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Dividend Roundup: TGT, CAT, F, USHS, NYX

June 08, 2011 | About:
Here are the five latest dividend-related developments featured on The Dynamic Dividend:

Target Boosts Dividend for 44th Consecutive Year

Target Corporation (TGT) announced a quarterly dividend of $0.30 per share at its annual shareholders meeting this afternoon, which is a 20% improvement over the $0.25 paid each of the previous four quarters by the discount retailer.

Target is not only positioned to improve its annual dividend total for the 44th consecutive year, but it’s on pace to tally its largest year-over-year dividend growth (31%) in more than 20 years — topping last year’s 27% improvement — and achieve double-digit payout growth for the eighth consecutive year. Since 2006 alone, Target has tripled its quarterly dividend.

Shares of TGT are currently trading at $46.74, where they now feature a 2.57% dividend yield.

Target has increased its annual dividend total every year dating back to 1968, earning it Class B Dividend Dynamo status.

Caterpillar Ups Dividend Again, But Keeps Guidance Low

Caterpillar Inc. (CAT) declared a quarterly dividend of $0.46 per share this afternoon, bumping its payout by two pennies (4.6%). The construction and mining equipment company is currently on pace to improve its dividend total for the 18th consecutive year.

Despite a forward payout ratio that barely tips 20%, Caterpillar’s dividend is inexplicably losing momentum. The company has now improved its payout by more than 160% since 2003, but is currently on pace to grow its dividend by just 4.7% this year. Only last year’s 2.4% growth has been worse over the last eight years.

Caterpillar also reaffirmed its full-year outlook today, saying it expects earnings of $6.25 to $6.75 per share on $52 to $54 billion in revenue. The consensus analyst view currently calls for a higher profit ($6.85 per share) and better sales ($54.1 billion).

Shares of CAT are currently trading at $99.26 (-0.62%), where they now feature a 1.85% dividend yield.

Caterpillar has increased its annual dividend total every year dating back to 1994, earning it Class E Dividend Dynamo status.

Ford's Dividend Returning in the "Near Term"

Ford Motor Company (F) said at yesterday’s 2011 investor meeting that it would reinstate its dividend once the auto giant earns an investment grade rating, something it expects to achieve “in the near term.”

With earnings growth fueling ahead-of-schedule debt repayments (Ford expects to pay down another $2.3 billion during the current quarter, bringing it within $4.6 billion of its stated goal of maintaining $10 billion in automotive debt), it’s probably not a stretch to assume Ford can reach investment grade by the end of the year.

As for the amount of cash it will return to shareholders, that’s more of a mystery. Ford has been vague on that front, saying only that it will pay dividends “at an appropriate level of after-tax earnings.” So let’s speculate.

If the company wants to keep its forward payout ratio below a conservative benchmark to start — let’s say 20%, giving it 5x dividend coverage — it would likely initiate its quarterly payout at no more than $0.10 per share. (Analysts currently expect the company to earn $2.02 per share in 2012.)

That has historical significance, as it would be in line with Ford’s pre-turnaround dividend. In its last three full years as a profitable and dividend-paying company (2003-2005) prior to its big restructuring, Ford maintained a quarterly dividend of $0.10 per share, which amounted to 39% of its total profit during that period. That’s nearly double the earnings strain the same payout would cause today.

Shares of F opened Wednesday’s session trading at $13.96. Buyers at today’s opening price would be sitting on a yield-on-cost of 2.87% if the company were to restart its quarterly payout at $0.10 per share. Bloomberg recently speculated the company would begin paying a dividend of $0.05 per share in the fourth quarter, which would provide those same investors with a 1.43% yield-on-cost.

U.S. Home Systems Initiates Quarterly Dividend

U.S. Home Systems (USHS) declared a quarterly dividend of $0.015 per share this morning. This will be the first time the specialty home products company has returned cash to its shareholders.

Shares of USHS closed Tuesday’s session trading at $5.13, where they now feature a 1.17% dividend yield.

The company is certainly kicking off its new era with plenty of dividend coverage. Analysts currently expect U.S. Home Systems to earn $0.69 per share in 2012, giving it a very manageable 8.7% forward payout ratio.

NYSE Euronext Plans Post-Merger Special Dividend

NYSE Euronext (NYX) and Deutsche Boerse, set to merge into the world’s leading global exchange operator, today announced plans for the combined company to distribute a special dividend of two euros per share after the transaction is complete.

Based on the share exchange ratios outlined in the merger agreement and the current Euro/USD exchange rate, NYSE Euronext shareholders can expect to pocket roughly $1.37 per share — or 3.85% of the stock’s current price.

Shares of NYX opened Tuesday’s session trading at $35.60, where they feature a 3.37% dividend yield. The global exchange operator has paid $0.30 per share each quarter since June 2008, and is currently slated to distribute the same amount later this month.

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Dynamic Dividend
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