As Dividend Cuts Rise, Some Companies May Increase Pay-Out

A number of experts say that companies, especially financial services firms, will cut dividends in 2008. CNN Money writes that "dividend cuts or suspensions will continue to pick up among financial services firms in 2008, said Howard Silverblatt, a senior index analyst at Standard & Poor’s."

But, there are several companies with the cash flow, balance sheets, and operating income to increase dividends this year, and may do so to make their shares more attractive.

Microsoft (MSFT) has a yield of 1.2% but one of the largest cash positions of any company in the world. All of its divisions are making money with the exception of its online operation MSN.

Altria (MO) is likely to spin-off its international operations leaving its domestic tobacco operations which throw off tremendous cash. The current yield of 4% could certainly go higher in a move to get the company’s share price up.

Exxon (XOM) has a modest pay-out of 1.4%.The is below Conoco (COP) and Chevron (CVX). Exxon may up its dividend to get inline with its competition.

Procter & Gamble (PG) had huge operating income of $4.4 billion on revenue of $20.2 billion last quarter, yet its pay-out is a modest 1.9%. Peer Johnson & Johnson (JNJ) has a 2.5% yield.

Intel (INTC) needs to make its shares more attractive now that the fear of a tech slowdown is cutting its share price. With over $2 billion in operating income last quarter and $12 billion in cash and short-term investments, it could increase its 1.8% yield to draw investors back.

Gannett (GCI) One of the few reasons for buying newspaper companies now is that the larger ones still have substantial free cash-flow for pay-outs. Gannett could easily up its 4.4% yield to bring back investors. It has operating income of over $400 million on revenue of $1.8 billion last quarter.

Douglas A. McIntyre