I found a recent article by CNBC’s Bob Pisani very interesting. As we work our way out of the recession more and more companies are not only paying a dividend but they are raising dividends.
The two takeaways for me are:
- 167 companies have announced dividend increases so far in 2013 compared to 160 in 2012 and 149 in 2011 (through April of each year). That alone is not that astonishing but its a good trend that can continue.
- More companies in the S&P are paying a dividend than any other time since 1999. 406 out of the 500 companies in the S&P 500 are returning cash to shareholders. Not bad.
These types of numbers get me thinking about the companies that are not paying dividends. When is it OK for a business to not return profits to its owners? The answer should be rarely.
A profitable company that has been in business for 10 years and has a market cap of $267B should be paying a dividend (Google). It’s lesser rival Yahoo is in the same boat. EPS of $3.45 and no dividend? Come on Yahoo!
I personally give Amazon a pass because their EPS is still very low. The company just announced earnings of $.18 per share for Q1 2013. If Amazon paid out 50% of its earnings it would only have a yield of .16%. That is a no brainier. It also means they have a long way to go before they will have a respectable EPS with a stock price over $200 per share.
Who else doesn’t pay a dividend that should? Here’s a list of a few established companies with positive EPS that may pay a dividend some day.
Dollar General (DG): Market Cap: 17B , EPS: 2.85
Bed Bath & Beyond (BBBY): Market Cap: 14B, EPS: 4.56
Ebay (EBAY): Market Cap: 25B, EPS 2.06
EMC Corp (EMC): Market Cap: 47B, EPS 1.23
VMware (VMW): Market Cap: 31B, EPS 1.72
Symantec Corp (SYMC): Market Cap: 17B, EPS 1.58
What company would you add to this list? There are plenty others out there.
