What Makes Dividend Increases Market-moving News

Dividend Increases Market-moving NewsThere is a huge amount of news for the stock market to digest this week, with both economic data and company earnings reports. The stock market has been unsure of itself the last couple of weeks, wondering if the rally off of the Federal Reserve’s third round of quantitative easing (QE3) was a fake out. Now, the market needs company earnings in order to justify its current level; the only problem being, they aren’t expected to grow much over last year’s third quarter.

There certainly is a positive trend to most of the economic news of late; a lot of people are becoming suspicious about the employment figures, however. Leadership in this stock market remains with large-cap technology stocks, and over the next two weeks, market’s largest players will report their corporate earnings.

One blue chip technology stock that has been hit really hard recently is Intel Corporation (NASDAQ/INTC). Ever since Intel announced slowing business conditions due to its operations in the eurozone and increased competition, the stock has been in a sustained downtrend. The company reports today; don’t be surprised if management increases its quarterly dividend again to attract investors. Intel’s company earnings are material to this market. The company’s stock chart is below:

Intel Corp Chart


Chart courtesy of www.StockCharts.com

Other important blue chips reporting today include Johnson & Johnson (NYSE/JNJ) and The Coca-Cola Company (NYSE/KO). Coca-Cola has been a stock market leader this year, but its position recently pulled back during the QE3 rally. Coca-Cola’s company earnings aren’t as material to this market as Intel’s, but they do affect sentiment. This is another company that’s increasingly likely to raise its quarterly dividend; it’s sitting on some $17.0 billion in cash and short-term investments. (See “The Best Stocks For New Buyers.”) Take a look at Coca-Cola’s stock chart below:

 Coca Cola Chart

Chart courtesy of www.StockCharts.com

One thing I’m noticing in this stock market is that quite a few trading days that begin to the upside are finishing lower. This isn’t good technically, and it’s a sign of a marketplace that’s “tired.” Company earnings have to surprise to the upside, along with fourth-quarter visibility if there is going to be any meaningful acceleration in the main stock market indices.

The most important thing going for the stock market at this time is its reasonable valuation. Investors aren’t expecting much in the way of company earnings growth for the bottom half of this year, so dividend increases will likely be market-moving events among large-caps.

I continue to feel that the stock market is in the process of forming a top—whether that top leads to a market collapse or just a meaningful correction remains to be seen. U.S. policymakers have a lot to agree on in the near term, and without confidence, institutional investors may soon run to the sidelines.