Can Dividends Save The Economy?

 

 

Since the economic crash of 2008, Wall Street is still looking for more stimulus. Not only have they asked for low interest rates but also got a promise from the FED that they will be low for several years. They also asked for the FED to help in terms of economic stimulus which led to QE1 and QE2 (and are now anxiously waiting for a hypothetical QE3). They were not entirely satisfied so the FED also danced for them (Operation Twist with bonds). And now… Wall Street is seeking another kind of stimulus. At least, this time, it won’t come from the Government.

 

Letting Money Sleep In a Bank Account Is A Crime

 

I often use this line when I talk to people who let their money hibernate (‘cause the sleeping period is too short to describe this phenomenon) in their bank account without interest. Well, this is exactly what a lot of companies are doing right now.

 

The amount estimated as liquidity in companies’ bank accounts is at $2.23 trillion. This is the equivalent to 19% of the US disposable income according to Paul Ashworth from Capital Economics. When you think about it, huge companies such as Apple or Google should imitate Microsoft and start giving money back. This is exactly what Apple did by announcing its first dividend payout not so long ago. But when you think about it, how many companies could contribute sustainably to a higher dividend payout?

 

I was curious so I pulled out all US stocks over $10 paying at least a 2% dividend yield and a payout ratio under 50% and a dividend growth of at least 2%. My point is to know how many stocks could use a good part of their liquidity to increase their dividend payouts up to a payout ratio of 50%.

 

Stocks With a Huge Possibility of Dividend Increase

 

