5 Stocks Primed for Bigger Dividends
As the first earnings season of 2012 slows down, it's time to take a look ahead to what's in store for next earnings season, which "officially" starts in just a couple of weeks. After all, fundamental investors don't get rewarded for buying companies that had good performance in the past -- the goal is to buy stocks that are going to impress Wall Street in the future. And right now, one of the most impressive feats a company can pull off is a dividend hike.
Investors have taken on a renewed interest in the last couple of years, after being unceremoniously reminded in 2007 and 2008 that those quarterly checks contribute a whole heck of a lot of Mr. Market's historical returns. According to research from Wharton Professor Jeremy Siegel, reinvested dividends account for 97% of total market performance. So it shouldn't be a big surprise that finding dividend increasers is a big priority.
Today, we'll look into the crystal ball to try and find firms likely to hike their payouts in the quarter ahead.
For our purposes, that "crystal ball" is composed of a few factors: namely a solid balance sheet, a low payout ratio, and a history of dividend hikes. While those items don't guarantee dividend announcements in the next month or two, they do dramatically increase the odds that management will hike their cash payouts, especially as investors start to get antsy about this 2012 rally.
Without further ado, here's a look at five stocks that could be about to increase their dividend payments in the next quarter.
Oil and gas behemoth Exxon Mobil (XOM) has been trailing the broad market in the last several months, doling out returns of just 16.5% in the last six months, vs. the S&P 500's near-21% climb over that same period. That lagging performance adds some extra impetus for Exxon's management team to add some shareholder value in the coming quarter. That could mean a hike from XOM's 47-cent dividend up to half a buck.
Exxon is the world's largest integrated oil and gas supermajor, with daily production of 2.4 million barrels of oil and 12.1 billion cubic feet of natural gas. That massive scale gives Exxon some advantages when it comes to cutting costs, even if a supersized footprint doesn't really help the E&P business. XOM has proven adept at generating deep margins for its operations, and triple-digit crude prices don't hurt. As consumers consider substituting natural gas for their energy needs, XOM's hefty exposure to gas should help the firm handle a shift in demand better than most.