Last week we began a series of companies which we expect will raise their dividends in 2011.  It was the first piece of a series and there are many other companies which we expect to boost their dividends in 2011.  Some may seem obvious while others will not.  We are looking for dividend hikes in 2011 from companies such as Abbott Laboratories (NYSE: ABT), American Water Works Company, Inc. (NYSE: AWK), Dr. Pepper Snapple Group, Inc. (NYSE: DPS), Exxon Mobil Corporation (NYSE: XOM), Kimberly-Clark Corporation (NYSE: KMB), NextEra Energy, Inc. (NYS: NEE), NextEra Energy, Inc. (NYS: NEE), and Wal-Mart Stores, Inc. (NYSE: WMT).

We have gone through the dividend history of each company here to outline a proper dividend growth history.  Then we have looked at industry trends and earnings trends to interpolate the dividend coverage ratios to see how high companies could raise their dividends and even what the realistic dividend hikes would look like.  There is also of course a yield analysis attached and the prospects ahead that make each attractive to dividend growth investors.

Abbott Laboratories (NYSE: ABT) is a company which could announce a dividend hike later in the first quarter of this year.  After all, Abbott generally raises its dividend yearly and it is due after four quarters of $0.44 for a dividend. Abbott’s yield of 3.7% tops J&J, but lags Merck and Pfizer.  At $47.92, its 52-week range is $44.59 to $55.66 and it already carries a 3.70% dividend yield.  The company may want to draw attention to its stock and a dividend hike after earnings season may just be what the doctor ordered.

American Water Works Company, Inc. (NYSE: AWK) is still one of our Top 10 Companies To Hold For The Next Decade and it was also named The Best Water Stock for 2011 of our own water sector coverage.  The growth will continue as long as it stays on its current path.  The company has the broadest public water utility portfolio out there and that gives it a virtual monopoly in each of its local markets.  It has about 16 million customers in 35 states and two Canadian provinces and a fresh asset sale in New Mexico and Arizona for $470 million changes nothing by our count.

We have identified this as a dividend grower in early 2010 and we expect a repeat performance in 2011.  The current $0.88 annualized payout compares to earnings expectations for 2010 of $1.52 EPS and $1.62 EPS for 2011.  We won’t expect another dividend hike before the summer here, but that $0.22 quarterly payout is likely to rise to $0.23 or $0.235 this year.  At $25.59, this one keeps hitting new 52-week highs almost each month and it has rarely offered any pullbacks to eager investors.

Dr. Pepper Snapple Group, Inc. (NYSE: DPS) is much younger as a public company compared to PepsiCo and Coca-Cola, at least this time around.  Last year the company noted that it intended to hike its payout after it paid off more debt and regained its investment-grade rating.  Even after fresh debt offerings after retiring debt at the end of 2010, those investment-grade ratings hold.  We do not expect an imminent hike from the beverage giant with some 50 different brands.  We would also did not expect the same 67% hike seen in 2010 as it caught up to peers on the shareholder payout game.

Dr. Pepper’s $0.25 dividend is likely to be boosted to $0.30 per quarter or $1.20 per year.  Earnings expectations are $2.38 EPS for 2010 and $2.77 EPS for 2011.  This offers more than ample dividend coverage as its 2.8% dividend is pretty much on par with Coca-Cola and Pepsi.  We believe that Dr. Pepper Snapple wants to differentiate itself as a higher dividend yield.  This dividend hike may come closer to the middle of 2011.  At $65.87, its 52-week range is $58.75 to $68.11.

Exxon Mobil Corporation (NYSE: XOM) has a surprisingly low dividend considering that it is America’s largest oil and gas play.  The company continues to repurchase stock as if there is no tomorrow, and the reason the dividend is not even higher is because it had to digest that XTO acquisition.  Fortunately, that was a stock-for-stock merger rather than a buyout which would have eaten up all of its cash and available liquidity.  The two most recent dividend hikes were only by two-cents per quarter and the current $0.44 dividend (or $1.56 per year) is one we expect to be raised higher than just two-cents this year.

This Exxon dividend hike may not come before the second quarter, but there is more than enough dividend coverage here to reward shareholders more. Thomson Reuters has estimates of $5.91 EPS for 2010 and $6.77 EPS for 2011.  Shares just hit a new high last week and its $78.98 closing price offers a current yield of about 2.2% to investors today.  It is time for Big Oil to boost its payout here yet again.  Our take is that the dividend gets hiked to $0.48 per quarter at the next dividend hike.