178 US Stocks:

Ticker	INDUSTRY_SUBGROUP	Name	Price	Dividend Yield	Payout Ratio	Dividend 5 year growth
PBT	Oil-US Royalty Trusts	Permian Basin Royalty Trust	21.3	6.27	0	2.02
THFF	Commer Banks-Central US	First Financial Corp/IN	31.05	3.03	33.29	2.03
WABC	Commer Banks-Western US	Westamerica Bancorporation	46.08	3.21	47.41	2.04
DD	Chemicals-Diversified	EI du Pont de Nemours & Co	52.62	3.12	44.52	2.07
NIDB	S&L/Thrifts-Central US	Northeast Indiana Bancorp Inc	14.65	4.91	42.65	2.1
HTLF	Commer Banks-Central US	Heartland Financial USA Inc	17	2.35	32.18	2.13
PNBI	Commer Banks-Southern US	Pioneer Bankshares Inc	18.5	3.24	36.93	2.17
UVV	Tobacco	Universal Corp/VA	45.9	4.27	31.78	2.2
KWR	Chemicals-Specialty	Quaker Chemical Corp	41.42	2.32	27.51	2.22
MRINA	Divers Oper/Commer Serv	McRae Industries Inc	17.09	2.11	17.8	2.22
FDBC	Commer Banks-Eastern US	Fidelity D&D Bancorp Inc	21.3	4.69	43.81	2.59
HMN	Multi-line Insurance	Horace Mann Educators Corp	17.83	2.92	26.94	2.71
FFIC	S&L/Thrifts-Eastern US	Flushing Financial Corp	12.64	4.11	45.01	2.93
WASH	Commer Banks-Eastern US	Washington Trust Bancorp Inc	23.49	3.92	48.12	2.94
PSBQ	Commer Banks-Central US	PSB Holdings Inc/WI	28	2.64	21.62	2.95
UTMD	Disposable Medical Prod	Utah Medical Products Inc	30.85	3.11	46.3	2.99
GSBC	Commer Banks-Central US	Great Southern Bancorp Inc	22.96	3.14	36.93	3.04
WHR	Appliances	Whirlpool Corp	64.17	3.12	38.01	3.06
CTBI	Commer Banks-Southern US	Community Trust Bancorp Inc	32.37	3.83	48.51	3.1
MTB	Commer Banks-Eastern US	M&T Bank Corp	87.39	3.2	43.04	3.13
SRCE	Commer Banks-Central US	1st Source Corp	23.02	2.78	32.42	3.18
MBCN	Commer Banks-Central US	Middlefield Banc Corp	22.25	4.67	42.71	3.21
HUB/B	Power Conv/Supply Equip	Hubbell Inc	79.53	2.06	33.86	3.26
NFG	Electric-Integrated	National Fuel Gas Co	45.85	3.1	44.75	3.42
QNBC	Commer Banks-Eastern US	QNB Corp	25.85001	4.02	35.48	3.51
CPK	Gas-Distribution	Chesapeake Utilities Corp	41.13	3.36	47.24	3.53
CBSH	Commer Banks-Central US	Commerce Bancshares Inc/MO	39.85	2.31	30.87	3.57
TFX	Medical Products	Teleflex Inc	62.44	2.18	45.88	3.59
ESBF	S&L/Thrifts-Eastern US	ESB Financial Corp	13.01	3.08	37.03	3.71
FFIN	Commer Banks-Central US	First Financial Bankshares Inc	33.39	2.88	43.57	3.71
PFS	S&L/Thrifts-Eastern US	Provident Financial Services Inc	13.75	3.49	43.63	3.71
INDB	Commer Banks-Eastern US	Independent Bank Corp/Rockland MA	28.38	2.96	35.88	3.71
KRO	Coatings/Paint	Kronos Worldwide Inc	22.8	2.63	38.82	3.71
SVBC	S&L/Thrifts-Southern US	Sistersville Bancorp Inc	16	4	22.46	3.78
MMM	Diversified Manufact Op	3M Co	87.48	2.7	36.31	3.79
PEG	Electric-Integrated	Public Service Enterprise Group Inc	30.41	4.67	49.26	3.8
BHB	Commer Banks-Eastern US	Bar Harbor Bankshares	35.6	3.2	38.29	3.83
SNA	Tools-Hand Held	Snap-on Inc	61.65	2.21	27.76	4.1
MMC	Insurance Brokers	Marsh & McLennan Cos Inc	32.38	2.72	48.54	4.1
TSH	S&L/Thrifts-Southern US	Teche Holding Co	36.8	3.97	41.05	4.14
SYBT	Commer Banks-Southern US	SY Bancorp Inc	22.64	3.36	42.07	4.35
LKFN	Commer Banks-Central US	Lakeland Financial Corp	25.28	2.69	32.8	4.4
