There was a lot happening in the economy throughout Q2. Funny enough, it reminds me of what happened last year during the same quarter:
– Fear of the Chinese economy slowing down
– Concerns about the Greek debt
– Concerns about the US economy
The good news (if there is any) is that companies continue to post great financial results (as was the case last year). On top of that, did you know that between July 1st, 2010 and July 1st, 2011, the US stock market went up by 26% and the Canadian market by 16%? Quite impressive, isn’t it? I guess this is the living proof that you can’t trust the media to tell you what will happen to the markets! But you can trust them to hype fear propaganda… they are pretty good at it!
So What Happened in the Dividend World in Q2?
The first good news is that we didn’t see many dividend cuts during the last quarter. There are only 1.39% of companies which cut their dividend while 21.50% raised them (that’s great news!). Among them, there are some notable increases from “popular stocks”;
Company Stock Dividend Yield Dividend Increase
Dow Chemical DOW 2.85% 66.67%
Jonhson & Johnson JNJ 3.38% 5.56%
Procter & Gamble GPS 3.25% 8.97%
PepsiCo PEP 2.97% 7.29%
Colgate-Palmolive CL 2.63% 9.43%
Dr Pepper Snapple Group DPS 3.09% 28%
HJ Heinz HNZ 3.59% 6.67%
Chevron CVX 3% 8.33%
Exxon Mobil XOM 2.31% 6.82%
JP Morgan JPM 2.53% 400.00%
Health Care REIT HCN 5.42% 3.12%
General Electric GE 3.23% 7.14%
So as you can see, there is better news with dividend stocks than with the US economy! On top of dividend increases, several companies also started to buy back their shares. These are 2 great stories for dividend investors!
Consumer cyclical & non-cyclical stocks: both winners
During the second quarter, both cyclical and non-cyclical consumer sectors performed pretty well. Companies such as Darden (DRI), Starbucks (SBUX), Merck (MRK), General Mills (GIS) and Kellogg (K) are among the companies expected to either buy back shares or increase their dividends in the next quarter. The financial moves made back in 2008 and 2009 are definitely paying off lately!
Financial: Getting out of boiling water
The word “dividend” is now allowed in this industry which suffered big time from the 2008 crisis. Some banks passed the Comprehensive Capital Analysis and Review (CCAR) and can now distribute dividends again. This is why JP Morgan Chase (JPM), Wells Fargo (WFC), Bank of New York Mellon Corp (BK), PNC Financial Services (PNC) increased their dividends massively (400%, 140%, 44% & 250% respectively).
Cash is in Technology
In the last quarter, 2 big players in the technology sector reported strong results and important amounts of cash on their balance sheets. IBM and Intel (INTC) had beaten analysts’ expectations and continue to pay great dividends. Microsoft (MSFT) is another company on the technology radar showing excess cash and a willingness to distribute some to its shareholders.
What’s coming in Q3?… QE3?
Unfortunately, I don’t have a crystal ball… but, since we have survived the debt level problem; we might hear about quantitative easing for a third time. Announcing a QE3 would be great news for the stock market and would certainly push them higher. On the other hand, I don’t believe that printing money continuously is a great solution…
Since we are currently in a dip on the stock market, I think that buying more dividend stocks could be very interesting at this time. Although companies’ balance sheets are strong, you have an opportunity to buy some of them at a rebate. This also means that you can easily boost your investment portfolio dividend yield at the same time! This is why I am actually bullish for the 3rd quarter, are you?
I am not terribly bullish yet. I think the Dow will hit 4 digits and re-test 2008 lows. I will wait for some of the dust to settle and then start thinking about it again. It has been too volatile for the past few days to get any good sense of direction.
I currently looking to increase my liquidity to jump in the market. I think it is a great opportunities for those who are willing to ride the roller coaster!
Awesome post!
It’s fantastic to see a breakdown of what’s happening in the dividend world like this. It’s great to see some sizable increases in dividends from the companies you mention, especially with many US companies given the current economic climate.
I was pleased to hear about the recent news with SAP and IGM increasing their dividends.
I totally agree with you re: MSFT. They have a lot of cash built up in their balance sheet and their dividend yield is creeping up. I recently bought a position in it, but wished I had waited a bit longer. Regardless, it’s a good long-term play, IMO.
Keep up the good work. I’m doing a dividend-related post myself this evening and will be sure to reference this post.
Great list of companies there. Staying steady and sticking to the plan is the name of the game.
It doesn’t look like we’ll see another round of easing. QE3 looks dead and I couldn’t be happier. Printing money, as you said, certainly isn’t the way out and I don’t think we need equities propped up. Let the chips fall where they may and I hope they fall lower…which offers me better opportunities to buy my favorite companies at further discounts.
Good luck with your buys! 🙂