Because of the coincidence that I wrote an article about AT&T’s merger with DirecTV on the eve of the Dow Jones announcement that Apple would be replacing AT&T in the Dow Jones Index, I received quite a few e-mails from readers asking whether that kind of move should be treated as a signal that Apple should be purchased or AT&T should be sold. I did not get a chance to respond to any of those readers, but hopefully my discussions here will provide an adequate answer to the question.
First, the Dow Jones Index has little rational bearing on actual buy-and-hold decisions these days, despite the fact that it is widely circulated in … Read the rest of this article!
Since 2008, AT&T has established the custom of raising its quarterly dividend by a penny per share, or $0.04 annually. That pattern has taken the $1.60 dividend in 2008 up to $1.88 here in 2015. The slow rate of dividend growth during these past seven years has served an important purpose: It has given AT&T the chance to increase the amount of its annual profits that aren’t earmarked for dividends. Retained earnings are in important ingredient in establishing future growth because it represents the available cash to sink into new initiatives without having to borrow from banks or dilute shareholders.
In the past ten years, the dividend has gone from consuming 83% of … Read the rest of this article!
For a company with a wildly impressive track record of rewarding shareholders, Best Buy sure is an ugly company. Since 1985, Best Buy has compounded wealth for shareholders at a rate of 20.58% annually for shareholders. Yes, this is a company that has been even better than the quintessential dividend stock of the Old Philip Morris, which has rewarded shareholders with huge dividend checks that now come from Altria, Philip Morris International, Kraft, and Mondelez. A mere $10,000 invested into Best Buy in 1985 would be over $2,612,000 today. Millionaire status could have been reached with a mere $3,850 investment in Best Buy.
Yet, we are here to talk about the future (as … Read the rest of this article!
From 1926 through 1991, a company called Eastern Airlines flew an unofficial monopoly over the northeasterly American skies. Headquartered in Miami, it was one of the “Big Four” airlines and featured hubs in Chicago, Orlando, and Tampa Bay. During the 1960s and 1970s, it had an extended period of delivering shareholders very good returns at a rate of 15.2% annually. That was because the company was reporting earnings per share growth of 13% and paid a small dividend, and investors were enamored with the stock. Around the mid-1980s, the stock started trading in the valuation range of 10-13x earnings, leading many people to think that the stock was cheap and worthy of purchase … Read the rest of this article!
With BP on my mind after writing last night’s article, I was once again a bit surprised to study the full effects that dividend payments can have—not just in terms of total returns—but also in providing a cushion against the next fall in the price of stock. The list of companies with worse PR issues than BP is indeed short, and people who remark that the price has little changed since 2010 are, of course, right.
But here is what I see: $1.68 in 2011 dividends, $1.98 in 2012 dividends, $2.19 in 2013 dividends, $2.34 in 2014 dividends, and (projected) $2.40 dividends in 2015. The price at both the start of 2011 and … Read the rest of this article!