eResearch| The past year was tumultuous. Even stalwart companies faced skepticism that expected dividend increases might not happen because of the COVID-19 pandemic.
Bolstered by fourth-quarter results, many businesses remain committed to their annual dividend increases despite continued uncertainty.
COVID-19 healing narratives have been circulating since the market rebounded in late March and early April. With the dust settling now, some of the larger companies managed to grow their market share even though revised estimates find that the U.S. real GDP decreased 3.5% in 2020.
In a normal economic growth year, the U.S. GDP grows between 2% and 3%.
Investors might have inflation concerns, given the $1.9 trillion COVID-relief bill in the senate and recent comments from the Federal Reserve Chair Jerome Powell that rates are likely to remain low for ‘some time’. Statista projects a 2.24% inflation for the U.S. in 2021, up from 0.62% in 2020.
FIGURE 1: U.S. Real GDP: Percent Change from Preceding Quarter
Canadian-listed Companies
Royal Bank of Canada (TSE: RY| NYSE: RY)
Headquartered in Montreal and Toronto, the Royal Bank of Canada “RBC” is the largest Canadian bank and second-largest Canadian company by market capitalization with over 86,000 employees.- The dividend payment is up C$0.03 to C$1.08 per share compared to one year ago, continuing a long-standing tradition of increases in payouts. Over the past 20 years, dividends did not increase in two years, 2009 and 2010, when dividends remained flat.
- RBC cites a fantastic fourth quarter, EPS up 11% over the same period last year, driven by record earnings in Capital Markets. Provisions for loan loss decreased as the quality of credit improved. Dave McKay, President and CEO of RBC cautioned that the road forward is uncertain.
IMAGE 1: Dave McKay Provides Additional Quarterly Earnings Context
Thomson Reuters (TSE: TRI| NYSE: TRI)
- Headquartered in Toronto, Reuters is a leading business and news information provider.
- Annualized dividends are increasing $0.10 from $1.52 per share to $1.62.
- Revenues and profitability grew in 2020, supported by increases in its “Big 3” Segments: Legal, Corporate, and Tax & Accounting. The smaller news and print segments are down. Reuters provides workflow and research products.
Magna International (TSE: MG| NYSE: MGA)
- Headquartered in Aurora, Ontario, Magna is an automobile parts manufacturer, selling to all major original equipment manufacturers “OEMs”. Magna has production facilities across the globe.
- Quarterly dividends increase to $0.43 per share, up $0.03.
- Despite supply issues with semiconductors and the COVID-19 pandemic, Magna had an increase in sales in the fourth quarter compared to last year. The fourth quarter nabbed 33% of sales in 2020.
U.S.-listed Companies
The Home Depot (NYSE: HD | FRA: HDI | BMV: HD)
- Headquartered in Atlanta, Georgia, The Home Depot is a home improvement retailer. With the slogan “”How Doers Get More Done”, The Home Depot helps homeowners and contractors source supplies for construction and renovation projects.
- Quarterly dividends are up to $1.65 per share, up $0.15 compared to last year.
- The Home Depot had a spectacular 2020 – comparable sales grew by 19.7%, and net earnings were similarly up by 16.5%. With more people spending time at home, homeowners are either upgrading their spaces or finally getting around to needed maintenance. This trend might continue with more people working from home.
Walmart (NYSE: WMT | FRA: WMT | BMV: WMT)
- Headquartered in Bentonville, Arkansas, Walmart is a retail behemoth and the largest company (by revenue) in the world. Walmart revolutionized retail by vast improvements in logistics and operations.
- ‘Quarterly’ dividends are up $0.01 to $0.55 per share, continuing a remarkable 48-year history of increased payments. Walmart announced a $20 billion share repurchase plan as well.
- Walmart’s comparable-store sales were up 8.6%, and eCommerce was up 69% in Q4. Overall, Walmart saw a 6.7% increase in revenues in its most recent fiscal year. Compared to the competition, big box stores benefitted from many pandemic orders because of spaciousness (occupancy limits), selling essential supplies (remaining open), and online ordering.
Xcel Energy (NASDAQ:XEL | FRA: NRN)
Headquartered in Minneapolis, Minnesota, Xcel Energy is a utility company focusing on electricity and natural gas. Xcel serves eight states and 5.8 million customers. Xcel operates in a highly regulated industry and often wins awards for its commitment to sustainability.- Quarterly dividends increased to $0.4575 per share, up $0.0275.
- Unlike many sectors, Xcel‘s revenue was constant between 2018-2020, reporting $11.5 billion in each of the previous three years. Net income was up for Xcel in 2020 as a result of a decreased income tax expense. Share prices have sunk 3.8% since the release of the annual report from $60.90 on February 17, 2021, to $58.59 on February 26, 2021.
