Several companies have raised their dividends in the last few weeks. Is the trend on the rise—and how should investors be positioned? Keith Goddard, portfolio manager of Capital Advisors Growth Fund, and Jeff Krumpelman, portfolio manager at Hilliard Lyons Capital Management, shared their insights.
“We’re really getting at the broader question of prudent allocation of capital,” Krumpelman told CNBC.
Krumpelman said the dividend-raising trend will be broad across the market and expects more tech, discretionary and financial stocks to follow.
In the meantime, Goddard said some companies such as Apple have “great reinvestment opportunities” and it would better serve shareholders for the firm to reinvest into growth.
“But for other companies that have matured, I’d rather see a balance where we get some of that capital back in the form of a dividend,” he said.
Meanwhile, companies with high dividend yields such as Paychex will have a harder time raising their dividends because they’re already distributing a high percentage of their earnings as dividends, said Goddard.
Meanwhile, names like Intel are still paying a small percentage of their earnings as dividends and have the ability to grow their dividend at a “double-digit rate.”
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Disclosures:
No immediate information was available for Goddard or Krumpelman.
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