The Best Sectors for Dividends Now …

Last week, I told you where my favorite places were to get solid income and protection from a possible double-dip recession.

Today, I want to follow-up on that theme by telling you about some of the latest trends in the dividend landscape.

Let’s start with a roundup of the second quarter: The good news is that Standard & Poor’s says the number of dividend cuts continued to slow — with just 34 issues decreasing or omitting their payments. Even better, S&P reports that a full 335 public companies increased their dividends during the quarter, which was a 43.8 percent jump from the second quarter of 2009!

In terms of sectors, staples and utilities were by far the best dividend boosters, with communications companies in third place.

Again, this should come as no surprise based on what I said last week — and it’s precisely why I just recommended both a utility and a telecom company for my brand-new Dad’s Income Portfolio service.

[Editor’s note: Those new buy orders went out on Friday after the close, which means Nilus’ dad will be placing them in his Vanguard account tomorrow. If you want to get on board now, and get those urgent new recommendations sent to you right away, just click here.]

Meanwhile, financials are still a major danger zone for dividend cuts with materials and discretionary companies also having problems.

Of Course, a Lot of Different Companies
In Nearly Every Sector Have Been
Boosting Their Payments Lately!

When you look at some of the individual companies that have boosted their dividends lately, you’ll see a slightly more eclectic list — including International Paper, which raised its payment a very impressive 500 percent … UnitedHealth, which more than quadrupled its monthly payment … and retailer Coach, which doubled its dividend.

That begs the question: How can we know who might increase their payments next?

For starters, Bloomberg’s analysts maintain what they call a “Dividend Directional Thermometer,” which uses a number of fundamental, rating, and company-specific data points to indicate general trends in dividends across sectors.

Based on that system, they currently believe consumer discretionary and technology companies look most likely to raise dividends in the near future.

And in the context of all-out income, other areas look more attractive going forward — with utilities, financials, and communications companies boasting the highest overall yields.

At the individual company level, it’s very hard to predict who will raise dividends in the short-term. Sure, plenty of firms are sitting on record levels of cash right now … but many management teams are also playing things very safe at the moment.

They want to make darn sure they have enough cash to weather more economic weakness that could be coming. They may also be eyeing acquisitions or share buyback programs.

Of course, the important part is that plenty of companies are increasing their dividends now and will continue to do so in the future … which means that investors have plenty of solid opportunities to collect good income even in this challenging interest rate environment.

Best wishes,

Nilus

P.S. Just as an additional example: The three companies I just recommended for Dad’s Income Portfolio are yielding an average of 6.3 percent and all boast terrific histories of rising dividend payments!

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