The Monday Yield: Intuit, WesBanco and Viad
Each Monday, I serve up a grab bag of dividend-paying stocks – some you’ll want to add to your watch list and others you should avoid at all costs.
For the “Monday Yield” I’ll be monitoring yields, dividend histories, growth potential and notoriety, analyzing the best and worst that the market has to offer. I’ll provide D&I Daily readers with a quick round of dividend stocks to act as a jumping-off point.
So, without further ado, let’s get to this week’s lineup.
First on deck…
Dividend Growth Not Yet Proven
Based in Mountain View, California, Intuit (Nasdaq: INTU) develops the well-known tax and accounting software packages Quicken, TurboTax and QuickBooks, which are all leaders in the tax preparation market. (In 2012, 59.87% of all online tax units were filed through TurboTax.)
Reflecting its stronghold, Intuit’s revenue and earnings per share (EPS) both grew annually by about 12% from 2008 to 2011. Shareholders were rewarded accordingly, as the stock rose 109% over the same period, compared to the S&P 500’s roughly 40% climb.
Up until this point, share buybacks were management’s preferred way of returning value to shareholders. But this year, Intuit announced a dividend of $0.15, increasing it this quarter to $0.17, or $0.68 annualized. This represents a 1.16% yield as of Friday’s closing price of $58.43.
That’s a pretty low-end yield and Intuit has almost no dividend history to speak of. It doesn’t help that management hasn’t given any guidance on what to expect in the future.
That said, the company’s projected EPS of $2.85 to $2.94 for the current fiscal year would give Intuit a payout ratio of between 23.9% and 23.1%. That leaves the company plenty of room to grow its dividend if it were to make increases a priority.
Given further indication by management of what to expect in the way of dividends going forward – and a year or so of proven increases – Intuit could be an interesting new dividend play.
Until then, it’s best left on ice.
On the Dividend Rebound
WesBanco (Nasdaq: WSBC) is a holding company for WesBanco Bank, Inc., which has been paying dividends since 1990 and has a strong history of increases. Up until 2009, that is, when pressure from the financial crisis forced the company to cut its dividend from $0.28 to $0.14.
In 2011, WesBanco once again began raising its dividend and has made four increases since. Most recently, it announced an increase from $0.17 to $0.18. Its new dividend represents a 3.30% yield.
While WesBanco hasn’t entirely returned to its pre-crisis levels, it’s still been outperforming the industry. According to Morningstar data, regional U.S. banks stocks dropped an average of 10.11% annually over the last five years, compared to an average annual decline of just 2.72% from WSBC over the same time period.
With two years of consecutive increases now under its belt, dividend payout ratios back to sustainable levels and an extremely strong history of dividend increases prior to the cut, WesBanco appears to have set itself back on the dividend growth track. A few more quarters of confirmation are all that’s left.
Viad (NYSE: VVI) is an S&P Small Cap 600 company that provides travel and recreation services in the United Kingdom and North America. In other words, it’s a travel-oriented event organizer. But one look at its dividend history shows that the company could do with a little adventuring itself.
I make note of Viad based solely on the fact that it just announced an 150% increase to its dividend, hiking the payout from $0.04 to $0.10.
“This quarterly dividend increase reflects the Board’s confidence in the continuing growth prospects for Viad and our ability to generate sustainable cash flows,” said Paul Dykstra, Viad CEO.
That’s pretty much boilerplate CEO speak for, “Here you go. Don’t spend it all in one place.” So it’s anything but a forward-looking statement, especially considering that it’s Viad’s first dividend increase since it began paying dividends in 2004.
In the end, I wouldn’t let Viad’s lackluster 2.03% yield and one-off hike trick you into thinking its dividend will do anything but languish for another 10 years.
That’s it for this week’s dividend stock roundup. Stay tuned!