Jim Cramer’s Dividend Stock Picks

Jim Cramer is a big fan of dividend stocks and has always encouraged investors to include dividend stocks in their portfolio. On last week’s Mad Money show, Mr. Cramer again put the focus back on dividend stocks. Specifically, his week-long special focused on stocks that have been increasing their dividend payouts – a very bullish sign for investors.

 

Here is a review of the dividend stock picks that Cramer discussed in his dividend special:

 

Hasbro

Hasbro (HAS: 40.95 +2.12%) reported great quarterly results last Monday that sent the stock up 12.7%. However, Cramer wasn’t surprised and he said that the company gave a hint that an earnings beat was coming when they raised their dividend by 25% the previous week. He likes dividend paying stocks because of the extra support that dividends provide to the stock price, and the strength that the company shows when they raise the dividend. Cramer believes that a safe dividend stock has earnings that are twice the level of their dividend payment and that the company has strong business fundamentals. He believes that Hasbro meets his requirements, and is a good example of why investors should pay attention when companies announce a dividend hike.

 

Core Laboratories

Core Laboratories (CLB: 78.15 +0.30%) is a relatively small oil driller with a modest dividend yield. However, Cramer is very bullish about the future of the company following their 20% dividend increase last month. The company provides assessment of oil pockets to help their customers maximize their yields. Currently, 70% of their business comes from outside the U.S.

 

While Core Laboratories offers a small dividend yield, Cramer said that the company has a history of paying out a special dividend each year which boosts the overall yield. Cramer feels that the dividend level is adequate for a company with such a high growth rate, and the company has the potential to raise their dividend given their strong earnings and solid balance sheet.

 

Ross Stores

Ross Stores (ROST: 55.65 +1.46%) recently raised their dividend from $0.11 to $0.16 and now offers investors a 1.4% yield. Cramer sees this as a sign that their business is very strong. The retailer also increased their earnings guidance (for the second time), and they now expect to earn $3.88 in 2011 and $4.33 in 2012. Given these bullish projections, the company’s dividend appears very safe. They are also doing an excellent job of managing store inventory and they have focused on organic growth and improving same store sales (SSS) instead of just opening new stores. Once the economy begins to show more signs of improvement, the company will then refocus on expanding their store count and management believes they can eventually double the number of stores. At 11x earnings and a 14% growth rate, Cramer believes the stock is cheap and recommends investors buy this stock.

 

Rollins

Cramer recommended Rollins (ROL: 21.87 +1.86%) after the company increased their dividend 29%. Cramer believes the dividend hike is a sign that business is strong and the stock is going higher. The pest control company has a reasonable 40% dividend payout ratio and a very large and diverse customer base. Cramer thinks the stock could pick up momentum if more Wall Street analysts begin covering the stock.

 

Wyndham Worldwide

The final dividend stock Jim Cramer recommended was Wyndham Worldwide (WYN: 22.71 +2.90%). The hotel stock recently increased their dividend by 200% going from $0.04 per share to $0.12 per share. Furthermore, the company stated that they intend to continue raising the dividend in the future. Cramer said that the company has a good balance sheet, despite their massive debt and their earnings should easily cover their dividend payments. Cramer urged investors that the stock was a “screaming buy”.

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