At the end of one of the most famous scenes from Apocalypse Now, Lieutenant Colonel Bill Kilgore lamented, “Someday, this war is gonna end.”
The Vietnam War had consumed him. It gave him purpose, and he couldn’t imagine life without it.
Well, central bankers are currently at war, too – with the markets – and they can’t imagine life without stimulus.
On October 16, with the S&P 500 down nearly 10% from its peak on September 18, a Bloomberg headline crossed the newswires…
*BULLARD SAYS FED SHOULD CONSIDER DELAY IN ENDING QE*
St. Louis Federal Reserve Bank President James Bullard was doing his part to arrest the rise in fear.
You see, every time inflation expectations have meaningfully declined over the past few years, central bankers have stepped in to provide stimulus in the form of quantitative easing (QE).
But now, it seems as though central planners can’t even tolerate a garden variety stock market correction before hinting at even more stimulus.
And it’s important to realize that, right now, the global financial markets are being driven by artificial stimulus, not fundamentals.
Matt King, Global Head of Credit Strategy at Citigroup, estimates that it takes around $200 billion from central banks each quarter to keep markets from selling off.
Alas, these are the financial markets we have, not the ones we may desire. We can only follow our investing processes as central planners continue to wage war against the free markets, price discovery, and the efficient allocation of resources and capital.
I can just imagine the Fed governors telling their young researchers in the halls of the Eccles Building…
“Someday, this war is gonna end.”
Those who went shopping for dividend growers amid the margin calls, as I suggested last week, have been rewarded handsomely. Those who sold into the fear are now chasing stocks higher.
The Dividend Sonar Index (DSI) is still down around 1.9% for the quarter, but considering its energy sector and mid-cap exposure, it held up admirably during the selloff.
Dividend Payout Increases
|Ticker||Name||Market Cap (Billions)||Dividend Declaration Date||Previous Dividend||Latest Dividend||Dividend Payout Change||Dividend Yield|
|UFPI||Universal Forest Products Inc||$1.0||10/15/2014||$0.21||$0.4||90%||1.6%|
|UCBI||United Community Banks Inc/GA||$1.0||10/16/2014||$0.03||$0.05||67%||1.3%|
|HBAN||Huntington Bancshares Inc/OH||$7.5||10/17/2014||$0.05||$0.06||20%||2.6%|
|WNR||Western Refining Inc||$4.3||10/14/2014||$0.26||$0.3||15%||2.8%|
|EV||Eaton Vance Corp||$4.3||10/16/2014||$0.22||$0.25||14%||2.8%|
|GS||Goldman Sachs Group Inc/The||$81.0||10/16/2014||$0.55||$0.6||9%||1.3%|
|B||Barnes Group Inc||$1.8||10/17/2014||$0.11||$0.12||9%||1.5%|
|MLAB||Mesa Laboratories Inc||$0.2||10/14/2014||$0.15||$0.16||7%||0.9%|
|PAG||Penske Automotive Group Inc||$3.6||10/15/2014||$0.2||$0.21||5%||2.1%|
|SHLM||A Schulman Inc||$0.9||10/16/2014||$0.2||$0.205||2%||2.6%|
|HCSG||Healthcare Services Group Inc||$1.9||10/14/2014||$0.17375||$0.175||1%||2.5%|
- Universal Forest Products (UFPI) is the nation’s leading manufacturer and distributor of wood and wood-alternative products to three markets: retail, construction, and industrial. Based on the firm’s cash flow, it doesn’t look like it will have a problem with the 90% increase to its dividend payout, barring any significant downturn in the housing market.
- Huntington Bancshares (HBAN) increased its dividend payout by a solid 20%, to $0.06 quarterly. However, it’s worth noting that the firm paid out a $0.2650 quarterly dividend in 2007 before having to slash it to $0.01 during the credit crisis.
- Like clockwork, Penske Automotive Group (PAG) raised its dividend, marking the 14th consecutive quarterly dividend increase since 2011.
- Eaton Vance (EV) is one of the oldest investment management firms in the United States. With its 2014 increase, the firm has raised its dividend in each of the last 34 fiscal years, and grown the dividend at an impressive 18% compound annual rate over that time frame.
- VF Corp (VFC) is an apparel and footwear company that owns many popular brands, including 7 For All Mankind, Nautica, Lee, JanSport, The North Face, Vans, and Wrangler. VF’s dividend increases have been consistent, with 20%-plus increases the past three years.
- In terms of market cap, Goldman Sachs (GS) was the largest company increasing its dividend in the past week.
|Ticker||Name||Market Cap (Billions)||Dividend Declaration Date||Dividend||Dividend Yield|
|METR||Metro Bancorp Inc||$0.3||10/14/2014||$0.07||1.3%|
|WGO||Winnebago Industries Inc||$0.6||10/15/2014||$0.09||1.8%|
|VAC||Marriott Vacations Worldwide C||$2.1||10/16/2014||$0.25||1.5%|
- Marriott Vacations Worldwide (VAC) was established in late 2011 as an independent, public company focusing primarily on vacation ownership experiences. Its brands include: Marriott Vacation Club, The Ritz-Carlton Destination Club, and Grand Residences by Marriott. President and CEO Stephen P. Weisz remarked, “With our strong cash position and cash flow outlook, I am pleased to announce that our Board of Directors has approved a quarterly dividend, our first as a public company.” The Board also authorized the repurchase of up to an additional 3.4 million shares, representing approximately 10% of the company’s outstanding common stock.
- Metro Bancorp Inc. (METR), formerly Pennsylvania Commerce Bancorp, is a regional bank based in Harrisburg, Pennsylvania. The Board of Directors approved a number of measures, including the initiation of an annual dividend of $0.28 per common share, beginning in the first quarter of 2015, and a 5% share repurchase program, beginning in the fourth quarter of 2014.
- Winnebago Industries (WGO), the motorhome manufacturer with the recognizable brand name, reinstated its dividend after a hiatus starting in 2008.
Dividend Action Watch
|Ticker||Name||Tentative Dividend Declaration Date|
|WCN||Waste Connections Inc||10/21/2014|
|MSM||MSC Industrial Direct Co Inc||10/22/2014|
|PNW||Pinnacle West Capital Corp||10/23/2014|
|MAC||The Macerich Co||10/24/2014|
Source: Wall Street Daily, Bloomberg