Dividend hikes may be on pause with many S&P 500 banks and sectors. But outside of financials, investors can still find rising dividends and stocks.
It’s the ultimate vote of confidence. It’s rare, though, finding companies willing to pay higher dividends with rising shares, too.
Just six companies in the S&P 500, including consumer discretionary eBay (EBAY), consumer staples Clorox (CLX) and video game maker Activision Blizzard (ATVI) announced paying higher dividends since April. And all these S&P 500 stocks are also up 10% or more this year, according to an Investor’s Business Daily analysis of data from S&P Global Market Intelligence and MarketSmith. During that time, the S&P 500 is down 6.9%.
Dividends are gaining cachet with investors as a signal the business is strong.
Some “public companies will need to redeploy excess operating cash flow,” said Nicolas Colas, co-founder of DataTrek Research. “For that, dividends are the way to go, and they transmit far more useful information to investors than buybacks about earnings power and growth.”
S&P 500 Dividend Hikes Disappearing
Just 39 S&P 500 companies announced plans to pay higher dividends since April. And it’s part of a pullback in dividends seen all year.
Though the end of March, only 25% of S&P 500 company made dividend changes that were positive, such as an initiation or hike, says Howard Silverblatt, index analyst at S&P Dow Jones Indices. That’s way down. Normally since 2012, 60% of S&P 500 companies make positive dividend changes annually.
And finding companies boosting dividends along with a rising stock price is even more rare. Shares of 27 of the 39 S&P 500 companies to announce higher dividends since April are down this year.
For instance, financial MetLife (MET) on April 28 said it would boost is quarterly dividend by 4.5% to 46 cents a share. But that’s a small consolation as shares are down by more than 30% this year.
Dividend Hikes And Rising Shares Are A Gold Standard
The courage to boost dividends plus the buying support of investors is a gold seal of approval for stocks. All six of the S&P 500 companies announcing paying higher dividends since April, with double-digit stock gains this year, carry IBD Composite Ratings of 85 or higher.
Companies have all the excuses in the world to hold dividends flat or even cut them. So the fact these S&P 500 companies are hiking them is telling. None of the companies are in the financial sector, which is a wake-up call as it’s normally a top pick for dividend hunters.
Some Big Dividend Success Stories
Most of the dividend winners are in durable consumer-facing sectors.
Take online auctioneer eBay as a classic example. The company on April 29 announced a a quarterly cash dividend of 16 cents a share, or 64 cents annually. That’s up 10% from the 58 cents a share dividend it was paying in the previous 12 months.
Additionally, shares are up more than 40% this year. That’s especially strong if you consider the Consumer Discretionary Select Sector SPDR ETF (XLY) is down more than 1% in 2020 so far.
And there’s good reason why investors, the company and analysts have confidence. The boom in online shopping plays right into eBay’s hands. The company is seen making 20% more, or $3.49 a share, in 2020. And that’s while S&P 500 profit is expected to drop 20% or more.
Rising dividends and a strong stock chart. These are S&P 500 companies ready to payoff for investors whatever the market dishes out.
Market Beating S&P 500 Companies Announcing Dividend Hikes
|Date Dividend Announced||Company||Symbol||New Annual Dividend / Share||Stock YTD % Ch.||Composite Rating||Sector|
|April 29||eBay||(EBAY)||$0.64||40.9%||95||Consumer Discretionary|
|May 20||Clorox||(CLX)||$4.44||40.2%||97||Consumer Staples|
|May 5||Activision Blizzard||(ATVI)||$1.64||28.6%||88||Communication Services|
|Apr 30||Apple||(AAPL)||$3.28||20.4%||93||Information Technology|
|Jun 25||Kroger||(KR)||$2.88||12.7%||89||Consumer Staples|
Source: IBD, S&P Global Market Intelligence
Follow Matt Krantz on Twitter @mattkrantz
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