Thanksgiving came early to the stock exchange last week, with a score of companies declaring increases in their dividends. To some degree that's expected, given that we're in the swing of the fall earnings season. Still, the table was almost overflowing with goodies.
It was nearly impossible to choose only three appetizing raisers from this selection; I went with tradition, selecting a trio of Dividend Aristocrats (stocks that have lifted their payouts at least once every year for at least 25 years running). These are VF Corporation (NYSE: VFC), Aflac (NYSE: AFL), and AbbVie (NYSE: ABBV).
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VF Corporation, the conglomerate behind such noted apparel and accessories brands as The North Face, Vans, and Timberland, is lifting its quarterly distribution by 10% to $0.46 per share.
Concurrent with the announcement of the raise, the company released third-quarter figures that saw modest but encouraging gains in total revenue (up 5% on a year-over-year basis) and adjusted earnings (3% higher). The improvements were due to sales gains in the outdoor and action sports, and workwear segments of its business, not to mention the always-edgy Vans footwear line.
This forward momentum should continue. VF upped its net profit guidance for this fiscal year by $0.05 per share to $3.01. If achieved, that amount would represent an 8% improvement over the 2016 result; meanwhile, the company is anticipating revenue growth of 6% for the year.
Lately, VF's spending on its share buyback program and its dividend payouts have exceeded free cash flow. Although this has become fairly standard practice, and as such the company will probably figure out a way to keep that dividend growing, investors should keep a wary eye on those line items going forward.
VF's next dividend will be paid on Dec. 18 to investors of record as of Dec. 8. The payout ratio on it, when matched with the company's Q3 earnings per share (EPS), would be 37%, while the yield would be 2.6%. The latter compares favorably to the current 1.9% average of dividend-paying stocks on the S&P 500.
Supplemental insurance provider Aflac (NYSE: AFL), noted for its duck mascot as well as its reliable dividend payments, is about to quack out the latest in a lengthening series of distribution raises. The company announced a nearly 5% increase in its quarterly payout to $0.45 per share.
Yet not every key number for Aflac has been on the rise. In the insurer's Q3, total revenue slipped by 4% (to just over $5.5 billion), although much of this could be ascribed to unfavorable exchange rates -- the company has a thriving business in Japan. On the plus side, net profit saw a 14% rise to $716 million and beat the average analyst estimate.
A retrenchment in the Japanese business, combined with steady growth in the U.S., should help Aflac improve that top-line figure while remaining well in the black. The company's total dividend payout is relatively small compared to its free cash flow; I see no reason why that should change dramatically in the near future, so I'd rate the company's chances to maintain its Aristocrat status as extremely likely.
Aflac will hand out its upcoming dividend on Dec. 1 to shareholders of record as of Nov. 15. At the most recent closing stock price, its yield would be 2.1%. The payout ratio on the new dividend comes in at a very light 25% using the Q3 EPS figure.
Top pharmaceutical company AbbVie is hiking its quarterly payout yet again. This year's raise clocks in at 11%, which amounts to $0.71 per share.
AbbVie is a sprawling pharma producer, and it has many products on the shelves and in development. Its top drugs -- autoimmune disease treatment Humira and cancer fighter Imbruvica, in particular -- showed strong sales growth in the company's Q3. This helped power revenue almost 9% higher (to just under $7 billion) while boosting adjusted per-share earnings by nearly 17% to $2.27 billion, or $1.41 per share.
This is giving AbbVie the confidence to predict robust future growth. The company lifted its guidance for 2017 adjusted net income, boosting it to $5.53 to $5.55 per share from the previous expectation of $5.44 to $5.54. Better, it believes that figure will rise substantially in fiscal 2018, coming in at $6.37 to $6.57, due in no small part to higher Humira sales.
The company is a very assertive buyer of its own stock; last year it spent over $6 billion on the activity, which swallowed nearly all its free cash flow. That's been a pattern lately. So although times are good and the future looks bright for AbbVie, its spendthrift ways are concerning.
The upcoming AbbVie dividend is to be dispensed on Feb. 15 next year, to stockholders of record as of Jan. 12. It yields a theoretical 3.1%, while its payout ratio is 50%.
More where that came from
We're nearly out of the final earnings season of 2017, so the recent high-number of dividend raise announcements will probably fall. Nevertheless, it's been a great year for hikes from optimistic companies; given that, we'll probably witness many more before the ball drops on New Year's Eve.
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