Since January, 37 S&P 500 companies have cut their dividends. But there are others that are actually raising them, and they’re components of some exchange traded funds (ETFs), too.
One thing to note is that all of these companies are in the “essential services” sector, such as consumer staples, energy, health care and utilities, states Greg Donaldson of Seeking Alpha. Some of these companies include Coca Cola (KO), which raised its dividend 8%; Colgate (CL), which raised its dividend 10%; Kinder Morgan Energy Partners (KMP), which saw an 11% hike; Abbott Labs (ABT), which raised its dividend by a whopping 11%; and FPL Group (FPL), which shot off a 6% increase in its dividend.
In general, these companies are raising their dividends for the following reasons:
- Their earnings are growing and they are confident that prosperity is in their future, despite the economic downturn
- They have a history and track record of sharing their financial success with their shareholders by increasing their dividends
- They are in solid businesses that produce positive cash flows from which dividends can be paid
If these companies continue to be financially successful and are willing to share this success with their shareholders, the ETFs that contain them will become more attractive and could generate a higher ROI, with dividend payments included, than a run-of-the-mill index; but remember to watch the trendlines if considering to get into an ETF that holds these companies.
If you do want to grab exposure check these out:
- WisdomTree LargeCap Dividend Fund (DLN): down 27.1% year to date; KO is 1.66%; ABT is 1.2%
- PowerShares Dynamic Consumer Staples Fund (PSL): down 15.5% year-to-date; CL is 2.6%; KO is 2.4%
- Utilities HOLDRs (UTH): down 18% year to date; FPL is 8.9%
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.