductor sector is doing better than it has in more than three years, but some worry that it may be nearing a top. Some analysts forecast that any pullback in the market might spark a sell-off in semis, reports Rodrigo Campos for Reuters. For now, though, the markets are flying high and we’re coming off a strong earnings season.
That often bodes well for semiconductors, beneficiaries of increased corporate IT spending.
Earlier this week the sector did get a shot of strength as shares of Micron are turning in one of the sector’s best performances, with the memory chip maker currently up by 3.8 %. Shares are on pace to close at their highest price since August of 2007, reports RTT staff writer for RTT News.
Is there a pullback in store? Maybe, but for now, you can’t deny that both SPDR S&P Semiconductor (NYSEArca: XSD) (of which Micron is 4.6%) and iShares PHLX SOXX Semiconductor (NYSEArca: SOXX) are more than 20% above their long-term trend lines.
Disclosure NONE.
The semiconductor sector is doing better than it has in more than three years, but some worry that it may be nearing a top. Some analysts forecast that any pullback in the market might spark a sell-off in semis, reports Rodrigo Campos for Reuters. For now, though, the markets are flying high and we’re coming off a strong earnings season.
That often bodes well for semiconductors, beneficiaries of increased corporate IT spending.
Earlier this week the sector did get a shot of strength as shares of Micron are turning in one of the sector’s best performances, with the memory chip maker currently up by 3.8 %. Shares are on pace to close at their highest price since August of 2007, reports RTT staff writer for RTT News.
Is there a pullback in store? Maybe, but for now, you can’t deny that both SPDR S&P Semiconductor (NYSEArca: XSD) (of which Micron is 4.6%) and iShares PHLX SOXX Semiconductor (NYSEArca: SOXX) are more than 20% above their long-term trend lines.
Disclosure NONE.
Sunday, February 20, 2011
Reynolds American Boosts Quarterly Dividend 8.2% To 53 Cents
Reynolds American Inc. (RAI) raised its quarterly dividend 8.2% as the tobacco company, like many other companies of late, looks to return value to shareholders.
The company boosted the dividend to 53 cents from its previous 49-cent level, bringing the annual rate to $2.12 a share.
"This increase aligns the dividend with the company's recently increased payout target and demonstrates the company's commitment to returning value to shareholders," said President and Chief Executive-elect Daniel Delen.
Many companies have been looking to return value to shareholders in recent months, using their cash piles to buy back stock or implement or boost dividends.
Earlier this month, Reynolds said its fourth-quarter profit climbed 44%, driven by higher pricing and productivity improvements.
Shares rose 0.8% to $33.50 in light premarket trading. As of Tuesday's close, the stock had risen 29% in the past year.
Disclosure None
The company boosted the dividend to 53 cents from its previous 49-cent level, bringing the annual rate to $2.12 a share.
"This increase aligns the dividend with the company's recently increased payout target and demonstrates the company's commitment to returning value to shareholders," said President and Chief Executive-elect Daniel Delen.
Many companies have been looking to return value to shareholders in recent months, using their cash piles to buy back stock or implement or boost dividends.
Earlier this month, Reynolds said its fourth-quarter profit climbed 44%, driven by higher pricing and productivity improvements.
Shares rose 0.8% to $33.50 in light premarket trading. As of Tuesday's close, the stock had risen 29% in the past year.
Disclosure None
M&T Bank announces quarterly dividend of 70 cents MTB
M&T Bank Corp. said it will pay a regular quarterly dividend of 70 cents per share. The holding company for M&T Bank said that the dividend will be paid March 31 to shareholders of record as of Feb. 28. M&T, based in Buffalo, N.Y., has paid 70-cent quarterly dividends for at least a year. The company's banks had 739 offices in the mid-Atlantic region at the end of 2009.
M&T Bank Corporation operates as the holding company for M&T Bank and M&T Bank, National Association that provide commercial and retail banking services to individuals, corporations and other businesses, and institutions. It offers business loans and leases; business credit cards; deposit products, including savings deposits, time deposits, NOW accounts, and noninterest-bearing deposits; and financial services, such as cash management, payroll and direct deposit, merchant credit card, and letters of credit.
The company also provides residential real estate loans; multifamily commercial real estate loans; commercial real estate loans; residential mortgage loans; investment and trading securities; short-term and long-term borrowed funds; brokered certificates of deposit and interest rate swap agreements related thereto; and offshore branch deposits.
