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Wednesday, June 25, 2008

* Dividends in the News

It seems lately that the headlines are dominated by companies dropping their dividends such as Fifth Third (FITB) from $0.44 to $0.15, KeyCorp's (KEY) Board expressed its intention to reduce its dividend 50% to an annualized dividend of $0.75/share, FairPoint Communications (FRP) lowering their dividend 35% and Crystal River Capital (CRZ) cutting its dividend from $0.68 to $0.30. Not all the news is bad.


Consider the following companies that recently announced double-digit dividend increases:
  • Chesapeake Energy (CHK) raised its dividend 11% to $0.075/share
  • VSE Corporation (VSEC) raised its dividend 12.5% to $0.045/share
  • Capstead Mortgage (CMO) raised its dividend 13% to $0.59/share
  • Target (TGT) raised its dividend 14% to to $0.16/share
  • Caterpillar (CAT) raised its dividend 17% to to $0.42/share
  • Kaiser Aluminum (KALU) raised its dividend 33% to $0.24/share
  • Monsanto (MON) raised its dividend 37% to $0.24/share
Unfortunately, after running these companies through my [D4L-PreScreen.xls] model none of them warranted additional consideration. CAT was the closest with a NPV of MMA Differential of (621) .

On June 19, 2008, BB&T Corporation (BBT) stated that the company's capital levels remain strong and management anticipates "some increase in the cash dividend during 2008."

And finally, sometimes good news is found in maintaining the status quo. According to Bloomberg, Bank of America's (BAC) CEO told Oppenheimer analyst Meredith Whitney the company's dividend was safe. With an effective yield between 8% and 9%, and trading less than book value, BAC could end up as one of the great steals of 2008. Time will tell.

At the time of this writing, I owned BAC and BBT.


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