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The grand parade of future dividends

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“Increases dividend”: a sound byte that should be but isn’t cutting through the leaden bad news we’re surrounded by. Companies are raising their dividends, still, headlines are full of bad news coming out of Europe.

What should the average investor focus on? The parade of companies increasing their dividends, or the end of the world scenarios that continue to make headlines?

Here are some of the names increasing their dividends:

Disney, Chevron, GE, BCE, Ford (resumes paying dividend), Agrium, Enbridge, Iamgold (by 25 per cent), National Bank of Canada, Laurentian Bank … the list goes on.

Does this return of shareholder cash signal a more optimistic future? Shouldn’t we reward these companies with positive press for doing something that will contribute to shareholders and the economy ultimately?

Income-lovers jump on dividend-payers. Why?

When a company’s increasing dividends, and some have increased more than once this year, management’s saying, “Hey, our operations are strong enough to keep this dividend going for a long time.” Companies are careful about cutting dividends, and so, this makes them cautious about raising them.

When a company cuts its dividend, it becomes kind of a corporate leper. Confidence is lost. Reputation takes a whack. Investors run for the hills.

Because of this, most companies don’t trifle with raising their dividends. They do some hard forecasting before making increases.

The dividend parade continues

While people focus on bad news, opportunity sits there. Why do investors focus on daily bytes that create a horrorshow of headlines?

The bottom line is:

  • Corporations continue to pay shareholders
  • The news is what it is

Investors may have some suspicion regarding the business intelligence they get, but, are they to believe that the managements of all these corporations raising their dividends are so out-of-touch with the world economy that the opportunity these same managements see is misguided?

Fact over fiction

  • The U.S. economic news is improving
  • The S&P 500 is a bargain
  • So, too, is the S&P TSX 60
  • Historically-speaking, the markets look full of potential if you’re focused on dividend-payers that consistently grow their dividends
  • Dividend-payers allow you a margin of safety regarding a recession in Europe and what it might do to the markets while allowing the average investor the opportunity to participate in good news

While the future’s unwritten and it’s difficult to predict markets or economic activity consistently, following a diversified strategy brimming with dividend splashes is one that you can have some long-term confidence in.

Brian Wesbury of First Trust Advisors says, stocks are “the cheapest we’ve seen since early 2009 or the early 1980s … equities have priced in the end of the world.”

What happens if the world doesn’t end?

Share the wealth

Since I blogged about this back in December, there’s been a steady increase in dividends. Here are a few of the notable increases as companies continue to decide that their financial footing’s more than steady enough to give back to shareholders.

Surprise, surprise: BMO Scotiabank increase dividends

BCE profit climbs on strength in wireless, media (not to mention the dividend increase)

CN is the latest to increase dividend with management sounding confident about the Canadian economy

TD and RBC continue the grand parade of dividend hiking

JPMorgan raises dividend and buys back $15 billion in shares

Wells Fargo raises dividend and plans share buybacks over next two years

Apple finally issues dividend, but it’s puny

Goldman Sachs hikes dividend

Intel increases dividend, third time in last 18 months

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Written by johnrondina

December 16, 2011 at 1:34 pm

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