THE VIRGINIAN-PILOT
Copyright (c) 1995, Landmark Communications, Inc.
DATE: Monday, October 16, 1995 TAG: 9510140207
SECTION: BUSINESS WEEKLY PAGE: 13 EDITION: FINAL
SOURCE: BY TOM SHEAN, BUSINESS WEEKLY
LENGTH: Medium: 86 lines
A prolonged dry spell in dividend increases may be easing, at least in Virginia. A handful of companies, including CSX Corp. and Richfood Holdings Inc., announced higher dividends last week.
Despite respectable improvements in corporate earnings this year, ``dividends continue to lag badly,'' Standard & Poor's declared in its Outlook investment newsletter last week. ``We see only a 5 percent rise in payments on the (S&P) 500 for 1995.''
``The puny payout ratio, together with the surge in stock prices, accounts for the current record low 2.4 percent yield on the S&P 500,'' the newsletter said.
However, investors eventually will benefit from the low payouts as corporations use their added funds for stock buybacks and expansions, Standard & Poor's predicted.
Richfood Holdings announced a 20 percent increase in its quarterly dividend: from 2.5 cents to 3 cents. The new dividend will be payable Dec. 30 to shareholders of Dec. 15.
Richfood also said its agreement to acquire grocery wholesaler Super Rite Corp. of Harrisburg, Pa., was approved by shareholders of both companies. The transaction, which involves an exchange of shares, is likely to be completed this week, Richfood said.
Richfood's shares retreated 5/8 for the week to 25 7/8.
Meanwhile, transportation holding company CSX said it will boost its quarterly dividend by 18 percent and then split its common stock two shares for one.
The dividend increase - from 44 cents to 52 cents - will be payable Dec. 15 to shareholders of Nov. 24. Shareholders of CSX common stock will receive one additional share beginning Dec. 21 for every two shares they own on Dec. 4.
Last week, Standard & Poor's included CSX on a list of companies whose per-share earnings will climb at least 25 percent in 1996. The rail, barge and shipping company will earn $5.20 a share this year and $7.70 next year, a 48 percent increase, S&P predicted.
The price of CSX's stock, which jumped 3 1/8 Wednesday on news of the dividend increase, closed Friday at 83 1/2, a gain of 2 1/4 for the week.
Prices of the region's bank stocks advanced amid news of higher third-quarter earnings. Crestar Financial Corp., which reported record net income for the Sept. 30 quarter, rose 1 5/8 for the week to 57 3/4 Friday. The Richmond-based banking company earned $1.27 a share, which was up from $1.15 in the 1994 third quarter.
Meanwhile, shares of First Virginia Banks Inc. edged up 1/8 last week to close at 41 3/8 Friday. The Falls Church-based bank holding company earned 86 cents per share for the September quarter, slightly ahead of the 85 cents earned in the year-earlier quarter.
``In general, the numbers have come in very close to expectations,'' said David West, a bank analyst with the securities firm Davenport & Co. of Virginia. ``Although there was some pressure on banks' net interest margins, they have had decent loan growth.''
Charlotte-based NationsBank Corp. was scheduled to report its third-quarter results today, and Signet Banking Corp.'s earnings are due to be released Thursday.
In the paper industry, stock prices have come under pressure amid concerns that manufacturers will have difficulty passing on additional price hikes.
Chesapeake Corp. slipped 3/8 for the week to close at 33 1/4, while James River Corp., another Richmond-based paper manufacturer, climbed 1 3/8 to 33 1/8. In an update of its estimates for 1996 corporate earnings, investment advisory service Value Line boosted its prediction for James River from $1 a share to $1.50 a share.
Part of the increase in James River's earnings next year will come from another round of cost-cutting efforts, said George F. Shipp, an analyst who monitors paper manufacturers for the securities firm Scott & Stringfellow.
Investor uncertainty about the prospects for paper manufacturers's 1996 earnings are tied closely to expectations in some quarters of a slowdown in economic activity, he said.
Chesapeake, which makes liner board and other packaging material, also will have to contend with additional capacity that competitors Weyerhaeuser Co. and Mead Corp. are putting in place, Shipp said. But Chesapeake has responded by stepping up its concentration on specialized packaging.
``Chesapeake, as a company, is doing well'' and probably will report record earnings when it releases its third-quarter results on Oct. 24, Shipp said.
Lawyers Title Corp., a Richmond-based title insurance concern, has applied for a listing on the New York Stock Exchange. The company, whose shares have been trading on Nasdaq, said it expects its stock to begin trading at the NYSE on Oct. 30, under the symbol LTI. by CNB