Kimberly Clark Corporation (NYSE: KMB) was another one of our Stocks To Hold For The Next Decade, and a part of that is because the company has been on a steady dividend hike path and on a plan to return capital to shareholders.  If the company boosts its payout, this would be about 40 consecutive years of dividend hikes.  It dates back to the 1800’s and it is smaller than Colgate-Palmolive and P&G.

Perhaps the biggest issue is whether the hike will be by the same amount as we saw last year when they quarterly rate went to $0.66 from $0.60.  Our guess is not, probably a hike to $0.64 per quarter or $2.56 per year.  Thomson Reuters has estimates of $4.64 EPS for 2010 and $5.01 EPS for 2011.  Even if the in-store promotion cost pressures remain in 2011, there is much more room for Kimberly Clark to boost that payout.  Its current yield is already 4.1% and at $64.28 its 52-week trading is $58.25 to $67.24.

NextEra Energy, Inc. (NYS: NEE) is the former FPL Group or Florida Power & Lighting.  We do not like when companies change their names, but that often brings change in and of itself.  NextEra did have some old legacy environmental ‘issues’ it wanted to distance itself from.  The company has more than 4.5 million retail power customers and it also owns a generation and transmission business along with a broad portfolio of renewable energy.

It is possible that the NextEra dividend hike may come as soon as the earnings report this week.  The company has historically raised its dividends each year and its $2.00 current annualized dividend is likely to be raised to at least $2.10 per year. That would still place its dividend coverage under half of its estimates of $4.35 EPS target for 2010 and $4.46 EPS in 2011.  This is one where a hike is much more likely than not by our count.  At $54.42, the 52-week trading range is $45.29 to $56.26.  If a hike comes this week, that would get the dividend yield closer to 4%.

Target Corporation (NYSE: TGT) still greatly lags its rival Wal-Mart in yield after last year’s big boost from a rate of $0.17 per quarter to $0.25 per quarter.  As the economy improves and as it unloads its credit card receivables portfolio, Target should have ample room to grow its dividend.  The expansion into Canada and the slower same-store sales growth should not get in the way of its ability to boost its dividend payout to its retail shareholders.

The current yield is only about 1.8% and we would not look for a dividend hike until the summer.  With estimates of $3.90 EPS for 2010 and $4.39 EPS for 2011, Target has much more room for dividend growth.  As the company is fighting same-store sales issues and expanding Northward, we’d look for “only” a 10% dividend growth this year to $0.275 or $0.28 per quarter unless things get better.  At $55.73, Target’s 52-week range is $48.23 to $60.97.

Wal-Mart Stores, Inc. (NYSE: WMT) is the king of retail and its 2.2% dividend yield is actually much higher than most giant retailers pay to shareholders.  The $1.21 annualized dividend still generate a yield of only 2.2%.  This makes it one of the lower DJIA components in yield and we won’t be letting a secret out if we note that the stock has been dead money for a decade.  More importantly, its share buybacks have done little to reward holders.  With a near-$200 billion market cap, does the company realistically think it can make a huge difference here buying back stock?  What could make a large difference is a higher dividend, and as we have noted before it could even put pressure on its peers and competitors by forcing them to raise their dividends to where they have less dividend coverage compared to earnings.

Wal-Mart may raise its dividend in the next six to eight weeks and we would prefer for the company to boost its payout to at least $0.35 per quarter.  That would bring the yield to 2.5%.  If Wal-Mart really wants to make a statement, it would aim for as much as $0.40 per quarter to get closer to 3%.  We’ll aim for the realistic approach of $0.35 per quarter.  At $1.40 paid out for a year, its 2010 estimates are $4.05 EPS and its 2011 estimates are $4.45 EPS.  After all, how much more cap-ex does Wal-Mart need for the U.S.?  At $55.77, its 52-week range is $47.77 to $56.27.

Again, if you want to see last week’s companies we think will hike dividends substantially in 2011 that list includes J.P. Morgan Chase & Co. (NYSE: JPM), Wells Fargo & Co. (NYSE: WFC), and Bank of America Corporation (NYSE: BAC) in banks; Cisco Systems, Inc. (NASDAQ: CSCO) for sure and maybe even Apple Inc. (NASDAQ: AAPL) if things get worse for Steve Jobs in tech; and General Electric Co. (NYSE: GE), United Technologies Corp. (NYSE: UTX), and 3M Co. (NYSE: MMM) in conglomerates.

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JON C. OGG

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