FMAO	Commer Banks-Central US	Farmers & Merchants Bancorp Inc/Archbold OH	22	3.45	41.85	4.5
CNAF	Commer Banks-Eastern US	Commercial National Financial Corp/PA	23.29	4.47	40.91	4.56
ALV	Auto/Trk Prts&Equip-Orig	Autoliv Inc	65.78	2.86	25.49	4.77
ESBK	S&L/Thrifts-Eastern US	Elmira Savings Bank FSB/The	18.05	4.88	45.85	4.91
CBU	Commer Banks-Eastern US	Community Bank System Inc	28.58	3.64	49.27	5.24
SWX	Gas-Distribution	Southwest Gas Corp	41.55	2.84	43.9	5.27
HBNC	Commer Banks-Central US	Horizon Bancorp/IN	21.31	2.44	20.27	5.3
BMTC	Commer Banks-Eastern US	Bryn Mawr Bank Corp	20.84	3.07	38.95	5.35
LANC	Food-Misc/Diversified	Lancaster Colony Corp	64.9	2.22	33.56	5.42
CAG	Food-Misc/Diversified	ConAgra Foods Inc	26.25	3.66	45.88	5.48
GNTX	Electronic Compo-Misc	Gentex Corp	21.23	2.45	41.79	5.5
DIMC	Commer Banks-Eastern US	Dimeco Inc	36	4	43.48	5.53
PUSH	Food-Retail	Publix Super Markets Inc	#N/A N/A	3.81	28.06	5.79
TMP	Commer Banks-Eastern US	Tompkins Financial Corp	39.8	3.62	43.54	5.9
MOCO	Instruments-Controls	MOCON Inc	16.8	2.5	39.41	5.92
CATC	Commer Banks-Eastern US	Cambridge Bancorp	34.00999	4.35	43.15	5.92
GMT	Transport-Equip&Leasng	GATX Corp	42.47	2.83	48.58	6.1
LARK	Commer Banks-Central US	Landmark Bancorp Inc/Manhattan KS	19.85	3.83	44.92	6.13
SXT	Chemicals-Specialty	Sensient Technologies Corp	38.35	2.19	34.68	6.26
BA	Aerospace/Defense	Boeing Co/The	73.55	2.39	31.49	6.34
NKSH	Commer Banks-Southern US	National Bankshares Inc	29.42	3.54	39.34	6.5
BKYF	Commer Banks-Southern US	Bank of Kentucky Financial Corp	25.32	2.37	26.82	6.67
ACO	Diversified Minerals	AMCOL International Corp	29.45	2.44	38.03	6.72
FISI	Commer Banks-Eastern US	Financial Institutions Inc	16.46	3.16	29.33	6.79
EEI	Environ Consulting&Eng	Ecology and Environment Inc	14.91	3.22	28.21	6.96
MGRC	Rental Auto/Equipment	McGrath RentCorp	28.87	3.26	45.75	6.98
MPR	Air Pollution Control Eq	Met-Pro Corp	10.16	2.8	14.61	7.04
SPLS	Retail-Office Supplies	Staples Inc	15.655	2.81	28.23	7.17
FLIC	Commer Banks-Eastern US	First of Long Island Corp/The	27.43	3.35	40.59	7.29
FRS	Retail-Restaurants	Frisch\'s Restaurants Inc	27.44	2.33	30.88	7.44
TUP	Consumer Products-Misc	Tupperware Brands Corp	61.66	2.34	33.21	7.44
MLGF	S&L/Thrifts-Western US	Malaga Financial Corp	15.25	3.28	21.12	7.74
STLD	Steel-Producers	Steel Dynamics Inc	12.89	3.1	31.44	7.78
GCBC	S&L/Thrifts-Eastern US	Greene County Bancorp Inc	17.7	3.95	31.13	7.84
NEE	Electric-Integrated	NextEra Energy Inc	63.46	3.78	47.66	7.95
EBTC	Commer Banks-Eastern US	Enterprise Bancorp Inc/MA	16.53	2.66	36.05	7.98
XOM	Oil Comp-Integrated	Exxon Mobil Corp	85.3	2.2	22.71	7.99
CZFS	Commer Banks-Eastern US	Citizens Financial Services Inc	36.75	3.27	24.53	8
CASC	Machinery-Material Handl	Cascade Corp	47.54	2.94	15.69	8.09
CMP	Quarrying	Compass Minerals International Inc	74.13	2.67	39.75	8.36
TWX	Multimedia	Time Warner Inc	36.6	2.84	34.55	8.39
HPQ	Computers	Hewlett-Packard Co	24.51	2.15	11.93	8.45
COL	Aerospace/Defense	Rockwell Collins Inc	55.56	2.16	24.07	8.45
BANF	Commer Banks-Central US	Bancfirst Corp	43.45	2.49	34.6	8.65
