The Dow Jones Industrial Average has one trait that most other broad market indexes cannot claim: Every single component pays a dividend to its shareholders.  With only a few exceptions, these DJIA components have a history of raising dividends and can keep raising their dividends ahead.  24/7 Wall St. has seen that over half of the DJIA components have already raised their dividends in 2012 and we wanted to see which other of the 30 DJIA components were likely to see higher payouts announced during the rest of 2012.

We used dividend payout ratio analysis on each component based upon forward earnings estimates from Thomson Reuters.  The main DJIA dividend hikes we expect to hear more about during the rest of the year are as follows: AT&T, Inc. (NYSE: T); Verizon Communications, Inc. (NYSE: VZ); Caterpillar Inc. (NYSE: CAT); General Electric Co. (NYSE: GE); McDonald’s Corporation (NYSE: MCD); Microsoft Corporation (NASDAQ: MSFT); and The Walt Disney Co. (NYSE: DIS).

With the 10-Year Treasury paying out only 1.6% or so, investors are looking for those high payouts which are safe and which can grow.  This is particularly an issues since dividend taxes are set to rise significantly after 2012 unless another extension is made.  If you counted these DJIA components up, we have only 7 of the 30 DJIA components which we would still expect to raise their dividends in the coming months in 2012.  Here is the logic behind each…

AT&T, Inc. (NYSE: T) and Verizon Communications, Inc. (NYSE: VZ) have been serial dividend hikers in the past.  Wall Street demands that these telecom and wireless giants keep boosting their payouts each year but the issue is that these giants are paying out large portions of the adjusted earnings per share (73% this year for AT&T and 80% this year for Verizon).  Earnings growth in these established players is no longer robust by any means.  It is safe to assume that dividend hikes are coming here but we would not expect any major hikes as these lead the DJIA in the yields already. Verizon just announced its fourth payout of $0.50, so these will be coming in the next quarter or so most likely.  AT&T yields 5.2% and Verizon yields 4.9%.

Caterpillar Inc. (NYSE: CAT) has had 4 consecutive payouts of $0.46 per share and the last payment was April 19.  If another dividend hike comes, it will be very soon and it should actually be the soonest announcement if the schedule holds up to our expectations.  The problem is that growth has been slowing in its key growth markets. With earnings estimates of $9.73 EPS in 2012 and $11.47 EPS, the $1.84 payout leaves far more room for dividend growth as the payout ratio is currently a paltry 19% and that is just too low for a company that is this well-heeled and this entrenched in the global infrastructure building.

General Electric Co. (NYSE: GE) has committed to raising its dividends with the rate of its income growth, but the change here is that GE itself is now getting dividends from its GE Capital unit for the first time in years.  When that news came out there was a boost as it signaled that higher payouts were coming and more domestic normalization was being seen in its consumer finance operations. At $19.00 this giant conglomerate is already yielding 3.7% so dividend hikes here would be expected to be incremental. One analyst recently predicted that GE could rise to $30 and the dividend growth was one supporting reason.  It is possible that a hike could come sooner, but we would look for it in late-2012.

McDonald’s Corporation (NYSE: MCD) has already had three consecutive quarterly payouts of $0.70 and the last hike was rather large with a 15% payout hike.  The $0.70 payout generates a yield of 3.2% based upon the $88.90 price, but the $2.80 annualized dividend payout compares to adjusted earnings estimates of $5.65 EPS in 2012 and $6.23 EPS in 2013.  We would be on the lookout for a dividend hike of closer to 10% this time around.

Microsoft Corporation (NASDAQ: MSFT) could be the ultimate wild card for dividend investors.  The company is likely to raise its dividend already right after the launch of Windows 8, but there is another take here.  Microsoft remains a key candidate for a one-time dividend if the dividend tax of 15% really is going to rise this much in 2013 and that special one-time dividend could be as much as $2.50 to $3.50 per share.  An alternative that Microsoft has been rumored to be considering is a large one-time share repurchase as well.  Earnings estimates are $2.70 EPS in 2012 and $3.06 EPS in 2013, so the current $0.80 annualized dividend payment has a lot of room to grow to well above the 2.7% yield with the shares around $29.40.

The Walt Disney Co. (NYSE: DIS) is one which is another long-dated wait for a higher dividend this year.  Its dividend payouts are only once per year and those come in December.  That means this one is a long-wait.  Disney increased its payout by a massive 50% last year to $0.60, but this is only a yield of 1.3% now that shares are close to the high of $46.10.  This is also only a 20% payout ratio against this year’s expected adjusted earnings per share.  Disney can do better, particularly since it has already made big movie acquisitions.  We would still rather see Disney move to a quarterly payout system rather than an annual system like all other DJIA components.

Read Also: Utility Dividends Replaced CDs and Treasuries

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