|New Threads Only:|
|New Threads & Replies:|
Forum List » Income Investors' Forum|
Ideas for Income Investors. High Dividend Stocks, Mutual Funds etc.
Three Companies expecting high dividend growth and returns
Posted by: Dividend Growth Investor (IP Logged)
Date: April 20, 2012 06:41AM
Dividend growth stocks provide investors with a rising stream of passive income, which grows over time. The consistent nature of dividend increases protects the dividend income against inflation. However, many dividend growth stocks actually tend to deliver dividend growth which typically exceeds the rate of inflation. Historically, US stocks have managed to boost dividends above the rate of inflation by 2% – 3%.
There is typically a trade-off between dividend yield and dividend growth, that investors have to put up with. Generally, companies with the highest current yields tend to distribute most of their cash flows to shareholders, which leaves little room for investment in the business. This leads to low earnings growth, that trickles down into low dividend growth. Companies with low and medium sized yields however tend to disitrbute a low portion of their earnings to shareholders, with the rest reinvested in the business, thus providing fuel for future dividend increases.
There are a few companies which meet both criteria, when purchased at the right times:
Philip Morris International Inc. (PM), through its subsidiaries, manufactures and sells cigarettes and other tobacco products. The company expects to generate 10%- 12% annual growth in earnings through its cost reduction programs, acquiring companies internationally as well as innovating in growing markets in order to position itself favorably. Phillip Morris International will be able to keep increasing dividends at the high single digit percentage points in the foreseeable future, while paying an above average yield of 3.60% today. (analysis)
ONEOK, Inc. (OKE), a diversified energy company, engages in the gathering, processing, storage, and transportation of natural gas in the United States. The company operates through three segments: ONEOK Partners, Natural Gas Distribution, and Energy Services. The company enjoys strong performance in its ONEOK Partners (OKS) segment, which has resulted in increased distributions to ONEOK from the partnership. In addition, the company has been able to generate strong cash flow from its natural gas distribution segment. ONEOK indicated in September 2011 that it expects to increase its dividend 50 percent by 2014 and affirmed a long-term dividend payout target of 60 percent to 70 percent of recurring earnings, subject to board of directors' approval. ONEOK announced today it is considering increasing its July 2012 dividend above the 4-cent-increase it provided in September 2011. Yield: 3% (analysis)
Kinder Morgan, Inc. (KMI) owns and operates energy transportation and storage assets in the United States and Canada. The company operates in six segments: Products Pipelines-KMP, Natural Gas Pipelines—KMP, CO2—KMP, Terminals—KMP, Kinder Morgan Canada—KMP, and NGPL PipeCo LLC. The company expects its acquisition of El Paso to be completed by May 2012. This combination will lead to synergies and cost savings of approximately $350 million/year. As a result of this transaction and KMI’s normal expected annual growth, KMI still expects its dividend per share to grow at an average annual rate of around 12.5 percent through 2015 from its budgeted 2011 dividend per share of $1.16. The growth of KMI is being driven by Kinder Morgan Partners (KMP), which expects to declare cash distributions of $4.98 per unit for 2012, an 8 percent increase over the $4.61 per unit it will distribute for 2011. Yield: 3.30% (analysis)
Full Disclosure: Long PM, OKS, KMR and KMI
Stocks Discussed: PM, OKS, KMR, KMI,
Disclaimers: GuruFocus.com is not operated by a broker, a dealer, or a registered investment adviser. Under no circumstances does any information posted on GuruFocus.com represent a recommendation to buy or sell a security. The information on this site, and in its related newsletters, is not intended to be, nor does it constitute, investment advice or recommendations. The gurus may buy and sell securities before and after any particular article and report and information herein is published, with respect to the securities discussed in any article and report posted herein. In no event shall GuruFocus.com be liable to any member, guest or third party for any damages of any kind arising out of the use of any content or other material published or available on GuruFocus.com, or relating to the use of, or inability to use, GuruFocus.com or any content, including, without limitation, any investment losses, lost profits, lost opportunity, special, incidental, indirect, consequential or punitive damages. Past performance is a poor indicator of future performance. The information on this site, and in its related newsletters, is not intended to be, nor does it constitute, investment advice or recommendations. The information on this site is in no way guaranteed for completeness, accuracy or in any other way. The gurus listed in this website are not affiliated with GuruFocus.com, LLC. Stock quotes provided by InterActive Data. Fundamental company data provided by Morningstar, updated daily.