Maker of Newport cigarettes announced that it had increased its dividend by 8 cents to $1 per share. The 8.7 percent increase was warranted by fundamentals. The company forecast higher sales, net income an0ncash per share. Type FA <Go> to use the Financial Analysis function to track estimated and reported company data. The higher dividend meant that Lorillard would pay out 65 percent of its projected earnings.
On Aug. 27, Altria followed suit. It raised its payout by 2 cents to 34 cents per share. The largest U.S. tobacco company was estimated to have a 32 percent decrease in net income 0n 2009, according to consensus data compiled by Bloomberg. The 6.25 percent increase meant the Richmond, Virginia—based company would pay out 81 percent of projected earnings.
NEXT IN LINE was 0ctober.orris. On Sept. 15, the New York—based company increased its dividend by 4 cents to 58 cents per share. The world’s largest publicly traded tobacco company reported a 14 percent drop in net income in October. Though Philip Morris could have maintained its payout amount and hit its target dividend range, the company decided to follow its peers.
Last, on Oct. 6, Reynolds upped its payout 5 cents to 90 cents per share. The Winston-Salem, North Carolina—based maker of Camel cigarettes was forecast to have lower revenue and profit in 2009. Even though the 5.9 percent increase was the smallest of the four tobacco companies, it left Reynolds with the second-highest dividend yield: 7 percent as of Nov. 9. Type RAI US <Equity> DVD <Go> to use the Dividend/Split Summary function to track changes in Reynolds’s payout.
Tobacco isn’t the only industry in which companies have raised payouts to track peers even when not supported by auto title loans. In the U.S. defense sector in 2009, General Dynamics Corp. was the first to increase, upping its payout by 3 cents to 38 cents in March. The 8.6 percent increase came while analysts were projecting the company’s earnings to be flat or down for 2009. The move by the Falls Church, Virginia—based maker of the Abrams tankwas followedby similar increases at peers Raytheon Co., Northrop Grumman Corp., Lockheed Martin Corp. and Goodrich Corp. The raises came at a time when the companies’ earnings capabilities were being limited by tightening defense spending and by mounting pension costs.
Identifying trends in payout behavior is one example of the considerations that go into forecasts for the Bloomberg Dividend Projections (BDVD) function. Bloomberg’s team of analysts, who make subjective calls based on seven factors such as company guidance, has estimated dividends more accurately than Wall Street analysts’ consensus. The BDVD team’s accuracy rate on more than 7,000 securities wM0 83 percent in the first three quarters of 2009 compared with 65 percent for consensus analyst estimates.
BDVD forecast the exact amount of Altria’s August increase and Philip Morris’s September raise. Type MO US <Equity> BDVD <Go> to see forecasts for Altria’s payout. For projections for Philip Morris, type PM US <Equity> BDVD <Go>.
Several sectors in addition to tobacco experienced strong dividend growth through the market turmoil of 2008 to 2009. BDVD can help you foresee such movements by predicting the dividend actions that companies within a sector are forecast to take, with specific amounts and dates.
BDVD is available for individual stocks, exchange-traded funds and indexes. You can also access BDVD data in the Equity Screening (EQS) and Relative Value (RV) functions.