In addition, it offers foreign exchange services. Further, the company provides consumer loans, and commercial loans and leases; credit life, and accident and health reinsurance; and brokerage, investment advisory, and insurance agency services. As of December 31, 2009, it had 793 banking offices in New York State, Pennsylvania, Maryland, Delaware, New Jersey, Virginia, West Virginia, and the District of Columbia, as well as a branch in George Town, Cayman Islands. The company was founded in 1969 and is headquartered in Buffalo, New York.
Disclosure NONE.
M&T Bank Corporation operates as the holding company for M&T Bank and M&T Bank, National Association that provide commercial and retail banking services to individuals, corporations and other businesses, and institutions. It offers business loans and leases; business credit cards; deposit products, including savings deposits, time deposits, NOW accounts, and noninterest-bearing deposits; and financial services, such as cash management, payroll and direct deposit, merchant credit card, and letters of credit.
The company also provides residential real estate loans; multifamily commercial real estate loans; commercial real estate loans; residential mortgage loans; investment and trading securities; short-term and long-term borrowed funds; brokered certificates of deposit and interest rate swap agreements related thereto; and offshore branch deposits.
In addition, it offers foreign exchange services. Further, the company provides consumer loans, and commercial loans and leases; credit life, and accident and health reinsurance; and brokerage, investment advisory, and insurance agency services. As of December 31, 2009, it had 793 banking offices in New York State, Pennsylvania, Maryland, Delaware, New Jersey, Virginia, West Virginia, and the District of Columbia, as well as a branch in George Town, Cayman Islands. The company was founded in 1969 and is headquartered in Buffalo, New York.
Disclosure NONE.
Kilroy Realty Corporation (NYSE: KRC) Declared a regular quarterly cash dividend of $0.35
Kilroy Realty Corporation (NYSE: KRC) announced today that its board of directors declared a regular quarterly cash dividend of $0.35 per common share payable on April 15, 2011 to stockholders of record on March 31, 2011. The dividend is equivalent to an annual rate of $1.40 per share. The board of directors also declared a dividend of $0.4875 per share on the company’s 7.80% Series E Cumulative Redeemable Preferred Stock for the period commencing on and including February 15, 2011 and ending on and including May 14, 2011. The dividend will be payable on May 16, 2011 to Series E preferred stockholders of record on April 29, 2011.
The board of directors also declared a dividend of $0.46875 per share on the company’s 7.50% Series F Cumulative Redeemable Preferred Stock for the period commencing on and including February 15, 2011 and ending on and including May 14, 2011. The dividend will be payable on May 16, 2011 to Series F preferred stockholders of record on April 29, 2011.
Kilroy Realty Corporation, a member of the S&P Small Cap 600 Index, is a real estate investment trust active in the premier office and industrial submarkets along the West Coast. For over 60 years, the company has owned, developed, acquired and managed real estate assets primarily in the coastal regions of Los Angeles, Orange County, San Diego, greater Seattle and the San Francisco Bay Area. At December 31, 2010, the company owned 10.4 million rentable square feet of commercial office space and 3.6 million rentable square feet of industrial space. More information is available at www.kilroyrealty.com.
The board of directors also declared a dividend of $0.46875 per share on the company’s 7.50% Series F Cumulative Redeemable Preferred Stock for the period commencing on and including February 15, 2011 and ending on and including May 14, 2011. The dividend will be payable on May 16, 2011 to Series F preferred stockholders of record on April 29, 2011.
Kilroy Realty Corporation, a member of the S&P Small Cap 600 Index, is a real estate investment trust active in the premier office and industrial submarkets along the West Coast. For over 60 years, the company has owned, developed, acquired and managed real estate assets primarily in the coastal regions of Los Angeles, Orange County, San Diego, greater Seattle and the San Francisco Bay Area. At December 31, 2010, the company owned 10.4 million rentable square feet of commercial office space and 3.6 million rentable square feet of industrial space. More information is available at www.kilroyrealty.com.
T. Rowe Price Raises Dividend
T. Rowe Price Group, Inc.’s (TROW - Analyst Report) board of directors approved a 15.0% hike in the company’s quarterly common stock dividend on Thursday. The revised quarterly dividend now stands at 31 cents per share compared with the previous amount of 27 cents. The revised dividend will be payable on March 29, to shareholders as of the close of business on March 15.
