As promised, this will be the year that I finally pay myself. As such, I'm always on the lookout for companies that are putting shareholders first. In 2011, we witnessed 1,953 dividend increases. Yet as Fool contributor Morgan Housel has pointed out, the overall payout ratio of the S&P 500 recently hit a record-low 29%. This means it isn't enough just to find a dividend; it's about finding a growing and sustainable dividend.
After perusing some of September's finest, I've settled on five companies that I think went beyond the call of duty to provide for their shareholders last month by increasing their payout or initiating a dividend payment.
New Quarterly Dividend
Previous Quarterly Dividend
Philip Morris International (NYS: PM)
Source: Individual company press releases. NM = not meaningful.
I'm sorry -- did someone say something about a government-spending slowdown? Because Lockheed Martin, which relies on defense spending for 93% of its revenue, didn't get that memo. Lockheed's 15% boost in its dividend marks the 10th straight year that it has rewarded shareholders with a double-digit dividend hike. Even though the U.S. government is actively looking to cut funding for military spending, Lockheed is focused on reducing its costs and maximizing its operating efficiency to ensure that shareholders continue to get their fair share.
It'll likely be a bumpy ride until the U.S. government cements the details of how we'll reduce our growing budget deficit, but Lockheed shareholders can enjoy a 4.9% yield in the meantime -- and be comforted by a payout that's grown tenfold since 2003:
Source: Nasdaq.com, * = assumes quarterly payout of $1.15.
Are you excited about the rollout of Windows 8? Because Microsoft certainly is! The company was plagued by slowing PC sales in 2011, and its mobile partnership with Nokiahasn't exactly paid the dividends it expected yet. However, that didn't stop Microsoft from rewarding shareholders with a generous bump of 15% in its quarterly payout.
If you recall, one of the reasons why I've always felt that, despite his criticisms, Steve Ballmer is actually a great CEO is that much of his compensation is tied to receiving dividends from the stock he owns. If he wants a raise, every one of Microsoft's shareholders also gets a raise. With its boosted payout, Microsoft's new yield of 3% is bound to attract income investors prior to the October release of Windows 8. It's also worth noting that Microsoft's quarterly payout has more than doubled in just the past five years:
Source: Nasdaq.com, * = assumes quarterly payout of $0.23.
What? You thought Intel was the only chipmaker that was putting big bucks in shareholders' pockets? Texas Instruments cited a strengthening product portfolio and less need for capital on hand as the reason for the 24% boost in its quarterly payout. We're starting to see Texas Instruments' product portfolio mature, which has allowed the company to spend less on research and development. The company's new approach, which has it reducing its focus on the smartphone and tablet market in favor of embedded chips in automobiles, dishwashers, and other appliances, is risky, but it could pay off, as competition is far less fierce in those areas.
If anything, shareholders aren't complaining about the fact that Texas Instruments' quarterly payout is up tenfold since 2004, that this is the ninth straight year of its payout being raised, or that the company is now yielding 3%:
Source: Nasdaq.com. Assumes quarterly payout of $0.21.
Philip Morris International
Nothing says "smoking hot" like a Philip Morris dividend hike! The tobacco company, which was spun off from Altria in 2008, sells its products globally, with the exception of a few countries, including the U.S. Avoiding the highly unfriendly tobacco laws in the U.S. has allowed Philip Morris to grow its bottom line where other tobacco companies (especially U.S.-based ones) have failed recently. Philip Morris plans to target a growing Chinese and Indian middle class and will be able to utilize the brand power of Marlboro, as well as incredible product diversification, to keep profits heading higher.
Was it really a surprise that Philip Morris boosted its payout by 10% in September? Not particularly, but shareholders are not complaining in the least. The new yield of 3.8% puts the company firmly on income seekers' radars, yet its payout ratio of 61% is far and away lower than its U.S. counterparts, leaving ample room for further dividend growth:
Source: Nasdaq.com. Assumes $0.85 quarterly payment for remaining 2012 & 2013.
Flooding in Thailand crippled hard-disk drive maker Western Digital in 2011, but those problems now look like a thing of the past. Western Digital's purchase of Hitachi's hard-drive operations, along with its quick rebound from Thailand flooding, has allowed both it and Seagate Technology to simultaneously flourish. Although Western Digital did lower its revenue forecast in the near term, the need for storage in big data centers, for servers, and for PCs on the front end of the cloud-computing revolution are bound to keep both hard-drive companies busy for a long time.
The newly initiated dividend starts Western Digital at a respectable 2.6% yield and comes at a time when the company also authorized an additional $1.5 billion in share buybacks. I can't help but be slightly annoyed with the fact that the dividend will cost only $62 million annually, while the company approved $1.5 billion worth of share buybacks. However, I figure it gives Western Digital plenty of room to boost its dividend from its current payout ratio of just 15% based on trailing-12-month earnings.
Finding great dividends is all about value, growth, and sustainability, and these five companies definitely exhibited that in September.
All eyes now turn to Microsoft and whether or not the rollout of Windows 8 will be enough to jump-start growth for the PC-heavy company. Find out the answer to this question and much more by getting your copy of our latest premium research report on Microsoft. Packed with in-depth and unbiased analysis on the opportunities and threats facing Microsoft -- and complete with a year of regular updates -- this report will give you the tools needed to make smart long-term investing decisions. Click here to claim your investing edge.
The article September's 5 Dividend Dynamos originally appeared on Fool.com.
Fool contributor Sean Williams has no material interest in any companies mentioned in this article. He loves a dividend payment just as much as the next person does. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong.The Motley Fool owns shares of Lockheed Martin, Microsoft, Intel, and Western Digital. Motley Fool newsletter services have recommended buying shares of Microsoft and Intel, as well as creating a synthetic covered call position in Microsoft. 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 Motley Fool has a disclosure policy that puts investors first.
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