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Economy's Down, But Some Dividends Are Up

Posted: Mar 31, 2009 10:05 AM by Glenn Curtis

Tickers in this Article: PG, JNJ, APD, QCOM, WMT, KMB, GD

Over the last few months I've written a fair amount about companies that have cut or suspended their dividends. But even with all of the doom and gloom out there, there are some publicly traded companies that have recently upped the dividend they pay or announced a dividend increase.

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When a company raises its dividend or announces an increase, it often catches my eye, because I think that if a company has the confidence to raise its dividend, it may have something going for it.

With all of that in mind, I set out to screen for companies that have recently upped the dividend they pay or announced a dividend increase. These companies are worth further investigation, so let's take a closer look. (Find out how to pick your own investments like a pro, read How Investors Can Screen For Stock Ideas.)

Company	Market Cap	Increase or Announced Increase
Air Products & Chemicals (NYSE:APD)	$12 billion	44 to 45 cents
General Dynamics (NYSE:GD)	$15.4 billion	35 to 38 cents
Kimberly Clark (NYSE:KMB)	$19.3 billion	58 to 60 cents
Qualcomm (Nasdaq:QCOM)	$62.9 billion	16 to 17 cents
Wal-Mart (NYSE:WMT)	$199.8 billion	95 cents to $1.09 (annual)
Data gathered intra-day on March 24.

Short-Term Loss
One might think that a company like Kimberly Clark, which sells diapers, tissues and feminine products, would be immune to an economic slowdown. However, that hasn't been the case.

A quick look at the data indicates that while the S&P 500 was down about 39% over the last 52 weeks, shares of Kimberly Clark were down about 28%. KMB is not alone, however, as consumer products giant, Procter & Gamble (NYSE:PG), which is known for its Charmin, Pampers and Puffs brands, has seen its stock dive nearly 32% over the last 52 weeks. Meanwhile Johnson & Johnson (NYSE:JNJ), which offers an array of consumer products, has seen its stock drop almost 18% over the last 52 weeks.

Promising Long-Term
Despite the recent downturn, I do think that the Kimberly Clark has staying power and that in the longer-term, this is a stock that has the potential to mount a major comeback. There are a number of things that impress me about this company.

Kimberly Clark has some unbelievably popular brands under its belt, ranging from Kleenex and Kotex to Depend, Huggies and Scott Products. While I think that some consumers will resort to discount brands in a slowing economy, many will return to Kimberly Clark once the economic outlook brightens. I also think that no matter how bad things get, some consumers will stay loyal to this company's brands. As a parent I was extremely loyal to the Huggies brand when my kids were growing up, even when money was at a premium. (The Oracle of Omaha's "Rip van Winkle" approach has served him well. To learn more, read Warren Buffett's Best Buys.)

In spite of economic concerns and all of the worries that consumers aren't spending, Kimberly Clark is expected to make plenty of dough this year and next. The company is expected to have earnings per share (EPS) of $4.15 this year and $4.61 a share next year. This means that KMB's shares trade at about 11.2 times the current year estimate. That's pretty reasonable, as the company is expected to grow 8% per annum in the next five years.

Delivering on Expectations
Kimberly Clark has done a pretty good job living up to earnings expectations. A quick look at the data shows that the company either beat or met estimates in three of the last four quarters. Whether KMB will continue down a profitable path is up for debate, but its pattern stands out. (Consensus estimates can send stocks spiraling - but are they representing reality? read Surprising Earnings Results.)

Let's not forget about the dividend either. In late February, Kimberly Clark's board approved a dividend of 60 cents, which would be two cents north of the previous dividend. Though dividends aren't guaranteed, it is nice to see a board that is confident enough to up the ante, even during trying times.

Bottom Line
There is, naturally, no guarantee that a company that announced an increase in its dividend or increased its dividend will do well in the future. However, I often like to take a closer look at such companies because they may have something going for them.

By Glenn Curtis

Glenn Curtis started his career in the 1990s as an equity analyst for a regional firm in New Jersey. There, he covered companies in the technology, entertainment, and gaming industries. Curtis has since worked as a financial writer at a series of both web and print publications, including TheStreet.com and Registered Rep Magazine. He has held his series 6,7,24, and 63 securities licenses.

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