Some Dividends Up in Consumer Goods

Despite the S&P 500 rallying 36.2% from the low close on March 9th (676.53), the market is still down 41.1% fro the closing high on October 9, 2007 (1,565.15). The global economic slowdown is negatively impacting the earnings and cash flow of many companies.

However, some companies still have strong cash flow and their Boards are sufficiently confident in the future to raise the dividend.

An announcement concerning an increased dividend in the current environment has positive implications for both the company's equity and bonds. In the Consumer Staples sector, four companies have announced an increase in the quarterly dividend in the last three months. Previously in April, we had mentioned that Avon Products (AVP - Analyst Report), Colgate Palmolive (CL - Analyst Report), Kimberly-Clark (KMB - Analyst Report) and Pepsi Bottling Group (PBG - Analyst Report) had announced dividend increases between January and March 2009.

On April 14, Procter & Gamble (PG - Analyst Report) announced a 10% increase in the dividend. The quarterly dividend was increased from $0.40 per share to $0.44 per share.

This is the 53rd consecutive fiscal year that the Board has increased the company's dividend, and the company has been paying dividends without interruption since incorporation in 1890. Proctor & Gamble is the least financially leveraged company of the five with a debt/equity ratio of 0.67. The stock currently has a yield of 3.4%.

On May 15, Molson Coors Brewing Company (TAP - Analyst Report) announced that its Board of Directors approved a 20% increase in the quarterly dividend from $0.20 to $0.24 per share.

Since the merger of Molson and Coors in 2005, the company's financial position has improved through reducing costs and retiring debt. However, we expect a pricing war to begin due to the rationalization of capacity within the brewing industry.

On May 28, The HJ Heinz Company (HNZ - Analyst Report) announced 1.2% increase in the quarterly dividend from $0.415 to $0.42. The dividend will be paid to shareholders of record on June 24 and paid on July 10. The new annualized dividend is $1.68. Heinz has increased its dividend almost 56% since being adjusted in fiscal 2003 for the Del Monte (DLM - Analyst Report) spin-off.

On June 19, Del Monte Foods announced a 25% dividend increase albeit from a small base. The Board of Directors approved a quarterly cash dividend $0.05 per share, which is a $0.01 increase from the prior level of $0.04. The company maintains a leveraged balance sheet with debt-to-equity ratio of 0.97.