In their efforts to balance short-term investor expectations with long-term strategic goals, The Boston Consulting Group (BCG) warns companies to avoid cash traps that can negatively impact near-term shareholder returns. One of which is the The Stock-Buyback Trap. BCG doesn’t discount the role that stock buybacks can play in boosting near-term returns for some companies. But the firm’s research indicates that buybacks do not change investors’ estimates for long-term earnings-per-share growth, or induce them to accord a company a higher valuation multiple. By contrast, it says, dividend growth has a far more positive long-term impact.
Below are several companies that recently avoided the cash trap by increasing dividends paid to their shareholders:
Village Super Market (VLGEA) operates a chain of 23 ShopRite supermarkets in New Jersey and Pennsylvania. March 19th the company increased its quarterly dividend 4% to $0.25/share. The dividend is payable on April 22, 2010 to shareholders of record at the close of business on April 1, 2010. The ex-dividend date is March 30, 2010. The yield based on the new payout is 3.61%.
Williams-Sonoma (WSM) sells high-quality products for the home via its retail stores and various direct-to-customer channels. March 22nd the company raised its quarterly dividend to $0.13/share. The yield based on the new payout is 1.88%.
Raven (RAVN) provides electronic precision-agriculture products, reinforced plastic sheeting, electronics manufacturing services, specialty aeronautics, and sewn products. March 22nd the company increased its quarterly dividend to $0.16/share. The dividend is payable April 15, 2010, to shareholders of record on March 31, 2010. The ex-dividend date is March 29, 2010. RAVN is a Dividend Achiever and has raised its dividend for 24 consecutive years. The yield based on the new payout is 2.89%. [Analysis]
ConocoPhillips (COP) is the the fourth largest integrated oil company in the world. March 24th the company raised its dividend 10%. COP also announced it would sell of 10 percent of LUKOIL and other assets over the next two years. The yield based on the new payout is 4.22%.
Starbucks (SBUX) is the leading coffee roaster and retailer of high-quality coffee products in the world. March 24th the company approved its first ever quarterly cash dividend of $0.10/share. The quarterly dividend of $0.10 per share will be paid on April 23, 2010, to shareholders of record on the close of business on April 7, 2010. The yield based on the new payout is 1.58%.
Clifton Savings Bancorp (CSBK) serves northeast New Jersey through its Clifton Savings Bank, S.L.A. subsidiary with assets of $801 million. March 24th the company raised its quarterly dividend to $0.06/share. The yield based on the new payout is 2.50%.
Raytheon (RTN) the world’s sixth largest military contractor, specializes in making high-tech missiles and electronics. March 24th the company increased its quarterly dividend 21% to $0.375/share. The dividend will be paid on April 29, 2010 to shareholders of record as of the close of business on April 6, 2010. The yield based on the new payout is 2.62%.
Hingham Institution for Savings (HIFS) is a Massachusetts-chartered savings bank with offices located in Hingham, South Hingham, Hull, Scituate, Cohasset, SouthWeymouth, Norwell and Boston’s South End. March 25th the company raised its quarterly dividend 4.5% to $0.23/share. The dividend is is payable on April 20, 2010 to stockholders of record as of April 9, 2010. Robert H. Gaughen, Jr., President and Chief Executive Officer of the Bank, in announcing the dividend, stated, “We are proud of the fact that we have increased cash dividends to shareholders in each of the past 15 years.” The yield based on the new payout is 2.83%.
Avoiding the cash trap works best when applied on a consistent basis. For a list of stocks with a long string of consecutive cash dividend increases, see this list.
Full Disclosure: No position in the aforementioned securities. See a list of all my income holdings here.