Big Unexpected Dividend Hikes (UNH, DE)

The stock market’s recent sell-off and snap-back recovery have not stopped dividend hikes.  There were two big ones this morning.  The unexpected dividend hike came from UnitedHealth Group (NYSE: UNH).  An unexpected, but manageable dividend hike came from Deere & Company (NYSE: DE).  With the political world being extremely hard on health insurance providers, this is a signal.  The machinery hike is a signal that maybe all the turmoil won’t fall down to the level that the most pessimistic fear.

UnitedHealth Group (NYSE: UNH)’s hike goes against the capital-political grain now.  The health insurance leader increased its common stock dividend with a move to a quarterly cycle and with a payout of $0.125 per share per quarter.  This comes to a full year of dividends using about 12% to 13% of its projected cash flows from operations.  Most recently, the Company paid a $0.03 per share annual dividend in April, 2010. The new dividend yield will jump from only about 0.1% up to 1.70% after a 1.25% gain to $29.23 today.

Deere & Company (NYSE: DE) also announced today that its board of directors hiked the quarterly payout from $0.28 yo $0.30 per share per quarter.  That comes to about a 7% hike and the prior $0.28 dividend had been in place since June-2008.  While this was a surprise hike, it is still only projected to be about one-quarter of its normalized earnings from operations. The machinery maker is trying to show that despite the woes of Europe that things will be as good as today or better ahead.  That brings the new dividend yield to 2.1%.

Warren Buffett recently exited his UnitedHealth stake entirely, and he is not an owner of Deere & Co.  Buffett probably felt as though the stake in the health insurance provider was too much at risk in the new political landscape even if he backed the Obama campaign.

UnitedHealth shares are up 1.25% to $29.23 in early afternoon trading and Deere shares are up 1.7% at $56.86.

JON C. OGG