Compound interest is what occurs when interest previously earned is added to the principle and is considered when calculating future interest - i.e. earning interest on interest. So, what's more powerful than compound interest? Compound dividends! Compound dividends are like compound interest on steroids - you are not only earning on reinvested dividends, but the dividend rate is increasing.
Here are several big-name companies compounding their dividends by raising their cash distributions to shareholders:
LLY was reviewed on 7/7/2008. However, I currently rate it as a 5 Star-Strong Buy. BBT was reviewed on 3/3/2008 with a 5-Star Strong Buy. It currently has a 4-Star Buy rating.
After running the remaining companies through my D4L-PreScreen.xls model, the Dividend Achiever T with a NPV of MMA Differential of $8,911 is one that I have on my watch list. WMI with a NPV of MMA Differential of $5,991, BA with a NPV of MMA Differential of $18,730 and ITT with a NPV of MMA Differential of $17,946 are ones worthy of additional consideration. None of the other companies' NPV of MMA Differentials were close enough to warrant a more complete evaluation.
Disclosure: Long LLY, BBT.
(Photo: Steve Woods)
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Big Names, Big Dividend Increases
Posted by D4L | Friday, December 19, 2008 | commentary | 0 comments »________________________________________________________________
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