NU	Electric-Integrated	Northeast Utilities	36.46	3.22	49.56	8.69
CB	Property/Casualty Ins	Chubb Corp/The	71.92	2.28	26.52	8.72
R	Transport-Services	Ryder System Inc	49.2	2.36	33	8.73
CVX	Oil Comp-Integrated	Chevron Corp	102.52	3.16	22.83	8.86
CBE	Diversified Manufact Op	Cooper Industries PLC	62.11	2	29.63	9.05
CNND	Commer Banks-Eastern US	Canandaigua National Corp	105.01	2.86	33.14	9.11
ODC	Chemicals-Specialty	Oil-Dri Corp of America	20.6	3.3	47.56	9.17
CCFN	Commer Banks-Eastern US	CCFNB Bancorp Inc	35	3.54	40.66	9.44
FL	Retail-Apparel/Shoe	Foot Locker Inc	31	2.32	36.33	9.44
NOC	Aerospace/Defense	Northrop Grumman Corp	61.81	3.24	26.03	9.51
TRV	Property/Casualty Ins	Travelers Cos Inc/The	62.75	2.93	46.95	9.54
ROK	Industrial Automat/Robot	Rockwell Automation Inc	78.33	2.17	30.19	9.55
AIT	Machinery-General Indust	Applied Industrial Technologies Inc	39.3	2.14	30.7	10.2
ACE	Multi-line Insurance	ACE Ltd	75.3	2.6	22.33	10.4
NHC	Medical-Nursing Homes	National Healthcare Corp	45.06	2.66	29.45	10.76
MDNB	S&L/Thrifts-Southern US	Minden Bancorp Inc	14.25	2.22	17.83	10.8
JCI	Auto/Trk Prts&Equip-Orig	Johnson Controls Inc	31.96	2.25	26.79	10.83
SJM	Food-Confectionery	JM Smucker Co/The	79.97	2.4	41.01	10.91
EV	Invest Mgmnt/Advis Serv	Eaton Vance Corp	26.3	2.89	39.93	10.96
DOV	Diversified Manufact Op	Dover Corp	60.12	2.1	25.92	10.97
SRE	Gas-Distribution	Sempra Energy	64.51	3.72	33.97	11.01
CBKM	Commer Banks-Central US	Consumers Bancorp Inc	14	3.14	37.23	11.1
APD	Chemicals-Diversified	Air Products & Chemicals Inc	89.75	2.85	38.99	11.2
BAX	Medical Products	Baxter International Inc	54.17	2.47	32.36	11.47
AVX	Electronic Compo-Misc	AVX Corp	12.82	2.34	13.24	11.63
UBNK	S&L/Thrifts-Eastern US	United Financial Bancorp Inc	15.58	2.31	45.31	11.65
CCF	Diversified Manufact Op	Chase Corp	15.31	2.29	28.67	11.84
FIS	Data Processing/Mgmt	Fidelity National Information Services Inc	33.07	2.42	15.39	11.84
BOBE	Retail-Restaurants	Bob Evans Farms Inc/DE	37.07	2.7	43.67	11.96
COP	Oil Comp-Integrated	ConocoPhillips	72.88	3.62	29.21	12.12
WEYS	Footwear&Related Apparel	Weyco Group Inc	22.85	2.8	46.46	12.2
ITW	Diversified Manufact Op	Illinois Tool Works Inc	55.79	2.58	33.97	12.3
ETN	Diversified Manufact Op	Eaton Corp	47.44	3.2	34.22	12.41
SPAN	Medical Products	Span-America Medical Systems Inc	16.52	2.66	31.54	12.42
UTX	Aerospace/Defense-Equip	United Technologies Corp	81	2.37	32.13	12.62
WSM	Retail-Mail Order	Williams-Sonoma Inc	38.39	2.29	32.21	12.79
RTN	Aerospace/Defense	Raytheon Co	53.11	3.77	32.4	12.92
BDX	Medical Products	Becton Dickinson and Co	76.43	2.36	28.59	13.33
ARLP	Coal	Alliance Resource Partners LP	60.47	6.55	34.26	13.44
MSFT	Applications Software	Microsoft Corp	32.42	2.47	23.33	13.63
HRL	Food-Meat Products	Hormel Foods Corp	28.59	2.1	28.69	13.86
GD	Aerospace/Defense	General Dynamics Corp	69.76	2.92	26.84	14.4
INTC	Electronic Compo-Semicon	Intel Corp	27.6	3.04	31.89	14.48
EAT	Retail-Restaurants	Brinker International Inc	27.9	2.29	36.46	14.62
TAP	Brewery	Molson Coors Brewing Co	41.3	3.1	34.18	14.87
