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High Yield Stocks Boosting Distributions
Posted by: Dividend Growth Investor (IP Logged)
Date: January 30, 2012 07:24AM

Utilities, Pipeline Master Limited Partnerships and Real Estate Investment trusts typically distribute a large portion of their earnings and cash flows to their shareholders. As a result, most of them typically enjoy high dividend yields in comparison to the broader market. The main disadvantage is that dividend increases are not as high as those for other traditional dividend growth stocks such as PepsiCo (PEP) or Coca Cola (KO). Given the low interest rate environment over the past two years however, many investors have started chasing the high distributions from these sectors, which has lead to increases in stock prices and decrease in dividend yields to historic lows. This has led some market analysts to proclaim that we might be approaching a dividend bubble. In a previous article I noted that we are far from a dividend bubble at this point. Any further increase in popularity for high yielding stocks such as Utilities, Master Limited Partnerships and Real Estate Investment Trusts however could bring us closer to this point for these sectors, and would make other dividend growth sectors more appealing.

The dividend growth companies that announced distribution increases over the past week included:

Consolidated Edison, Inc. (ED), through its subsidiaries, provides energy services to residential, commercial, industrial, and government customers in the United States. The company raised its quarterly dividend by 0.83% to 60.50cents/share. This dividend aristocrat has raised distributions for 38 years in a row. The low dividend growth and the steep run up in price, which pushed the yield down to multi-decade lows make this stock a hold. Yield: 4.10% (analysis)

HCP, Inc. (HCP) is a real estate investment trust which primarily invests in properties serving the healthcare industry including sectors of healthcare such as senior housing, life science, medical office, hospital and skilled nursing. The company raised its quarterly dividend by 4.20% to 50 cents/share. This dividend champion has raised distributions for 27 years in a row. Yield: 4.80% (analysis)

Health Care REIT, Inc. (HCN) is a real estate investment trust which invests in senior living and health care properties. The company raised its quarterly dividend by 3.50% to 74 cents/share. This dividend stock has raised distributions for 6 years in a row. Yield: 5.20%

Magellan Midstream Partners, L.P. (MMP), together with its subsidiaries, engages in the transportation, storage, and distribution of refined petroleum products and crude oil in the United States. The master limited partnership raised its quarterly distributions 81.50 cents/unit, which was a 7.60% increase over the Q1 2011 distribution. This dividend achiever has raised distributions for 11 years in a row. Yield: 4.90%

Holly Energy Partners, L.P. (HEP) operates a system of petroleum product and crude oil pipelines, storage tanks, distribution terminals, and loading rack facilities. The master limited partnership raised its quarterly distributions 88.50 cents/unit, which was a 4.70% increase over the Q1 2011 distribution. This Holly Energy Partners has raised distributions for 7 years in a row. Yield: 6.50%

SJW Corp. (SJW), through its subsidiaries, engages in the production, purchase, storage, purification, distribution, wholesale, and retail sale of water. The company raised its quarterly dividend by 2.90% to 17.75 cents/share. This dividend champion has raised distributions for 45 years in a row. Yield: 3%

California Water Service Group (CWT), through its subsidiaries, provides water utility and other related services in California, Washington, New Mexico, and Hawaii. The company raised its quarterly dividend by 2.40% to 15.75 cents/share. This dividend champion has raised distributions for 45 years in a row. Yield: 3.40%

Energen Corporation (EGN), an energy holding company, engages in the acquisition, exploration, development, and production of oil, natural gas, and natural gas liquids in the continental United States. The company raised its quarterly dividend by 3.70% to 14 cents/share. This dividend champion has raised distributions for 30 years in a row. Yield: 1%

CMS Energy Corporation (CMS), through its subsidiaries, operates as an energy company primarily in Michigan. The company operates in three segments: Electric Utility, Gas Utility, and Enterprises. The company raised its quarterly dividend by 14.30% to 24 cents/share. This dividend stock has raised distributions for 6 years in a row. Yield: 4.40%

Canadian National Railway Company (CNI), together with its subsidiaries, engages in the rail and related transportation business in North America. The company raised its quarterly dividend by 15% to 37.50 cents/share. This international dividend achiever has raised distributions every year since 1996. Yield: 2%

Norfolk Southern Corporation (NSC), through its subsidiaries, engages in the rail transportation of raw materials, intermediate products, and finished goods primarily in the United States. The company raised its quarterly dividend by 9.30% to 47 cents/share. This dividend achiever has raised distributions every year for 11 years. Yield: 2.50%

Donaldson Company, Inc. (DCI) engages in the manufacture and sale of filtration systems and replacement parts worldwide. The company operates in two segments, Engine Products and Industrial Products. The company raised its quarterly dividend by 6.70% to 16 cents/share. This dividend champion has raised distributions for 26 years in a row. Yield: 0.90%

Parker Hannifin Corporation (PH) manufactures fluid power systems, electromechanical controls, and related components worldwide. The company raised its quarterly dividend by 5.40% to 39 cents/share. This dividend king has raised distributions for 55 years in a row. Yield: 1.90%

Rollins, Inc. (ROL), through its subsidiaries, provides pest and termite control services to residential and commercial customers in North America. The company raised its quarterly dividend by 14.30% to 8 cents/share. This dividend stock has raised distributions for 10 years in a row. Yield: 1.40%

Bar Harbor Bankshares (BHB) operates as the holding company for Bar Harbor Bank & Trust that provides various banking products and services to individuals, businesses, not-for-profit organizations. The company raised its quarterly dividend to 28.50cents/share, which represents a 5.60% increase over the Q1 2011 dividend. This dividend stock has raised distributions for 9 years in a row. Yield: 3.80%

Full Disclosure: Long ED


Stocks Discussed: PEP, KO, ED, HCP, HCN, MMP, HEP, SJW, CWT, EGN, CNI,
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