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Dividend Increases for the week of January 2, 2012
As things return to normal this week, we saw six companies come to market with announcements of a dividend increase. The companies reporting increases were spread broadly across several sectors including retail, real estate, business development, banking as well as a heating & cooling equipment supply company.
The weekly wrap
After the announced dividend increases, the new yields ranged from a low of 1.45% up to 8.51%. This week’s winner for highest yield was Pennant Park Floating Rate Capital (ticker: PFLT) – yield 8.51%. It should come as little surprise to DDI readers that Pennant Park is a Business Development Company ( also known as a BDC). Like many of the BDC’s we’ve seen in the dividend update recently, Pennant Park has increased their payout three times since June, 2011.
In a sign that the economy may finally be getting back on solid ground, we were pleasantly surprised with Macy’s (ticker: M) dividend increase this week to $.80/annually. That is a 100% increase over their previous dividend payout. Will this be the beginning of more dividend increases to come from the likes of Gap, Target, Nordstrom and Walmart? While some retailers like Sears Holdings (ticker: SHLD) said their holiday season wasn’t so merry – the general consensus seems to be that more good news lies ahead for retailers.
Daily Dividend Portfolio Due Diligence
Each week when I put together the list of dividend increases, I’m on the lookout for new investment ideas that I may want to add to the DDI portfolio. Because I’ve added a few BDC’s (Solar Capital: ticker SUNS) to the portfolio recently, I would probably pass on adding Pennant Park to my review list presently even though it does pay monthly with an above average yield.
The two ideas that seem most compelling at the moment are Watsco (ticker: WSO), the heating & cooling equipment supply company yielding 3.67% and Macy’s (ticker: M) the clothing and home-furnishing retailer yielding 2.31%. Even though I’m currently targeting new holdings with a dividend yield at or above 4% I would add these two companies to my consideration list because they would provide sector / industry diversification that I’m currently lacking.
There were no current DDI portfolio holdings that reported a dividend increase this week. A spreadsheet containing the weekly dividend increase round up for the week of January 2, 2012 can be found here – or by clicking on the spreadsheet image located at the bottom of today’s post.
As always when evaluating investment opportunities it’s important to keep in mind not only the fundamentals of the stock itself, but also how the holding entity (Limited Partnership,Royalty Trust, Master Limited Partnership, Business Development Company, Preferred Stock) may affect the way you report income on your annual tax return as well as the amount or percentage of tax you will be required to pay. Adding shares of any of these special entities to tax deferred / retirement accounts may also present additional issues.
Remember to review all of the fundamentals of any company BEFORE investing – do not simply buy a stock based on the dividend payout. If you have further questions about any stock mentioned her you should first consult with your CPA or tax planner / advisor before making any investments.
For more detailed information about all of today’s dividend increases please refer to the chart below.