Many Big DJIA Dividend Hikes Expected Very Soon

Stock Split Image24/7 Wall St. is still a big fan of dividends. What is even better than a high dividend yield is when companies with solid dividends raise their dividend payouts. Dividend hikes have been noticeably slower after the fiscal cliff debate put many companies in a place where they decided to accelerate payouts into 2012 or to raise their payouts earlier.

We are still looking for many key dividend hikes in early 2013. That will particularly be the case for giants such as Coca-Cola Co. (NYSE: KO), J.P. Morgan Chase & Co. (NYSE: JPM), 3M Co. (NYSE: MMM), and Wal-Mart Stores Inc. (NYSE: WMT). A serious potential dividend hike may finally come for Bank of America Corp. (NYSE: C), but we are not ready to really say that is definite until another year of capital building. Chevron Corp. (NYSE: CVX) and Exxon Mobil Corp. (NYSE: XOM) also are likely to keep up their dividend war to attract investors.

We have looked for the current yield and what prior dividend history has been, and also we have included what the expected payout rate of earnings would be compared to existing Thomson Reuters earnings per share estimates for 2013. We have recently offered informal upside to our DJIA 14,590 peak price target for 2013 and these dividend hikes have to be one of the key driving factors in that chase.

The Coca-Cola Co. (NYSE: KO) is likely to have yet another dividend hike. In 2012 that came in mid-February, and it has an earnings webcast on February 12 and presentation to consumer analysts on February 22. Last year marked the first stock split in a generation, and the beverage giant has a history of annual dividend hikes. The $1.04 per share annualized payout generates a current dividend of 2.75%. We would note that this is already at a payout rate of about 48% of the projected $2.17 in earnings per share for the 2013 consensus estimate from Thomson Reuters. Coke's hand may be forced here as rival Pepsico Inc. (NYSE: PEP) yields closer to 3%.

J.P. Morgan Chase & Co. (NYSE: JPM) now has its London Whale mess behind it and Jamie Dimon has said that he wants to be able to get back on track with dividend hikes, share buybacks and more shareholder friendly activities. The wild card is whether banking regulators will approve such a move. We think that a hike remains probably, but we would not look for its dividend hike to be massive. At 2.5% or so, its $0.30 per quarter might be allowed to be raised to as much as $0.35 per share per quarter. This would represent a 26% payout rate of its comparable earnings per share estimate of $5.36 from Thomson Reuters for 2013. Wells Fargo & Co. (NYSE: WFC) already raised its dividend, and we think Jamie Dimon will press for this. Bank of America Corp. (NYSE: BAC) remains a wild card as it is among the second tier of the too big to fail banks as far as regulators are concerned. Banking analyst Dick Bove sees higher payouts coming from banks soon as well, but we would note that BofA's last dividend announcement did not exude much dividend hike confidence.

3M Co. (NYSE: MMM) is a serial dividend payer and a serial dividend hiker. We expect that to continue, perhaps in the next few days. 3M says that it has paid 384 consecutive quarterly cash dividends and increased the annual dividend for 54 consecutive years. With a 2.3% dividend yield, 3M lags the much larger 3.4% payout offered by General Electric Co. (NYSE: GE). 3M shares are literally trying to challenge a 52-week high and we would mark that an all-time high if you adjust for dividends. Its $2.36 annualized payout of the past 12 months represents a payout rate of almost 35% of its normalized expected earnings per share of $6.84 by Thomson Reuters.

Wal-Mart Stores Inc. (NYSE: WMT) moved up its last dividend date at a rate of $0.3975, but that was the retail giant's fourth payment at that rate in a row. The Walmart board of directors approved its last hike on March 1, 2012, an annual dividend hike of about 9% to $1.59 per share. With shares currently around $70, the yield is 2.3%. With earnings projected to be $5.38 per share in the year ahead, the same 9% hike again would represent a payout rate of about 32%.

Chevron Corp. (NYSE: CVX) and Exxon Mobil Corp. (NYSE: XOM) are listed last because they are slightly farther away. These two oil and gas giants are both DJIA components and should both see their common stock dividends get raised. Unfortunately, this may be about 60 days to 75 days away. Chevron is yielding 3.1%, and while there could be one more quarter of a $0.90 payout, this was raised twice inside of the historic four-quarter dividend hike cycle. Exxon Mobil has a four-quarter cycle, and it hiked its payment last April. Its yield today only clocks in at about 2.5%.

We would make investors aware of two more things here. The Vanguard Dividend Appreciation ETF (NYSEMKT: VIG) tracks the companies that have raised their dividends through time. It should be no surprise at all that six of its ten top holdings are listed in here. An alternative to the direct dividend ETF is the PowerShares Buyback Achievers (NYSEMKT: PKW) which follows companies aggressively repurchasing their shares. That is "the other dividend" when it comes to returning capital to shareholders.


Filed under: 24/7 Wall St. Wire, Banking & Finance, Compensation, Conglomerates, Corporate Governance, Dividends & Buybacks, Personal Finance, Shareholder Issues, Stock Buybacks Tagged: BAC, C, CVX, featured, GE, JPM, KO, MMM, PEP, PKW, VIG, WMT, XOM

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