The 2013 financial year was a fruitful one for many companies. As markets got a fresh burst of optimism a few lucky companies saw their trickling cash flows turning into raging torrents.
Strong results lead to big dividend increases for this handful of companies. Insurance Australia Group (ASX: IAG) was a particular standout, increasing its distributions to shareholders by over 100% year on year.
IAG’s group net profit after tax (NPAT) was up 275% from $207 million to $776 million and the result came on the back of especially strong performance in the company’s invested funds.
The insurance group announced a fully franked final dividend of 25 cents per share (cps) compared to 12cps in 2012. IAG’s total dividend for the year will also increase over 100% from 17cps to 36cps.
Favourable investment movements were also a key driver for the improved performance of Suncorp Group (ASX: SUN). Suncorp’s NPAT was up 79% year on year and investors were rewarded with a 50% increase in fully franked final dividend.
|Company||Dividend last year (cps)||Dividend this year (cps)||Percent change (%)|
|Resmed (ASX: RMD)||(US$) 17||(US$) 25||47%|
|Suncorp Group (ASX: SUN)||20||30||50%|
|Aristocrat Leisure (ASX: ALL)||4||7||75%|
|Insurance Australia Group (ASX: IAG)||12||25||108%|
Source: Company announcements and websites
Aristocrat Leisure (ASX: ALL) increased earnings per share 11% in constant currency terms, despite revenue being down 7.5%, but an increased interim dividend from 4 to 7 cents per share gave it a healthy looking 75% dividend jump.
Just scraping in over the 45% increase threshold is respiratory system maker Resmed (ASX: RMD), which bumped its quarterly dividend up 47% from US$0.17 to US$0.25. The lower Aussie dollar was an added sweetener for Australian investors, who ended up with 27cps.
These four companies stand out for the size of their dividend increases. However, how a dividend is grown is almost more important than how big the increase is. Before rushing out to buy any of the above companies, it is important to understand the reason for the dividend increase.
Some good questions to ask are: is the dividend sustainable?, did it come from company earnings? and is the company sacrificing of future growth for the dividend?
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Motley Fool contributor Regan Pearson does not own shares in any company mentioned.