BOKF	Commer Banks-Central US	BOK Financial Corp	54.69	2.41	26.73	15.06
DE	Machinery-Farm	Deere & Co	80.91	2.27	22.79	15.28
TROW	Invest Mgmnt/Advis Serv	T Rowe Price Group Inc	61.88	2.2	41.11	15.42
WMT	Retail-Discount	Wal-Mart Stores Inc	62.45	2.55	32.02	15.62
AFL	Life/Health Insurance	Aflac Inc	41.62	3.17	28.11	15.8
XLNX	Electronic Compo-Semicon	Xilinx Inc	34.4	2.56	26.34	16.12
AMP	Invest Mgmnt/Advis Serv	Ameriprise Financial Inc	53.45	2.1	18.66	17.13
MDT	Medical Instruments	Medtronic Inc	37.61	2.58	31.3	17.13
MTSC	Computers-Integrated Sys	MTS Systems Corp	47.85	2.09	25.95	17.18
CL	Cosmetics&Toiletries	Colgate-Palmolive Co	98.88	2.51	49.49	17.37
BBY	Retail-Consumer Electron	Best Buy Co Inc	21.47	2.98	18.64	17.61
LLL	Electronics-Military	L-3 Communications Holdings Inc	69.91	2.86	19.67	17.89
OXY	Oil Comp-Explor&Prodtn	Occidental Petroleum Corp	88.61	2.44	22.55	17.98
CCE	Beverages-Non-alcoholic	Coca-Cola Enterprises Inc	28.96	2.21	21.72	18.04
SSI	Retail-Regnl Dept Store	Stage Stores Inc	15.49	2.32	35.64	18.13
NSC	Transport-Rail	Norfolk Southern Corp	69.53	2.7	30.06	18.51
CAH	Medical-Whsle Drug Dist	Cardinal Health Inc	41.55	2.07	29.06	19.03
SGK	Data Processing/Mgmt	Schawk Inc	12.94	2.47	39.78	19.74
RSRV	Oil Comp-Explor&Prodtn	Reserve Petroleum Co	335.01999	5.97	30.52	20.11
CA	Enterprise Software/Serv	CA Inc	26.56	3.77	9.84	20.11
AM	Consumer Products-Misc	American Greetings Corp	15.12	3.97	25.69	20.11
TGT	Retail-Discount	Target Corp	57.28	2.09	26.53	20.11
HAS	Toys	Hasbro Inc	35.92	4.01	41.07	20.11
SWY	Food-Retail	Safeway Inc	22.09	2.63	36.31	20.32
LMT	Aerospace/Defense	Lockheed Martin Corp	90.84	4.4	40.93	21.91
HRS	Telecommunication Equip	Harris Corp	44.1	2.99	21.6	22.69
STX	Computers-Memory Devices	Seagate Technology PLC	29.21	3.42	31.77	23.05
WAG	Retail-Drug Store	Walgreen Co	35.93	2.5	25.24	23.36
BLK	Invest Mgmnt/Advis Serv	BlackRock Inc	190.4	3.15	43.39	23.85
IVZ	Invest Mgmnt/Advis Serv	Invesco Ltd	24.18	2.03	30.27	26.05
CME	Finance-Other Services	CME Group Inc	273.05	3.27	20.61	27.95
UNP	Transport-Rail	Union Pacific Corp	107.26	2.24	28.49	28.03
STRA	Schools	Strayer Education Inc	86.13	4.64	46.31	28.88
IPHS	Chemicals-Diversified	Innophos Holdings Inc	49.33	2.19	25.05	29.51
DRI	Retail-Restaurants	Darden Restaurants Inc	49.93	3.44	36.83	30.18
CSX	Transport-Rail	CSX Corp	21.61	2.22	26.4	30.19
ACN	Computer Services	Accenture PLC	63.4	2.13	28.26	30.99
CLF	Metal-Iron	Cliffs Natural Resources Inc	67.3	3.71	7.26	31.42
HUN	Chemicals-Diversified	Huntsman Corp	14.49	2.76	38.95	31.95
AWH	Reinsurance	Allied World Assurance Co Holdings AG	70.66	2.12	15.63	37.97
TWGP	Property/Casualty Ins	Tower Group Inc	21.29	3.52	46.34	49.63
CPA	Airlines	Copa Holdings SA	80.65	2.03	23.51	53.89
ESV	Oil&Gas Drilling	Ensco PLC	52.95	2.83	44.82	70.12
CALM	Food-Misc/Diversified	Cal-Maine Foods Inc	35.41	4.11	33.37	79.86
GES	Retail-Apparel/Shoe	Guess? Inc	29.79	2.69	27.93	92.84
WU	Commercial Serv-Finance	Western Union Co/The	18	2.22	16.66	102.44
GKSR	Linen Supply&Rel Items	G&K Services Inc	33	2.36	21.43	116.13

