Dividends up but not enough

Andrew Leckey

February 19, 1992|By Andrew Leckey

The good news is that the nation's stock dividends are growing, which helps investors looking for alternatives during a period in which fixed-rate yields are down.

The bad news is that those dividends aren't increasing nearly as much as investors would like.

Dividends were boosted by 124 companies in January. That's 11 percent more than that same month a year ago but 16 percent less than in January 1990.

The average stock dividend is less than 3 percent, low by anyone's standards. Nonetheless, many higher-yielding choices are readily available. Trusty electric utilities, for example, feature an average yield of nearly 6 percent.

"Investors will increasingly be looking for higher stock dividends, since interest rates should stay where they are for a while and there is no takeover game to boost bond yields," said Joseph Lisanti, senior editor of the Standard & Poor's Outlook investment letter.

"This won't be a gang-buster year for dividend increases, with only about a 3 percent or 4 percent gain, but that should improve considerably in 1993 due to an improved economy," Mr. Lisanti said.

"The dividend picture reflects the cyclicality of business, and the dividends won't be as good as the earnings increases for a while," said Bruce Baughman, portfolio manager for the Franklin Rising Dividend Fund, which rose 36 percent in 1991. "There's been some talk in Washington that Congress might do something about the double taxation of dividends, and, if so, this would really loosen the purse strings," said James Coxon, head of equity investment for Kemper Financial Services.

Mr. Lisanti favors Long Island Lighting (recently a 7.3 percent dividend yield), which, after the "mothballing" of its Shoreham nuclear plant, has an agreement with New York regulators for 4 percent to 5 percent rate increases over the next 10 years.

Another utility, Florida Progress (6.5 percent yield), has increased dividends for 39 straight years and is likely to continue this "badge of honor," he said.

Atlanta Gas Light (5.8 percent yield) is in a growing service area, has boosted its dividend in each of the past five years and offers the possibility of price appreciation.

Sears Roebuck (4.6 percent yield) has a secure dividend and Mr. Lisanti considers it a "sleeping giant."

Mobil Corp. (5.1 percent yield) offers a secure dividend in a strong worldwide oil company with efficient refining and marketing. Eventually, oil prices will rise and Mobil will benefit, Mr. Lisanti said.

Among preferred stocks, he said, USX (9 percent yield, but adjustable to a minimum of 7.5 percent and maximum of 15.75 percent) offers excellent potential for return. BankAmerica Corp. preferred "A" (7.3 percent yield, but adjustable to a minimum of 6.5 percent and maximum of 14.5 percent) is an investment in a company with excellent prospects, he said.

Mr. Coxon is high on the regional Bell spin-off companies because they offer good returns and reasonable price appreciation. Favorites are NYNEX Corp. (6.1 percent yield) and BellSouth Corp. (5.8 percent). In natural gas stocks, he likes Sonat Inc. (6.6 percent) and Consolidated Natural Gas (5.5 percent).

Other Coxon picks are British Petroleum (7.5 percent), Meditrust (8 percent), International Business Machines (5.4 percent), American Express (4.7 percent), H.F. Ahmanson & Co. (4.8 percent) and Great Western Financial (4.8 percent).

Baltimore Sun Articles
|
|
|
Please note the green-lined linked article text has been applied commercially without any involvement from our newsroom editors, reporters or any other editorial staff.