General Electric (GE) raises dividend; 15 other companies follow suit
General Electric Company (GE) operates as a technology, media, and financial services company worldwide. Back in 2009, General Electric (GE) cut dividends by 68% to 10 cents/share. Investors, who just a few months earlier were reassured by the company’s CEO that the dividend is safe, rushed to the exits, sending the stock price to its lowest levels in a decade. The company halted its stock buyback program, and issued shares to the public. Legendary Investor Warren Buffett also made an investment in the conglomerate, by putting several billion in exchange for preferred stock yielding 10%. Almost one and half years after the dividend was cut, the company raised its quarterly dividend 20% to 12 cents/share on Friday. The news sent the stock over 3% higher for the day. Whether the company can rebuild its streak of consecutive dividend increases remains to be seen however.
“We are able to restore the GE dividend at a historical payout level for 2010 earlier than previously anticipated and to extend our share buyback program because of continued strong cash generation, recovery at GE Capital, and solid underlying performance in our Industrial businesses through the first half of 2010,” GE CEO Jeff Immelt said. “In addition, the Company continues to plan on capitalizing on strategic and financially attractive inorganic growth opportunities. “
“We are executing well, progressing on our plans to make GE Capital a smaller, more competitive specialty-finance company, and continuing to generate strong cash flow,” Immelt said. “This gives us the flexibility to allocate capital for growth and shareholder value, while keeping GE safe and secure.”
Other companies which are seldom mentioned, but should probably get much more credit include energy master limited partnerships, which boast strong cash flows and stable distributions. In addition to that, the toll-bridge business model for those energy transportation companies has enabled many of them to raised distributions more than once per year.
Enbridge Energy Partners, L.P. (EEP) owns and operates crude oil and liquid petroleum transportation and storage assets, as well as natural gas gathering, treating, processing, transmission, and marketing assets in the United States. The company announced a cash distribution of $1.0275 per unit, which was an increase of 2.5 percent over previous quarters distribution per unit. Yield: 7.10%
Navios Maritime Partners L.P. (NMM) operates as an international owner and operator of drybulk carriers in Greece. Navios Maritime Partners L.P. increased cash distributions by 1.20% to $0.42 per unit and has consistently raised distributions since going public in 2008. Yield: 9.20%
Western Gas Partners, LP (WES) owns, operates, acquires, and develops midstream energy assets in east and west Texas, the Rocky Mountains, and the Mid-Continent. This master limited partnership raised quarterly distributions by 3% to 35 cents/unit and has consistently raised distributions since going public in 2008. Yield: 5.70%
El Paso Pipeline Partners, L.P. (EPB) engages in the ownership and operation of natural gas transportation pipelines and storage assets in the United States. declared a $0.40 per unit quarterly cash distribution for the second quarter of 2010, or $1.60 per unit on an annualized basis. This distribution represents a 21% increase from the $0.33 per unit paid for the second quarter 2009 and a 5% increase from the $0.38 per unit paid for the first quarter 2010. El Paso Pipeline Partners, L.P. has raised distributions every quarter since going public in 2008. Yield: 5.10%
Vanguard Natural Resources, LLC, (VNR) through its subsidiaries, engages in the acquisition and development of natural gas and oil properties in the United States. The company raised quarterly distributions by 4.80% to 55 cents/unit. Vanguard Natural Resources, LLC has consistently raised distributions since going public in 2008. Yield: 8.90%
Spectra Energy Partners, LP, (SEP) through its subsidiaries, engages in the transportation of natural gas through interstate pipeline systems, and the storage of natural gas in underground facilities in the United States. This master limited partnership raised quarterly distributions by 2.40% to 43 cents/unit. Spectra Energy Partners, LP has raised distributions every quarter since going public in 2007. Yield: 4.90%
Other companies raising dividend include:
Starbucks Corporation (SBUX) engages in the purchase, roasting, and sale of whole bean coffees worldwide. The company increased quarterly dividend 30% to 13 cent/share. This was the first dividend increase since the company started paying dividends earlier this year. Yield: 2.10%
Westfield Financial, Inc. (WFD) operates as the bank holding company for Westfield Bank that provides various banking products and services to businesses and individuals in Massachusetts. The company raised dividends by 20% to $0.06 per share. This company has not only consistently raised distributions since 2003, but also frequently pays special dividends to shareholders. Yield: 2.80%
Eaton Corporation (ETN) operates as a power management company primarily in the United States, Canada, Latin America, Europe, and the Asia Pacific. The company also increased their quarterly dividend 16% to 58 cents/share. This was the first dividend increase since 2008. Yield: 3%
Solera Holdings, Inc. (SLH) provides software and services to the automobile insurance claims processing industry. The company’s board of directors approved a 20% increase in its quarterly dividend to 7.50 cents/share. This was the first dividend increase since the company started paying dividends in 2009. Yield: 0.80%