This marks T. Rowe’s 25th consecutive annual dividend increase, reflecting the company’s commitment to return value to shareholders with its strong cash generation capabilities. Prior to this revision, the company increased its dividend by 8% (from 25 cents to 27 cents per share) in February 2010.
Based in Baltimore, T. Rowe Price is a global investment management organization with $482.0 billion in assets under management (AUM) as of December 31, 2010. The organization provides a broad array of mutual funds, subadvisory services, and separate account management for individual and institutional investors, retirement plans and financial intermediaries. The company also offers refined investment planning and guidance tools.
We believe that despite active competition in markets, the company has a significant long-term upside potential based on its disciplined risk-aware investment approach which focuses on diversification, style consistency and fundamental research.
As of December 31, 2010, T. Rowe Price remains debt-free with substantial liquidity, including cash and mutual fund investment holdings of about $1.5 billion, which supports the company’s ability to continue investing for the future periods.
In 2010, the company paid roughly $278.9 million in dividends to common shareholders. Cash and cash equivalents exiting the year were $813.1 million. The company had $732.8 million in operating cash flows compared with $535.6 million as of December 31, 2009.
Earnings Recap
T. Rowe Price’s fourth-quarter 2010 earnings of 72 cents per share were significantly up from 57 cents reported in the prior-year quarter. Higher-than-expected results and better AUM were partially offset by increase operating expenses. Earnings for the quarter also surpassed the Zacks Consensus Estimate of 69 cents.
Based on its current strategic projects and plans, T. Rowe Price expects capital expenditures for fiscal 2011 to be approximately $120 million for property and equipment additions. The company anticipates funding these cash expenditures from internal resources.
Nevertheless, fundamentals remain strong with a debt-free position, higher return on earnings and improving investor sentiment. Further, relative mutual fund performance was also positive and we believe that in the long run, the company’s financial stability has the potential to take advantage of the gaining traction in the economy and benefit from the growth opportunities in the domestic and global AUM.
Moreover, the dividend increase reflects T. Rowe Price’s strong cash position and shareholders’ value to the company.
Disclosure None.
This marks T. Rowe’s 25th consecutive annual dividend increase, reflecting the company’s commitment to return value to shareholders with its strong cash generation capabilities. Prior to this revision, the company increased its dividend by 8% (from 25 cents to 27 cents per share) in February 2010.
Based in Baltimore, T. Rowe Price is a global investment management organization with $482.0 billion in assets under management (AUM) as of December 31, 2010. The organization provides a broad array of mutual funds, subadvisory services, and separate account management for individual and institutional investors, retirement plans and financial intermediaries. The company also offers refined investment planning and guidance tools.
We believe that despite active competition in markets, the company has a significant long-term upside potential based on its disciplined risk-aware investment approach which focuses on diversification, style consistency and fundamental research.
As of December 31, 2010, T. Rowe Price remains debt-free with substantial liquidity, including cash and mutual fund investment holdings of about $1.5 billion, which supports the company’s ability to continue investing for the future periods.
In 2010, the company paid roughly $278.9 million in dividends to common shareholders. Cash and cash equivalents exiting the year were $813.1 million. The company had $732.8 million in operating cash flows compared with $535.6 million as of December 31, 2009.
Earnings Recap
T. Rowe Price’s fourth-quarter 2010 earnings of 72 cents per share were significantly up from 57 cents reported in the prior-year quarter. Higher-than-expected results and better AUM were partially offset by increase operating expenses. Earnings for the quarter also surpassed the Zacks Consensus Estimate of 69 cents.
Based on its current strategic projects and plans, T. Rowe Price expects capital expenditures for fiscal 2011 to be approximately $120 million for property and equipment additions. The company anticipates funding these cash expenditures from internal resources.
Nevertheless, fundamentals remain strong with a debt-free position, higher return on earnings and improving investor sentiment. Further, relative mutual fund performance was also positive and we believe that in the long run, the company’s financial stability has the potential to take advantage of the gaining traction in the economy and benefit from the growth opportunities in the domestic and global AUM.
Moreover, the dividend increase reflects T. Rowe Price’s strong cash position and shareholders’ value to the company.
Disclosure None.
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