Four Stocks with Sustainable Dividends

It is important that companies continue to raise it dividend year after year. In addition, it is also critical to make sure we understand that companies can sustain their dividends. Following are four companies that recently announced their quarterly results. Based on these results, it seems their dividends are covered and can be sustained.

Procter & Gamble Company (PG): The 4Q09 earning per share was $0.80 (vs. $0.84 in 3Q09).

  • The key highlight was reduced earnings on q-o-q and y-o-y basis (vs. $0.92 in 4Q08) and reduced revenue.
  • For year 2009, EPS increased by 17% to $3.64 (from $4.26). This increase is due to sale of Folger’s business unit.
  • Yearly dividend of $1.76/share is well covered with earnings. Payout ratio is at 41%.

Clorox Corporation (CLX): The 4Q09 earning per share was $1.20 (vs. $1.08 in 3Q09).

  • The highlight was 8% increase in EPS (vs. $1.13 in 4Q08) on y-o-y basis.
  • For year 2009, EPS increased 16% to $3.81 (from $3.24)
  • Increased EPS came from combination of increased revenue and cost control.
  • Annual dividend of $2.00/share is well covered with earnings. Payout ratio is 52%.

The Chubb Corporation (CB): The year 2Q09 earnings per share was $1.54 (vs. $0.95 in 1Q09).

  • This is increase in earnings on y-o-y (vs. $1.27 in 2Q08)
  • The highlights were increase in operating income (6%) and reduced revenue from premium collections.
  • Quarterly dividend of $0.35/share is well covered with earnings. The annual payout ratio is 23%.

PepsiCo (PEP): The year 2Q09 earnings per share was $1.02 (vs. $1.05 in 1Q09).

  • The key highlights were reduced y-o-y EPS (vs. $1.05 in 2Q08).
  • Y-o-Y revenue reduced by 3%. The reduction in EPS was due reduced sales of Pepsi’s beverage products.
  • Quarterly dividend of $0.45/share is very well covered. Quarterly payout ratio is 44%.

While PG and CB showed reduce earnings and revenue, the payout factor has sufficient room to cover the dividends. These four companies keep marching and battling the recession.

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