Back in December, I wrote about why the major cruise lines are compelling investment candidates right now. One of our loyal readers, Jim C., wrote in to point out that anyone who owns at least 100 shares of Carnival Cruise Lines (NYSE: CCL) is entitled to a unique fringe benefit -- up to $250 in complimentary onboard spending credits per cruise.
This isn't one of those promotional offers you see advertised to the general public. It's a special perk reserved strictly for Carnival shareholders. Put another way, this $250 offer is equivalent to $2.50 per share for an investor who holds 100 shares. That represents a bonus payout of 5.1% on the $48 stock -- on top of the 4.3% dividend yield.
Double that if you happen to book two cruises.
After Jim wrote in to us, my staff and I got to talking... And after doing a little research, it turns out a whole host of companies offers little-known "perks" like this. So I thought it would be fun to take a break from our regular format and focus on four companies that offer special shareholder benefits.
Of course, these enticements alone aren't necessarily reasons to invest. But since these are all profitable businesses with above-average dividend yields, think of the perks like an extra reward. Down here in Louisiana, we call that "lagniappe," or a little something extra. The goal of these programs is for shareholders to also become loyal customers (and advocates) of these brands.
One caveat: these programs may be changed or discontinued at any time. Companies might also require the issuance of paper stock certificates registered in an individual holder's name, which is rare in today's digital book-entry world. If you have questions, please consult the respective company's investor relations department.
Without further ado, here they are...
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1. InterContinental Hotels (IHG)
Overview: IHG is an American Depositary Receipt (ADR) of a London-listed stock. The company has built a global collection of 15 popular brands from budget to luxury, including Holiday Inn, Candlewood Suites, Crown Plaza and the namesake InterContinental.
Rather than owning properties outright, IHG has adopted a franchise model, whereby it collects licensing income and managerial fees. These predictable, recurring revenues flow regardless of whether the hotels are full or empty. So the company is largely insulated from travel downturns (not that we're in one). This "asset-light" approach requires less capital (and maintenance expense), allowing lofty free cash flow generation.
There are currently 5,518 hotels flagged under one of IHG's brands in 100 countries worldwide. These properties contain 826,000 hotel rooms, with another 267,000 in the development pipeline. The company just signed 27,000 new rooms last quarter, the best performance in a decade. And it now boasts 100+ million enrolled members in its IHG loyalty club program.
Dividends: Like many European companies, ING makes semi-annual distributions, paying out an interim dividend in the third quarter and then a larger final payment after the end of the fiscal year. These payments have been raised or maintained every year since 2003, climbing at an annual pace of 11%. Over that time frame, the company has returned $13 billion in dividends to stockholders.
The current trailing distribution of $1.07 per ADR puts the yield at 2%. Citing the desire to "return surplus cash to shareholders," there is also a $500 million special dividend scheduled for the first quarter of 2019.
Perk: You could log on to Expedia to book a hotel room at Holiday Inn or one of IHG's other resorts. But shareholders have special access to a private website with deeper (unpublished) discounts. Further details are available at the company's website.
2. Ford (NYSE: F)
Overview: Ford doesn't really need much of an introduction. The iconic automaker sold 196,000 vehicles in the United States last month, with average transaction prices climbing $1,600 over the past year to a record $37,000. The best-selling F-150 line of pickup trucks has reported monthly sales volume of 70,000 or more units for the past nine consecutive months.
I used to hold Ford in my High-Yield Investing portfolio, but we exited with a nice gain this past January amid signs of a slowdown. The U.S. auto market has indeed cooled since then. But I still like Ford's improved manufacturing efficiency and shift toward more profitable trucks and SUVs (which have kept North American margins at elevated levels near 9%).
Dividends: Despite industry headwinds, quarterly dividend distributions have been maintained at $0.15 per share or $0.60 annually. Incidentally, that's less than half this year's expected earnings of $1.30 to $1.50 per share.
With the stock price nearly cut in half, the yield has risen to 7.6%.
Perk: Shareholders get privileged rates well below sticker price. In some cases, cars and trucks can be purchased for just 4% above employee pricing. Here's what the company has to say:
As a special thank-you to our shareholders, we offer qualifying shareholders the opportunity to participate in our "Friends & Neighbors" Special Vehicle Pricing Privilege (also known as our "X-Plan").
To qualify for this offer to qualifying shareholders, you must be a current Ford Motor Company shareholder who has held a minimum of one hundred (100) shares of Ford Motor Company stock (Ticker: F) for at least the past 6 months. Qualifying shareholders are limited to one PIN per 12-month period.
While some companies offer a token gesture, this generous program could potentially mean thousands of dollars to stockholders (for perspective, 100 shares of F currently cost just $750).
3. IBM (NYSE: IBM)
Overview: IBM is widely referred to as "Big-Blue" for its status as the bluest of blue-chip stocks. The tech juggernaut is involved in everything from legacy computer mainframes to newer ventures such as cloud computing and artificial intelligence.
After years of sluggish top-line growth, IBM has started to turn things around, particularly in emerging markets (where revenues are growing in 70 countries). The proposed $54 billion acquisition of Red Hat, a major distributor of open-source software and technology, should also provide new growth outlets and be accretive to cash flows. Strong insider buying activity from five different board members is also encouraging.
With a talented research and development bench and a wealth of patents, IBM is making strategic investments in the technologies of tomorrow. In the meantime, the company is on track to deliver massive free cash flows of $12 billion this year, much of which will be returned to stockholders.
Dividends: IBM has increased dividends for 22 consecutive years, doubling the quarterly payout since 2012 from $0.75 per share to the current $1.57. Meanwhile, the stock has slid from a peak of $180 in February 2017 to around $112. The combination of rising dividends and falling share price has propelled the yield to a healthy 5.6%.
Perk: IBM's products are mostly marketed to other businesses rather than consumers. But stockholders are given a passcode to enter a special retail store. Once inside, you'll find generous discounts of up to 25% on Thinkpad laptops and tablets and other merchandise.
4. Kimberly Clark (NYSE: KMB)
Overview: Kimberly Clark is one of the world's leading suppliers of diapers and feminine products. The Dallas-based company owns five different billion-dollar brands, with products on the shelves in 175 countries worldwide and a dominant No. 1 or No. 2 market share position in half of them. About one-fourth of the world's population uses KMB products daily, generating $18 billion in annual sales.
Dividend: It takes at least 25 consecutive years of annual dividend hikes to be considered a so-called Dividend Aristocrat. Kimberly Clark has almost met that lofty goal twice over, having raised dividends for 46 straight years. The latest increase puts the quarterly distribution at $1.00 per share for a sizeable yield of 3.5%.
Perk: What better way to engender brand loyalty than to give stockholders a special gift box full of your best-selling products? For a modest fee (about $18 plus shipping), investors are mailed a box chock full of Kleenex wet wipes, Scott paper towels and other essentials. It also contains a dozen valuable coupons. Kimberly Clark has shipped more than 3 million of these gift packages since the program was started in 1957.
Action to Take
Again, I would never invest solely to capture these "freebies." But if you happen to be interested in one of these companies (which are all leaders in their respective fields), then the incentives can certainly tip the scales.
While the current yield isn't quite high enough to add to my premium portfolio over at High-Yield Investing, I'm particularly interested in InterContinental Hotels Group, whose franchise business model is conducive to recurring free cash flows, rising dividend distributions and superior returns on invested capital (RoIC). The stock has delivered market-crushing annualized returns of 21% over the past decade.