August’s Ex-Dividend Roundup: Cliffs Natural Resources, Neenah Paper and Lockheed Martin
Every month, I dig through D&I Daily’s dividends calendar in search of stocks that are about to go ex-dividend. That is, pay out cash on a specified date.
I’ll point out both the good and the bad, because protecting your hard-earned money from shaky investments is just as important as making gains.
Remember, to be eligible to receive the next dividend payment, you need to own shares at least one day prior to the ex-dividend date.
So, without further ado, here are three stocks that are primed to go ex-dividend in August…
Cliffs Natural Resources (CLF) | Ex-Date August 13
My colleague, Steve Gunn, provided a rundown of this iron ore producer back in October of last year. The stock was ailing then – and it’s ailing now.
Over the last five years, the stock whipsawed severely – careening from over $100 per share in 2008, down to nearly $13 in 2009 during the financial crisis. It recovered almost fully by 2011, gapping back up to its $100 per share highs, only to come crashing back down since then. It’s now trading near $17.
Throughout all of this, the stock made up for its price volatility by offering a hefty, rising dividend – yielding 9.9% at its peak.
The wild price movements – and eventual earnings crash – stems largely from iron ore demand out of China, which has undergone a severe slowdown along with its economy.
In short, iron ore production is a cyclical industry, and the global economy is moving at a snail’s pace. Until that changes, it won’t be easy for Cliffs Natural Resources to restore earnings and keep its dividends alive. More cuts should be expected.
Neenah Paper (NP) | Ex-Date August 14
Like I pointed out last November, Neenah Paper is a relatively new dividend payer. And new dividend payers make for risky income investments.
Even though the company was spun off from the long-time dividend payer, Kimberly-Clark Corporation (KMB), that doesn’t inspire much confidence.
Despite the fact that Neenah launched into paying dividends immediately following the spin-off, it failed to declare any increases until 2011.
And while the company has followed through with increases every year since, there’s a heck of a lot to be desired in the dividend growth department. Case in point: Overall, it’s grown payouts by only 27%.
Making that figure even worse is the fact that Neenah’s dividend payout ratio (DPR) remains on the low end, clocking in at just 19.9%.
Bottom line: Although the company has the earnings to spend on dividends growth, management is simply choosing to allocate capital differently. And for income seekers, that’s a bad sign.
Lockheed Martin (LMT) | Ex-Date August 29
There’s no disputing it… Lockheed Martin is a serious dividend grower, averaging a high-end 23% over the last five years.
As a result of the long line of substantial increases, the stock’s projected yield clocks in at 4.87% – more than twice the S&P 500 average.
But don’t expect that growth to continue forever. Since the increases haven’t been accompanied by a corresponding rise in earnings, the DPR has ballooned from 25.6% in 2005 to 49.7% on a trailing 12-month basis.
Most sensible companies start shaving increases in the 40% to 50% range. So unless earnings at Lockheed start pacing the DPR growth rate, a dividend slowdown is imminent.
Now, that doesn’t mean Lockheed is unattractive. The contraction will take quarters to complete, and – simply because shareholders have become accustomed to holding a dividend growth stock – it’s unlikely the increases will slow to anything less than 10% annually. That’s respectable by any measure.
Furthermore, considering its solid growth history, plus year-to-date gains of 24.5%, the stock is priced at a bargain. It’s trading at just 13 times earnings, or a 21% discount to the S&P 500. And, in the end, finding solid, growing dividends on the cheap is no easy task.