Digital Realty Trust, Inc. (DLR), a real estate investment trust (REIT), through its controlling interest in Digital Realty Trust, L.P., engages in the ownership, acquisition, development, redevelopment, and management of technology-related real estate. The company increased quarterly dividends by 10.30% to 53 cents/share. The company has consistently raised distributions since 2004. Yield: 3.50%
Lindsay Corporation (LNN) designs, manufactures, and sells automated agricultural irrigation systems that are primarily used in the agricultural industry to increase or stabilize crop production while conserving water, energy, and labor in the United States and internationally. The board of directors declared a six percent increase in its regular quarterly cash dividend to $0.085/share. The company has consistently raised distributions since 2003. Yield: 1%
Altera Corporation (ALTR) designs, manufactures, and markets programmable logic devices (PLD), HardCopy application-specific integrated circuit (ASIC) devices, pre-defined design building blocks, and associated development tools. The company raised quarterly dividends by 20% to 6 cents/share. The company doesn’t have a long history of dividend increases. Yield: 0.80%
Airgas, Inc., (ARG) through its subsidiaries, distributes industrial, medical, and specialty gases, as well as hardgoods in the United States. The company raised quarterly dividends from 22 to 25 cents/share. The company has consistently raised distributions since 2003. Yield: 1.50%
A. O. Smith Corporation (AOS) engages in the manufacture and sale of water heating equipment and electric motors for the residential, commercial, and industrial end markets in the United States and internationally. The Board of Directors approved an 8% increase in the company’s quarterly cash dividend to a rate of $0.21/share. This dividend achiever has raised distributions for 17 consecutive years.Yield: 1.50%
On a side note, investors who find Enbridge Energy Partners, L.P. (EEP) to be attractively valued at the moment, but are not willing to deal with further complications in their tax returns, could consider purchasing Enbridge Energy Management, L.L.C. (EEQ) shares instead. Enbridge Energy Management, L.L.C. does not pay distributions in cash, but automatically distributes fractional shares to shareholders on record. They pay their distributions directly as additional shares, which is similar to automatic dividend reinvestment. If you choose to invest in Kinder Morgan Energy (KMP) or Enbridge Energy Partners (EEP) in an IRA, consider investing in Kinder Morgan Management (KMR) and Enbridge Energy Management, L.L.C. (EEQ). KMR and EEQ are great vehicles for taxable accounts as well since their distributions are not taxable when received, and thus shareholders are not issued an annual 1099 tax form. You would pay taxes only when you sell your units.The taxation characteristics of your investments are just one part of the investment puzzle. Always make sure to investigate the company’s fundamentals and do your homework before investing in stocks.
Full Disclosure: Long EEQ and KMR
Relevant Articles:
- MLPs for tax-deferred accounts
- General Electric (GE) Cuts the Dividend
- Master Limited Partnerships (MLPs) – an island of opportunity for dividend investors
- Is GE’s dividend safe?
about 3 weeks ago
What, I am shocked, Shocked I tell you. Corporate ties to our Government… However did this occur in our great nation.
about 3 weeks ago
buyback stock is a way for a company to tell the street that its shares are undervalued. By buying back the stock, the company reduces the amount of outstanding shares and therefore boost the stock price. It has a PR effect but also a true impact on the per share price as you divide the company valuation or market cap by its number of shares outstanding.
Lately big corporations have been seating on a ton of cash (billions) and they do not know what to do with it; they can also borrow money at historical low rates: they use the cash or the borrow money to buyback their own shares as they believe it is undervalued. If you borrow let's say at 5% take the cash and use it to buy back shares it signal the Street that you believ the return on your earnings will be greater than 5%, therefire buyingback shares make senses.
about 1 week ago
Dividend Yield
It also shows that the business cares about their shareholders.
about 6 days ago
Did the Journal say how much they were buying back? What was the value?
Currently, the Border's Group has $2.6 billion in assets and $1.9 billion in debts, so they can afford to take on a little more debt without a problem.
Apparently they're strapped for cash. They have about $120 million in the bank and $370 million in liquid assets (not counting inventory), but they have more than double that in short term obligations, so they certainly won't be able to buy back any stock with their cash on hand. That's likely what made them turn to borrowing.
As far as their strategy, we'd probably have to get hold of the minutes for that. It was likely one of many common reasons companies wish to buy back their stock, and the loan was just their means to an end. If I were them, I wouldn't be concerned so much about the loan as I would the interst, and just to make sure it wouldn't be a prohibitive expense, which is a minor concern.
Common reasons for wanting to buy back stock:
1) excessive shares outstanding might be diluting the value of their shares, and they want to reverse the trend
2) they're getting ready to offer employee stock options, and they need shares on hand to satisfy the deal
3) they're getting ready to tender an offer of stock to merge with another company and need the shares to cover the offer
4) they have already made the offer and are following through