2 Securities Continue Rising Dividend Payouts and Lift Share Prices More Than 20% in One Year
By: Ned Piplovic,
A fund investing in dividend-paying utilities and a manufacturer of industrial machines are rewarding their investors with rising dividend payouts and share-price growth.
Current dividend yields are 5.5% for the utilities fund and 2.9% for the machines manufacturer. Over the last 12 months, these two securities have enhanced share prices at 21% and 39% respectively.
The strong share price performance and the rising dividend distributions might be good reasons to take long positions in one or both of these equities. However, with ex-dividend dates on July 17 and July 18, interested investors should move quickly to be eligible to collect the dividend payments in mid-July and mid-August when pay dates are scheduled for these two securities.
Reaves Utility Income Fund (AMEX:UTG)
Reaves Utility Income Fund is a closed-end fund that focuses on investing in utilities and preferred income securities issued by companies. As of March 31, 2017, common stocks of multi-utility and electric utility companies represented more than 47% of the fund’s holdings. Media, diversified telecommunication services, and oil, gas and consumable fuels sectors rounded out UTG’s top five sector holdings, which accounted for more than three quarters of total current holdings.
Charter Communications, Inc. (NASDAQ: CHTR), DTE Energy Co. (NYSE:DTE), NextEra Energy, Inc. (NYSE:NEE), Comcast Corp. (NASDAQ: CMCSA) and American Water Works Co. Inc. (NYSE:AWK) are the top five individual stock holdings. Eighty-five percent of the fund’s $1.5 billion assets under management is invested in U.S. common stocks. Foreign common stocks account for another 11.4%. The remaining assets are spread among limited partnerships, short-term securities and corporate bonds.
The current monthly dividend of $0.16 is almost 6% higher than the $1.15125 monthly distribution from the same period last year. The monthly dividend amount is equivalent to a $1.92 annual payout and a 5.5% yield. In the last 13 years since the fund started paying a dividend, the monthly dividend distribution has doubled. Since the last dividend cut in 2010, the company paid a rising dividend for the past seven consecutive years. Over that period, the total annual dividend distribution rose at an average rate of 4.8% per year.
The share price lost 7% between July and mid-November 2016. After that initial drop, the share price rose more than 36% and reached a new all-time high by mid-June 2017. Since the recent price peak, the share price pulled back about 5%. However, the closing price of $34.88 on July 11, 2017, is almost 21% above the price from one year ago and more than 90% higher than it was five years ago.
Caterpillar Inc. (NYSE:CAT)
Caterpillar Inc. manufactures and sells construction and mining equipment, diesel and natural gas engines, industrial gas turbines and diesel-electric locomotives for industrial application. The company’s Construction Industries segment offers backhoes, loaders, prep tractors, excavators, graders, asphalt pavers, etc.
CAT’s Resource Industries segment provides electric rope and hydraulic shovel, landfill and soil compactors, track and rotary drills, hard rock vehicle and continuous mining systems, as well as mining, off-highway and articulated trucks. Additionally, the Energy & Transportation segment offers reciprocating engine-powered generators, turbines, centrifugal gas compressor, diesel-electric locomotives and other rail-related products and services. The company has its own financial products segment that offers financing for Caterpillar products, as well as property, casualty, life, accident and health insurance. Founded as the Caterpillar Tractor Co. in 1925, the company changed its name to Caterpillar Inc. in 1986 and its headquarters are currently in Peoria, Illinois.
The current quarterly dividend of $0.78 per share is 1.3% above last quarter’s $0.77 payout. The new quarterly dividend converts to a $3.12 annualized distribution, which is equivalent to a 2.9% yield. That yield is 131% higher than the 1.25% average yield for the industrial goods sector.
While the 2.9% yield might not be as high as other companies, CAT has a history of rising dividend payouts for the past 20 consecutive years. Since 1997, the company has hiked its annual dividend distribution more than six-fold because of consecutive annual boosts at an average growth rate of 9.6% per year.
Over the last year, the stock growth complemented the company’s rising dividend. Since the stock’s 52-week low price of $77.32 in July 2016, the share price rose more than 40% with minimal fluctuations and has reached its 52-week high of $108.49 on July 10, 2017. The current price is just 3% below its all-time high price in 2011. More importantly, the price surged up more than 39% in the past 12 months.
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