For a dividend investor, there is not much worse than a stock that cuts or eliminates its dividend. Suddenly, the reason you purchased the stock no longer exists. Many dividend investors, myself included, have a hard and fast rule to immediately sell any stock held as income investment if it cuts its dividend. However, when a company freezes its dividend at the current rate, the decision is not as clear-cut. At this point you must look look at alternative investments, along with the company’s current yield and future outlook.
Here are a few select companies that have avoided a June freeze by increasing the cash dividends paid to their shareholders:
Duke Energy (DUK) provides service to 3.9 million electric customers in North Carolina, South Carolina, Indiana, Ohio and Kentucky, and 500,000 gas customers in Kentucky and Ohio. June 22nd the company raised its quarterly dividend to $0.245/share. The dividend is payable on September 16, 2010, to shareholders of record at the close of business Aug. 13, 2010. The yield based on the new payout is 6.00%.
Petsmart Inc. (PETM) operates more than 1,100 pet stores in the U.S. and Canada, offering pet food, supplies and services. June 21st the company increased its quarterly dividend 25% to $0.125/share. The dividend is payable on August 13, 2010, to stockholders of record at the close of business on July 30, 2010. The yield based on the new payout is 1.25%.
Darden Restaurants (DRI) operates the Red Lobster, Olive Garden, Bahama Breeze and Seasons 52 chains, as well as the LongHorn Steakhouse and Capital Grille chains, which it acquired in October 2007. June 23rd the company increased its quarterly dividend 28% to $0.32/share. The dividend is payable on August 2, 2010, to stockholders of record at the close of business on July 9, 2010. The yield based on the new payout is 3.22%.
Peoples Financial (PFBX) provides banking services to individuals and small to middle market businesses via its 15 branch offices located in Mississippi. June 23rd the company raised its semiannual dividend 10% $0.11/share. The dividend is payable July 16, 2010, to stockholders of record July 9, 2010. The ex-dividend date is July 7, 2010. The yield based on the new payout is 1.92%.
Best Buy (BBY) is a leading retailer of consumer electronics and entertainment software operates approximately 4,000 stores in the U.S., Canada, China and Europe. June 24th the company increased its quarterly dividend 7% to $0.15/share. The dividend is payable on Oct. 26, 2010, to shareholders of record as of Oct. 5, 2010. The yield based on the new payout is 1.67%.
Medtronic (MDT) is a global medical device manufacturer has leadership positions in the pacemaker, defibrillator, orthopedic, diabetes management and other medical markets. June 24th the company raised its quarterly dividend 9.8% to $0.225/share. The dividend is payable on July 30, 2010, to shareholders of record at the close of business on July 9, 2010. MDT is a Dividend Achiever and has raised its dividend for 33 consecutive years. The yield based on the new payout is 2.41%.
Selecting stocks with increasing dividends is critical for an income growth strategy. The above list contains stocks that recently raised their dividends, it is not a list of recommend buys. As always, due diligence should be performed before buying or selling any stock. 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.