Dividend Watch: High Silver & Gold Prices No Issue At Tiffany (TIF, HWD, SIG, ZLC)

Tiffany & Co. (NYSE: TIF) has been an amazing stock.  Despite the rise in precious metals, the company has so far not been impacted by rising prices when it comes to sell-through rates.  It was not even damaged too much from the Japan situation if you just look at its stock performance.  Tiffany has shown one more sign of strength now that it has just raised its dividend payout.  The prior $0.25 dividend is now jumping to $0.29 per quarter.

When we look at the luxury jewelry market of US-traded shares, Tiffany & Co. stands above companies like Harry Winston Diamond Corporation (NYSE: HWD), Signet Jewelers Limited (NYSE: SIG), and Zale Corporation (NYSE: ZLC).  Zale’s has been losing money and is not in a position to pay a dividend, but Signet last had a dividend in 2008 and Harry Winston last paid a dividend in early 2009.

When you annualize this to $1.16 per year and use roughly a $70.00 stock price it comes to a dividend yield of 1.65%.  This might not sound like a super-high dividend, but some of that is because Tiffany & Co.’s stock has a 52-week range of $35.81 to $70.26.  Its market cap is now $8.9 billion and Thomson Reuters has a consensus price target of only $68.75.

With shares currently above the consensus price target objective, Tiffany’s only real choice was to hike its dividend.  Hiking a dividend is much better of a signal to investors than share buybacks.  Share buybacks are usually meant to infer that the stock is cheap at the current time, but when companies raise a dividend it is meant to imply that business is going to remain ample to support that payout for years.  A company can stop buying stock, but investors generally treat a lowering of dividends with a poor reception.

As far as how $1.16 per year comes out on the math, Thomson Reuters has estimates of $3.32 EPS for its Fiscal January-2012 and $3.79 EPS for its Fiscal January-2013.  If Tiffany can come anywhere close to its earnings estimates ahead then it can keep raising its dividends.

JON C. OGG