2 Investments Offer Multi-Year Dividend Boosts and 3.6%-Plus Yields
By: Ned Piplovic,
A telecommunications giant and a regional banking institution offer multi-year records of boosting dividends, as well as yields of 4.7% and 3.6%, respectively.
While the two companies represent different economic sectors and vary greatly in market capitalization – $225 billion versus $86 million – they are very similar in their long-term dividend performance. If you can be patient to wait for the dividends and are content to buy the stocks at slightly reduced prices in light of their April 6 ex-dividend date, now may be a good time to start considering them.
AT&T Inc. (NYSE:T)
AT&T Inc. provides telecommunications and digital entertainment services. The company operates through several segments and offers traditional and long-distance telephone services, mobile phone and data services, DSL internet access service, video entertainment and audio programming channels to approximately 25 million subscribers.
After steady growth between April and July 2016, the share price experienced a significant drop of more than 20% from August through mid-October 2016. However, the price recovered by the end of December 2016 and has been trading in the $41 to $43 range in 2017. While the most recent closing price on March 31, 2017 is still about 5% below the 52-week high from July 2016, it is 15% above the 52-week low and 6.1% higher than the price from April 2016.
The current quarterly dividend of $0.49 translates to a $1.96 annual distribution with a 4.7% yield. While the company has gone through several transformations in terms of ownership and structure, it has paid a dividend since 1881.
In the last 20 years, the company failed to raise its annual dividend payout only once. Over that period, the dividend grew at an average annual rate of 7.7%, which resulted in a 4.5-fold annual payout increase over the last two decades.
The current streak of consecutive dividend boosts started 12 years ago. Since 2004, the annual dividend increased at a 3.5% average annual rate.
There were some concerns that the Federal Communications Commission (FCC) could oppose AT&T’s proposed merger with Time Warner Inc. (NYSE:TWX). However, it appears that the newly appointed FCC Chairman, Ajit Pai, sees no impediment to the proposed merger.
While the merger could have a negative impact on consumer’s service options and prices, the merger is likely to boost the company’s financials and could drive the stock price and the dividend income higher.
Mackinac Financial Corporation (NASDAQ:MFNC)
Mackinac Financial Corporation is the holding company for mBank. The bank provides commercial and retail banking services through 17 branch offices and 22 automated teller machines in Michigan. The company, formerly known as North Country Financial Corporation, changed its name to Mackinac Financial Corporation in December 2004. Mackinac Financial Corporation, incorporated in 1974, is headquartered in Manistique, Michigan, which is in the picturesque Upper Peninsula of the Great Lakes state.
The company boosted its quarterly dividend by 20% from $0.10 to $0.12 for this quarter. Therefore, the annualized distribution is $0.48 per share and yields 3.6%. This increase of the annual dividend payout is the fourth consecutive hike since the company resumed paying dividends in 2013.
The share price increased 15% from April to November 2016. After that increase, the share price grew even faster and rose another 20% by mid-December. Since reaching the 52-week high on December 14, 2016, the share price fluctuated between $13 and $14. As of March 31, 2017, the price was $13.71, which is just 6% below the December 2016 peak price and 21% higher than the price from April 2016.
Another positive factor is that mBank ranks as one of the top lenders to the Small Business Administration in Michigan. Most of new job creation and business innovation generally comes from small businesses. Therefore, if we encounter any economic growth spurred by tax cuts and potential business deregulation, mBank’s exposure to the small business sector would have a positive effect on the company’s financial performance and could boost further its dividend payouts and its share price.
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