Optimistic companies promising bigger payouts

AP Personal Finance Writer Candice Choi has a recent report on some dividend stock increases. Optimistic companies promising bigger payouts

Corporate America is betting cash -- in the form of higher dividend payouts -- that the economy is rebounding.

Three major U.S. companies -- Caterpillar Inc., Target Corp. and Viacom Inc. -- hiked their dividends Wednesday, signaling a growing optimism about the path of the global economy. Medical device maker C.R. Bard Inc. also raised its dividend.

So far this year, that means 135 companies have raised, initiated or reinstated dividends, while only two companies have cut them, according to Standard & Poor's. The net effect is a $10.4 billion increase in dividend payouts for the year.

By contrast, dividend payouts last year dropped by a record $39.8 billion, or 21 percent, overall. The net decrease was the result of 79 dividend increases and 63 decreases.

Dividends are cash that companies pay to shareholders on a quarterly basis. Promising a higher regular payout means a company is confident about its future earning potential.

Caterpillar, the world's largest maker of construction and mining equipment, said it was raising its quarterly dividend by 5 percent to 44 cents. The hike comes as demand continues to grow for the company's heavy equipment amid a global economic recovery.

Viacom's dividend of 15 cents per Class A and B common share declared Wednesday is the company's first. The entertainment conglomerate, which owns MTV Networks and Paramount Pictures, also said it plans to resume a stock repurchase program that was suspended during the financial crisis.

Discount retailer Target raised its quarterly dividend to 25 cents per share, up 45 percent from 17 cents previously.

Three other companies raised dividends on Tuesday: liquor company Brown-Forman Corp., engineering and construction company KBR Inc. and agribusiness company Bunge Ltd.

And more will surely follow later this year, said Howard Silverblatt, an S&P analyst. Many companies are likely waiting to have a couple of quarters of solid performance behind them before raising their dividends, he said. That should result in a surge of dividend hikes in the fourth quarter, he said.

Disclosure: The Div Guy does not own any of the stocks in this post at this time.