 

20 CDN Stocks:

Ticker	Name	INDUSTRY_SUBGROUP	Price	Dividend Yield	Payout Ratio	Dividend 5 year growth
NMC	Newmont Mining Corp of Canada Ltd	Gold Mining	50.2	2.79	0	20.79	20.79
IMG	IAMGOLD Corp	Gold Mining	12.21	2.13	0.02	26.46	26.46
BEI-U	Boardwalk Real Estate Investment Trust	REITS-Apartments	58.88	3.16	7.25	6.02	6.02
MRD	Melcor Developments Ltd	Real Estate Oper/Develop	15.05	2.66	14.81	5.92	5.92
DII/B	Dorel Industries Inc	Home Furnishings	29.37	2.04	18.62	32.76	32.76
MG	Magna International Inc	Auto/Trk Prts&Equip-Orig	45.57	2.39	23.18	6.43	6.43
CWB	Canadian Western Bank	Commer Banks Non-US	28.51	2.1	24.04	14.87	14.87
CSU	Constellation Software Inc/Canada	Computer Software	88.43	4.48	26.97	41.18	41.18
CCL/B	CCL Industries Inc	Containers-Metal/Glass	37.67	2.07	27.55	9.86	9.86
ESI	Ensign Energy Services Inc	Oil&Gas Drilling	14.26	2.95	28.13	5.23	5.23
MX	Methanex Corp	Chemicals-Specialty	31.4	2.15	30.75	3.54	3.54
SNC	SNC-Lavalin Group Inc	Engineering/R&D Services	39.25	2.24	33.46	23.16	23.16
LB	Laurentian Bank of Canada	Commer Banks Non-US	44.55	4.04	33.69	8.45	8.45
SC	Shoppers Drug Mart Corp	Retail-Drug Store	44	2.41	35.29	14.31	14.31
NA	National Bank of Canada	Commer Banks Non-US	78.64	3.81	38.36	7.02	7.02
TD	Toronto-Dominion Bank/The	Commer Banks Non-US	83.94	3.43	40.57	7.26	7.26
ADW/A	Andrew Peller Ltd	Beverages-Wine/Spirits	10.08	3.57	43.12	8.14	8.14
BNS	Bank of Nova Scotia	Commer Banks Non-US	54.75	4.02	44.36	5.43	5.43
RY	Royal Bank of Canada	Commer Banks Non-US	57.15	3.99	46.61	6.88	6.88
BDI	Black Diamond Group Ltd	Rental Auto/Equipment	20.51	3.22	49.85	18.33	18.33

 

Obviously, this won’t happen tomorrow for several reasons. Some companies prefer to reinvest in their business, make acquisitions and others would rather pay off debts or start a share repurchase program, etc. But the point is that the potential is there. As investors, we can see how many stocks have the power to increase their dividend greatly and reward us.

 

The Dividend Impact on the Economy

 

If there was a massive dividend increase movement, I can see 2 very interesting impacts. The first one would be a great interest in these stocks. Every time that the market foresees a sustainable dividend increase, they are more likely to buy this stock for future payouts. Therefore, I guess this would be quite beneficial for CEO’s who wish to exercise some of their options in a near future ;-). This would probably push is into an official bullish market. For the past 2 years, analysts tend to say, after the fact, that “last year was bullish. It would be refreshing to hear them talking about the future for once.

 

This would lead to the other impact, that would probably be more important than just stocks skyrocketing (mind you, I’d love to see my portfolio get a solid boost!). If there are more dividends distributed to investors, it also means that there is more cash available to spend! Mr. Ashworth’s theory is that it could increase the population’s disposable income by 2%. This would create a great economic boost!

 

I think it’s an interesting theory since retirees would tend to spend a little bit more to enjoy life if they can count on stronger income. It would also give a break to defined contribution pension plan where companies have to make sure there is enough money to fund the pensions. If the market was ecstatic when there were those stimulus checks back in 2008-20009, I guess that “continuous” stimulus dividend checks would create a positive reaction on the overall economy as well.  In addition to that, even the Government would get its share in taxes. So the company sees its stock go higher, the investor sees more money coming in and the Government sees additional revenues. It sounds like a win-win-win situation for everybody!

 

The Problem is Volatility

 

Unfortunately, chances are that we won’t see tons of companies boosting their dividend to reach a 50% payout ratio. The economic volatility and uncertainty around the Euro Zone, the slower growth from emerging markets and the slow economic restart in the US are among the reasons why companies prefer being full of cash instead of distributing their liquidity. But I’m expecting to see some steady dividend increase from many companies in the years to come. Since profit is still rising, they will continue to hike their dividend and make some of us happy. I personally think that we are in the middle of an awesome investing opportunity where the stock you buy right now will provide you incredible yield in 10 years.

 

I can’t wait to write that I’m earning a 10% dividend yield on my INTC or KO shares in 10 years ;-).

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