Phillips 66 Raises Dividend By 25%

One of the mistakes new investors make is they assume that any stock that’s down is a value stock and is therefore a good buy. Unfortunately, a stock being down doesn’t make it cheap. It only makes it cheaper than it was.

The same thing with a low P/E Ratio. Sometimes a stock’s P/E Ratio is low for a very good reason. A low multiple is a necessary but not sufficient characteristic for a value stock.

How can you tell the difference between a good stock that’s down and a bad one that’s down? That’s a very difficult question, but there is one shortcut I like.

The dividend.

Investors should always take notice whenever a beaten-down stock raises its dividend. That’s often a sign from management that things will get better.

Last year, Phillips 66 (PSX) was spun-off from ConocoPhillips. The stock initially did very well, but it has been a laggard for the last six months. Impressively, the company just raised their dividend by 25%. That’s a hefty increase. The quarterly dividend will rise from 31.25 cents per share to 39 cents per share. At $1.56 for the year, PSX now yields 2.65%.

I can’t say whether PSX is a good buy here. I’d need to do more research. But the higher dividend is a very encouraging sign.

Posted by on October 4th, 2013 at 11:41 am


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