With market volatility swinging higher this week, it pays to get some protection for your portfolio -- literally.
I'm talking about dividends, the cash payouts that many firms make to shareholders on a quarterly basis. If you've been ignoring dividends for your portfolio, you shouldn't. With corporate cash and investor anxiety both at all time highs, it makes sense to add some income to your portfolio; not only are dividend-payers typically more defensive stocks, their payouts reduce the overall volatility of your holdings.
Today, we'll take a look at firms that have been ratcheting their payouts higher.
The trickle of dividend-payers is continuing in December. All told, 17 stocks with a market cap of over $1-billion announced dividend increases in the last week. That's the same number of stocks as we saw in the previous week -- a good sign that dividend hikes aren't completely dropping off.
Historically, dividend stocks have been a good bet. Over the last 36 years, dividend stocks have outperformed the rest of the S&P 500 by 2.5 per cent annually, and they outperformed nonpayers by nearly 8 per cent every year, all while paying out cash to their shareholders, according to data compiled by Ned Davis Research. The numbers are even more compelling when looking at companies that consistently increase their payouts.
That's why we pay close attention to the firms that are shoveling more corporate cash to shareholders each week. With that, here's a look at seven of the stocks that hiked payouts in the last week.
$56-billion drug maker Bristol-Myers Squibb has had a strong year in 2011; shareholders have seen their stakes appreciate more than 25 per cent since the first trading day of January. Now management is upping the ante, hiking the firm's quarterly dividend by 3.03 per cent to 34 cents per share.
While that doesn't sound like much of an increase, BMY is already a perennially high-yielding stock (and one of the top-yielding drug stocks). Shares currently pay out a 4.08 per cent yield on current share price levels.
Bristol's pharmaceutical pipeline puts it a step ahead of most of its peers. The firm treats its pipeline like any good portfolio manager, diversifying away the risks of failure though exposure to a significant number of treatments as well as partnerships with peer firms.
Like most big pharma names, however, Bristol isn't immune from the patent drop-offs that are plaguing drug developers in the next several years. The firm will need to push its late-stage pipeline along if it wants to mitigate that downside.
Financially, Bristol-Myers Squibb is in solid shape, with a deep net cash position and considerable free cash flow generation abilities. That should secure the firm's hefty dividend payout going forward.
Medical device maker Stryker has a tight grip on the orthopedic market, developing and manufacturing everything from reconstructive joint implants to the scopes and surgical tools used in the operating room. The firm's niche focus is appealing -- with competition fierce in the medical device industry, Stryker's positioning ensures that revenues aren't as challenged by competitors.
That's not to say that there hasn't been some trepidation over the firm's outlook. Management has voiced concern over health care providers' reimbursement policies for costly orthopedic implants, and while the necessary nature of reconstructive implant surgery makes it less susceptible to economic headwinds, anything can spook investors in this market.
Growth has been consistently strong in the last several years. When investors see that Stryker can continue its expansion, shares should follow.
Stryker is another firm that's in a strong financial position right now. Like Bristol, Stryker has a net cash position and strong margins. That financial health helped to fuel management's 18.06 per cent dividend hike last week, which brings the firm's payout to 21 cents, a 1.8 per cent dividend payout at current levels.
Equity Residential is a $16-billion apartment real estate investment trust that has ownership interests in 451 properties that feature a total of 129,600 apartment units. The firm's geographic footprint is centered on major metropolitan areas where rent and demand for units are both high; New York, D.C., South Florida and Los Angeles are Equity Residential's four biggest markets.
As a REIT, Equity Residential is essentially an income-generation tool. By law, the firm is required to pay out the vast majority of its earnings directly to shareholders as dividends, a feature that allows the firm to skirt income taxes. Instead, shareholders pay taxes directly on their income from the firm.
While residential REITs have some major disadvantages compared with commercial REITs (laws concerning residential landlords are much more restrictive, and provide fewer options for recourse), Equity Residential operates at higher levels of profitability than most peers.
- Bristol-Myers Squibb Co$71.96-0.22(-0.30%)
- Stryker Corp$109.94+0.93(+0.85%)
- Equity Residential$69.15+1.08(+1.59%)
- Ecolab Inc$114.27-0.71(-0.62%)
- Aetna Inc$113.85+1.58(+1.41%)
- Ameriprise Financial Inc$97.82+1.92(+2.00%)
- Roper Technologies Inc$177.50+1.41(+0.80%)
- Updated May 2 4:00 PM EDT. Delayed by at least 15 minutes.