Market Overview

Four Dow Components Due for a Dividend Hike (CVX, XOM, IBM, JNJ)

Dow Jones Industrial Average companies Chevron (NYSE: CVX), Exxon Mobil (NYSE: XOM), IBM (NYSE: IBM) and Johnson & Johnson (NYSE: JNJ) are about due to boost their payouts, according to a report on CNBC.

These blue chips have significant cash hoards, buy back shares and are doing well now, as markets are near all-time highs. And they are the kinds of companies that investors expect to raise their dividends annually.

Here is a quick look at how these four stocks have fared and what analysts expect from them.

Chevron

Chevron now offers a $0.90 quarterly dividend, or a yield of about three percent. The coming hike could be between five and 10 percent, to as much as $1.00. The San Ramon, California-based petroleum, chemicals and energy company sports a market capitalization near $229 billion.

The price-to-earnings (P/E) ratio is just a bit higher than the industry average, but the long-term earnings per share (EPS) growth forecast is less than two percent. Chevron's operating margin is higher than the industry average. The short interest is about one percent of the float.

Of the 24 analysts surveyed by Thomson/First Call who follow this stock, 16 recommend buying shares. The consensus recommendation has been to buy shares for at least three months. The mean price target, or where analysts expect the share price to go, indicates almost seven percent potential upside.

While the share price of Chevron is more than six percent higher year-to-date, shares have pulled back almost three percent from a recent 52-week high. The stock has outperformed Exxon and Royal Dutch Shell (NYSE: RDS-A) over the past six months.

Exxon Mobil

Exxon now offers a $0.57 quarterly dividend, or near a 2.5 percent yield. The expected hike here is more than 12 percent to $0.65, bringing its yield more in line with Chevron's. Exxon has a market cap of more than $403 billion, which is second only to Apple (NASDAQ: AAPL).

Exxon's long-term EPS growth forecast is less than four percent, and the P/E ratio is greater than the industry average. But the return on equity is about 28 percent. And the short interest is about one percent of the total float.

Just eight of the 23 analysts surveyed recommend buying shares, but none recommend selling them. Their mean price target represents more than five percent potential upside relative to the current share price. That target would be a new multiyear high.

Shares are trading only marginally higher than they were at the beginning of the year. Over the past six months, this stock has underperformed competitors Chevron and BP (NYSE: BP).

IBM

The current quarterly dividend of this IT product and service provider is $0.85. This is a yield of about 1.6 percent, or about half the yield of competitor Microsoft (NASDAQ: MSFT). The hike could be more than 10 percent to $0.95. IBM has a market cap of more than $235 billion.

This S&P 500 company has a long-term EPS growth forecast of more than 10 percent. Its P/E ratio is less than that of Microsoft, and the return on equity is more than 85 percent. The number of shares sold short represents more than one percent of the float.

Only 11 of the 26 polled analysts recommend buying the stock, but just one rates shares at Underperform. The analysts believe IBM has a little head room, as their price target is more than six higher than the current share price.

Shares are trading more than eight percent higher year-to-date and hit a multiyear high in mid-March. The stock has outperformed Microsoft but underperformed the Dow Jones Industrial Average over the past six months.

Johnson & Johnson

This New Jersey-based health care products giant currently offers a yield of about three percent. The $0.61 quarterly dividend could be hiked to $0.65. The maker of Band-Aid, Tylenol and Listerine products has a nearly $230 billion market cap.

The P/E ratio is in line with the industry average, and the long-term EPS growth forecast is more than six percent. The return on equity is almost 18 percent. The short interest is more than three percent of the company's float.

For at least three months, the analysts' consensus recommendation has been to buy shares. However, the share price has overrun their mean price target. The street-high target suggests more than eight percent potential upside.

Shares are trading near a 52-week high after rising almost 16 percent since the beginning of the year. Over the past six months, Johnson & Johnson has outperformed the likes of Covidien (NYSE: COV) and Novartis (NYSE: NVS).

Posted-In: Apple bp ChevronCNBC Long Ideas Short Ideas Dividends Trading Ideas Best of Benzinga

 

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