The Fed's 1-Cent-a-Share Dividend Cap

Antony Currie wants a bit more clarity on why the Federal Reserve seems to be happy with Bank of America paying a dividend of 1 cent per quarter, but unhappy with a dividend of 5 cents per quarter. “It’s not clear,” he writes, “whether the Fed is worried about BofA’s core earnings falling short or about potential losses being higher than the bank projected, to pick a couple of possible concerns.” My feeling is that the Fed’s logic wasn’t nearly that granular. There are basically three states that a bank can be in: it can pay no dividends at all; it can pay the minimum possible token dividend of 1 cent per quarter; or it can pay out a full and generous dividend. The Fed, in the wake of its latest stress tests, has determined that both Citigroup (C) and Bank of America... more

Dividend Scan: DFS, FITB, CRR, MRX, MAA, NI

Amid the downward movement of the US market following Federal Reserve's rejection of Bank of America Corporation (NYSE: BAC) dividend hike plan, several companies declared their future dividend plans. Some notable dividend payers are discussed here. Discover Financial Services (NYSE: DFS) announced an increase in its quarterly dividend by 6 cents per share from its previous 2 cents a share. DFS gained 3.33 percent or $0.74 to $22.99. Fifth Third Bancorp (Nasdaq: FITB) raised its quarterly dividend to 6 cents a share from its previous one cent a share. Despite the increase, FITB was down 0.25 percent or $0.04 to $13.81. Carbo Ceramics Inc (NYSE: CRR) plans to pay a quarterly dividend of 20 cents per share, payable on May 16, 2011 to shareholders of record on May 2, 2011. CRR lost... more

What's Really Wrong With Letting Big Banks Pay Bigger Dividends

The Federal Reserve is finally -- albeit only implicitly -- admitting that not all the big banks are healthy: The Fed isn't letting Bank of America pay increased dividends. When the Fed allowed other large banks to issue increased dividends last Friday, I asked why. The big banks are insolvent, because -- at a minimum -- their loan portfolios are wildly overvalued. The reason the banks aren't bankrupt despite their insolvency is because the government stands behind them. Since the banks are in such shaky financial straits, they shouldn't be paying out money they don't have as dividends. Period. Yet the Fed let many of these the banks reward shareholders -- who, under reality-based accounting, would have been wiped out -- with money that could otherwise be used to help the banks... more

Bristol-Myers: A $44 Billion High-Yield Stock That Could Be in Trouble

It's one of the largest pharmaceutical companies in the world. I added the shares to my High-Yield Investing portfolio in January 2009. Over the following two years, I received $2.54 a share in dividends thanks to a 5% yield. Meanwhile, the price rose steadily for a gain of more than 40%. Dividends of $1.28 per share in 2010 were paid out of earnings of $1.79 per share, for a comfortable 72% payout ratio. The current dividend rate of $1.32 per share is amply covered by management's projected earnings of $2.00-$2.10 a share this year. So why on Earth did I sell this seemingly rock-solid dividend payer -- Bristol-Myers Squibb (BMY) -- from my portfolio earlier this month?The market's recent pullback has been a long time coming. If it weren't for the tragedy in Japan or riots in Libya, then... more

Dividend Report Card: Pfizer

The Dividend Report Card wasn't designed as a buy or sell signal, but rather as a tool to gauge the health of a company's dividend. For a full explanation of each category, click here for a tutorial. Today's pupil is Pfizer (NYSE: PFE ) , which posts a 4% dividend yield.... more

The Most Promising Dividends in Varied Manufacturing

Yields and growth rates and payout ratios, oh my!Before we get to those companies, though, you should understand just why you'd want to own dividend payers. These stocks can contribute a huge chunk of growth to your portfolio in good times, and bolster it during market downturns. As my colleague Matt Koppenheffer has noted: "Between 2000 and 2009, the average dividend-adjusted return on stocks with market caps above $5 billion and a trailing yield of 2.5% or better was a whopping 114%. Compare that to a 19% drop for the S&P 500."... more

Fed Says 'No' to Bank of America's Dividend Plan

The Federal Reserve recently gave the all-clear sign for banks to raise their dividends. Well, not totally all-clear. The dividend increases still need to be approved by the Fed. After all, you can’t have public money being shoveled right to shareholders. The government wants them to make a profit first. So I was happy to see that JPMorgan Chase (JPM) a member of our Buy List,... more

Avoid Dividend Cutters At All Costs

Companies cut dividends when they either expects that business would deteriorate to an extent where all cash might be needed to sustain the business or because they cannot afford to pay the dividend. When management expects losses that would drain cash in the near future, they are very likely to cut distributions. When dividends are cut, stock prices typically nosedive as the last investors who have held on hoping for better news leave the sinking ship. As a rule, I always sell when a company announces that it would be cutting dividends. Over the past three years I have had four situations, where I have had to deal with dividend cutters and eliminators. In 2008 American Capital (ACAS) suspended its dividend payment. In 2009 General Electric (GE) and State Street (STT) also cut... more

38 Top Dividend Paying Industrial Stocks With Highest Margin of Safety

Known as the father of value investment, Benjamin Graham was an economist and a professional investor. Warren Buffett states that Graham is the second most influential person in his life after his father. Benjamin Graham is famous for his simple yet powerful estimation rules. In his famous book, Renaissance of Value, Benjamin Graham suggests a rule-of-thumb for estimating the intrinsic value of a company: Value = EPS x (8.5 + 2 x Estimated Earnings Growth) x (4.4 / AAA Corporate Bond Yield) Note that this is a long-term valuation. It does not imply any target price estimate. Moreover, according to this valuation, companies that are currently loss-making are worth zero. However, the formula can still be used to calculate the margin of safety in the long run: Margin of Safety =... more

20 Non-Cyclical Consumer Stocks for Dividend Lovers

Non-cyclical consumer stocks are defensive stocks that perform relatively well in declining markets. They slightly underperform the market in bull markets, but make up for the loss in bear markets. IShares Dow Jones US Consumer Goods (IYK) beat the S&P 500 index by around 20% during the last five years. We prepared a list of 20 non-cyclical consumer stocks which pay fat dividend checks regularly. All companies in this list have a market capitalization above $1 billion, P/E ratio lower than 25, and dividend yield of at least 3%. These 20 stocks returned 12.5% (including dividends) during the past 12 months, beating the government bonds by a large margin. 1. The Procter & Gamble Company (PG): Procter & Gamble is one of the leading consumer goods companies in the world. PG ... more