These 7 Stocks Are Overdue for a Dividend Hike

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With the strength of corporate profits over the past couple of years since the recession ended, investors have rightly come to expect dividend increases from the stocks they own. In large part, corporate America has delivered on those expectations. But a few holdouts are giving shareholders the stiff-arm, despite having more than sufficient earnings to loosen up the purse strings and boost their dividends.

A dividend nation
In the past couple of years, dividend investors have seen payouts go from the stingiest on record to a restored, strongly growing environment. During the first three months of 2009, more S&P 500 companies cut their dividends than did during the entire year of 2008. A record low number of stocks raised their dividends during 2009's second quarter.

Now, though, dividend growth is back with a vengeance. During 2011's first quarter, 117 members of the S&P 500 started paying dividends or increased their payouts. Even technology companies, which investors once saw as eternal holdouts from ever paying dividends at all, now regularly offer healthy payouts to shareholders.

With income from other types of investments, especially fixed-income securities like bonds and bank CDs, at very low levels, dividends have become even more important for investors. So with all the pressure to deliver on the dividend front, why are some companies choosing not to reward their shareholders even when it wouldn't take much effort on their part?

The time is now
Often, companies announcing dividends will see their stock rise after their announcement. So if you can identify those companies before they make those announcements, you have a potential catalyst for future gains.

To that end, I looked for large-cap companies that have kept their dividends constant for at least five straight years. But in order to weed out those companies that truly can't afford to raise their payouts, I also made sure that only companies that earned at least twice as much as they're currently paying in dividends made the final list. Here are seven of the stocks that passed both tests:

Stock

Current Yield

Payout Ratio

Global Payments (NYS: GPN) 0.2%3.1%
Cooper Cos. (NYS: COO) 0.1%1.6%
Hess (NYS: HES) 0.7%4.9%
Southwest Airlines (NYS: LUV) 0.2%2.6%
RadioShack (NYS: RSH) 2%16.3%
Tyson Foods (NYS: TSN) 0.9%6.9%
Anadarko Petroleum (NYS: APC) 0.5%21.3%

Source: Capital IQ; Yahoo! Finance.

As you can see, these companies aren't doing everything they can to make their shareholders happy. Among these stocks, only RadioShack has a dividend yield that even comes close to matching the 2.2% overall payout of the S&P 500.

You can't deny that several of these stocks face obvious challenges. Southwest, for instance, has struggled to remain profitable even when the rest of the industry has seen huge swings from profits to losses in recent years. Tyson is dealing with a big chicken glut but is holding firm with its competitors as long as it can.

But just looking at the payout ratios of these stocks shows how easy it would be for them to boost their dividends. Even small increases would go a long way toward showing shareholders that they're serious about providing value for investors. Moreover, it would make the companies more competitive compared to their peers. Certainly for Hess and Anadarko, alternatives in the energy sector provide much larger payouts for income-hungry shareholders.

Demand the best
With so many companies returning more money to their shareholders through dividends, you have every right to expect more from the stocks you own. For these profitable companies to hold back on dividend increases for five years running just doesn't make any sense. But as the pressure rises for them to follow suit and implement more shareholder-friendly dividend policies, those who bought shares early could see a healthy gain from their foresight.

If you want the biggest dividends you can find, look no further. We've found 13 promising dividend stocks and present them to you in this free special report from The Motley Fool, so take a look at them today.

At the time this article was published Fool contributorDan Caplingerwants to see the cash and wants it on time. You can follow him on Twitter here. He doesn't own shares of the companies mentioned in this article. The Motley Fool owns shares of RadioShack. Motley Fool newsletter services have recommended buying shares of Southwest Airlines. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Fool'sdisclosure policyis meaner than a library cop in collecting overdue fines.

Copyright © 1995 - 2011 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

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