Will These Companies Actually Increase Dividends?
Since the recession began, most companies have been slashing dividends left and right. This is because companies are interested in the bottom line. Since companies are interested in increasing their capital, less of their profits are being used to pay dividends to shareholders. However, not all companies are cutting their dividends. More than 200 raised their dividends this past quarter. (Although, to be honest, there are usually far more dividend increases than decreases — which has not been the case recently.) Indeed, there are some companies that still manage to do well, even in this climate, and they might actually consider raising their dividends.
The Street thinks that Best Buy (BBY), Burlington Northern (BNI) and Walgreens (WAG) will actually increase dividends. This is because these companies are in positions to see growth in the coming 3rd Quarter. And it makes sense. The company I, personally, think is most likely to raise dividends is Walgreens. Walgreens provides consumer goods that are generally accepted as necessities. Prescriptions, hygiene items and other personal care items still need to be bought, even during a time of recession.
This is in sharp contrast to, say, bank dividends. Bank dividends have been dwindling as the financial sector struggles through the recession. And, because banks are not particularly well capitalized right now, it is no surprise that they want to keep as much of their profits as possible. (Banks turned profits in Quarter 1, so it’s assumed that Quarter 2 earnings — which are coming out now — will show a similar trend.) It will be quite some time if banks start raising their dividends again.
In the end, it’s about being discerning in the companies you invest in. And making sure that you have enough of a diversified income that a drop in dividends won’t devastate you.
Disclaimer: I am not an investment professional. Nothing in this piece or on this Web site should be construed as investment advice. Before making investment decisions, do your own research and/or consult with an investment professional. All investment comes with the risk of loss. You are responsible for your own investment decisions and any loss that may result from your decisions.
July 23rd, 2009 at 4:03 pm
[…] that have kept dividends relatively steady throughout this recession — and some have even increased their dividends. Capital appreciation is an added benefit of investing in dividend paying […]