Investors Wake Up to the Return of Dividends

With interest rates on savings accounts, CDs and Treasury instruments remaining near record lows, investors and savers often look to higher yielding dividend stocks as a way to earn a decent return on their money.  Luckily, many companies are restoring or raising dividends.

On Tuesday, BP Plc. (NYSE:BP) raised its dividend after earnings beat estimates due to higher crude prices.  Europe’s second-biggest oil company raised its dividend by 14 percent to 8 cents per share.  It was the first increase since the company restored its dividend last year after the Macondo oil well disaster.  “BP is on the turn and has been since the third quarter,” said Stuart Joyner, an analyst at Investec Securities.  Increasing the dividend is “very much a starter of where the company wants to go post-Macondo.”  Other oil giants such as Chevron Corp. (NYSE:CVX), ExxonMobil (NYSE:XOM) and ConocoPhillips (NYSE:COP) also pay a dividend.

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According to Federal Reserve data, consumer borrowing in the U.S. increased more than expected.  Credit rose by $19.3 billion to $2.5 trillion, a welcoming report for dividend payers such as Visa Inc. (NYSE:V), American Express (NYSE:AXP) and Capital One (NYSE:COP).    A week after posting strong quarterly results, MasterCard Inc. (NYSE:MA) doubled its dividend to 30 cents per share on Tuesday.  Reuters reports, “The dividend raise comes five years after the company’s last such move in 2007 to 15 cents from 9 cents.  The cash dividend will be paid on May 9 to holders of record of Class A and Class B common stock as of April 9.”  Money-transfer company Western Union Co. (NYSE:WU) also increased its quarterly dividend by 25 percent.

Rounding out the list of recent dividend increases include Beam Inc. (NYSE:BEAM), Limited Brands, Inc. (NYSE:LTD) and Ameristar Casinos (NASDAQ:ASCA).  Major banks such as Bank of America (NYSE:BAC) and Citigroup (NYSE:C) have been quiet on dividend increases, as regulations and a weak economy dampen earnings.  However, some investors are expecting this to change.

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Saudi investor Prince Alwaleed bin Talal, who owns a large stake in Citigroup, recently said in an interview with CNBC, “We believe that Citigroup within the next three quarters will be in a great and strong position and hopefully, we have asked Citibank to start distributing dividends to us as shareholders and I hope that there will be positive results.”

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To contact the reporter on this story: Eric McWhinnie at staff.writers@wallstcheatsheet.com

To contact the editor responsible for this story: Damien Hoffman at editors@wallstcheatsheet.com