2 more telling dividend jumps

I think a dividend increase like the 50% jump announced by Corning (GLW, news) on Oct. 6 serves both purposes. First, it pushed Corning's projected dividend yield up to 2.1%, above the yield on the 10-year Treasury. Second, it signaled that the company, which would announce some pretty negative trends for demand for its liquid crystal display (LCD) glass in the fourth quarter, was confident that demand would recover in 2012.

All things considered though, what I really like to see in a dividend increase right now is a jump that puts the yield over the 10-year Treasury rate and that signals not only that the future isn't grim but that it might be downright rosy. That's the combined message that I think Union Pacific (UNP, news) sent when it raised its dividend not once but twice this year. The two increases brought the projected yield on the railroad's shares to 2.4%.

When the company reported third-quarter earnings on Oct. 20, it said revenue had climbed 15.7% from the third quarter of 2010 as total carloads carried grew by 1%. Four of the railroad's six business groups -- those for autos, industrial products, energy and chemicals -- reported increased volumes.

And for 2012? Standard & Poor's projects a 3% increase in volume and a 6.5% increase in revenue (after the 15% revenue growth in 2011). Credit Suisse is less optimistic about growth in volumes, projecting a 2% increase, but more optimistic on pricing, which translates into an estimated 18% increase in earnings in 2012 from 2011.

S&P puts a 12-month target on the stock of $107 a share. (It closed at $98.25 on Nov. 22.) Credit Suisse has set its target at $120 a share.

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If I can extrapolate from Union Pacific's two dividend increases in 2011, I'd say the railroad would agree with the higher target.

That's obviously just the company's opinion, and predicting growth in 2012 in the U.S. economy is a tough job. But as we try to cut through the confusion, I'd suggest that investors pay special attention to companies that are letting their dividend increases do the talking.

At the time of publication, Jim Jubak did not own or control shares of any company mentioned in this column in his personal portfolio. The mutual fund he manages, Jubak Global Equity Fund (JUBAX), may or may not now own shares of any stock mentioned in this column. Find a full list of the stocks in the fund as of the end of September here.

Jim Jubak's column has run on MSN Money since 1997. He is the author of the book "The Jubak Picks," based on his market-beating Jubak's Picks portfolio; the writer of the Jubak's Picks blog; and the senior markets editor at MoneyShow.com. Get a free 60-day trial subscription to JAM, his premium investment letter, by using this code: MSN60 when you register at the Jubak Asset Management website.

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Stocks mentioned on the previous page include Starwood Hotels & Resorts Worldwide (HOT, news) and Johnson Controls (JCI, news).