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The Best Sectors for Dividends
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by Nilus Mattive |
Last week, I told you where my
favorite places were to get solid income and
protection from a possible double-dip recession.
Today, I want to follow-up on
that theme by telling you about some of the latest trends
in the dividend landscape.
Let's start with a roundup of
the second quarter: The good news is that Standard &
Poor's says the number of dividend cuts continued to slow
— with just 34 issues decreasing or omitting their
payments. Even better, S&P reports that a full 335 public
companies increased their dividends during the
quarter, which was a 43.8 percent jump from the second
quarter of 2009!
In terms of sectors, staples and
utilities were by far the best dividend boosters, with
communications companies in third place.
Again, this should come as no
surprise based on what I said last week — and it's
precisely why I just recommended both a utility and a
telecom company for my brand-new Dad's Income
Portfolio service.
[Editor's note: Those new buy
orders went out on Friday after the close, which means
Nilus' dad will be placing them in his Vanguard account
tomorrow. If you want to get on board now, and get those
urgent new recommendations sent to you right away, just
click here.]
Meanwhile, financials are still
a major danger zone for dividend cuts with materials and
discretionary companies also having problems.
Of Course, a Lot of
Different Companies In Nearly Every Sector Have Been
Boosting Their Payments Lately!
When you look at some of the
individual companies that have boosted their dividends
lately, you'll see a slightly more eclectic list —
including International Paper, which raised its payment a
very impressive 500 percent ... UnitedHealth, which more
than quadrupled its monthly payment ... and retailer
Coach, which doubled its dividend.
That begs the question: How can
we know who might increase their payments next?
For starters, Bloomberg's
analysts maintain what they call a "Dividend Directional
Thermometer," which uses a number of fundamental, rating,
and company-specific data points to indicate general
trends in dividends across sectors.
Based on that system, they
currently believe consumer discretionary and technology
companies look most likely to raise dividends in the near
future.
And in the context of all-out
income, other areas look more attractive going forward —
with utilities, financials, and communications companies
boasting the highest overall yields.
At the individual company level,
it's very hard to predict who will raise dividends in the
short-term. Sure, plenty of firms are sitting on record
levels of cash right now ... but many management teams are
also playing things very safe at the moment.
They want to make darn sure they
have enough cash to weather more economic weakness that
could be coming. They may also be eyeing acquisitions or
share buyback programs.
Of course, the important part is
that plenty of companies are increasing their
dividends now and will continue to do so in the future ...
which means that investors have plenty of solid
opportunities to collect good income even in this
challenging interest rate environment.
Best wishes,
Nilus
P.S. Just as an additional
example: The three companies I just recommended for
Dad's Income Portfolio are yielding an average of 6.3
percent and all boast terrific histories of rising
dividend payments!
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