Family Dollar/Dollar Tree Merger Announced

Discount store Family Dollar (FDO) has finally put itself up for sale after much pressure from billionaire investor Carl Icahn (Trades, Portfolio), who recently acquired a 9.4% stake in the company. Icahn reportedly sent a letter to Family Dollar's CEO demanding that the company offer itself for sale, which he believes would greatly improve the company's performance and bring the company up to speed with other big name rivals. The billionaire investor went as far as to threatening to disperse his demands and recommendations to the company's shareholders, and to make an attempt at pushing out the entire board of directors. Needless to say, Icahn firmly believed that Family Dollar's management team was not up to the task of managing the organization's operations. The discount chain obviously recognized problems within the business when it closed a large number of stores, and announced plans to close almost 400 more in the third and fourth quarter of 2014.

On July 28, Dollar Tree (DLTR) announced that it will be buying rival Family Dollar for a total of $9.2 billion (including debt). Icahn had originally suggested that Family Dollar be bought out by leader Dollar General, but shortly after stated that the recent announcement of the retirement of Dollar General's CEO would cause disruptions in his plan of merging the two companies. The announced deal gives Dollar Tree over 13,000 stores in the 48 states and Canada, as well as more than $18 billion in sales. This pushes Dollar Tree above and beyond major rival Dollar General, which last year had $17.5 billion in sales and 11,338 current locations. There has also been much talk about the impact this merger will have on the giant Wal-Mart (WMT), which generally focuses on low-income consumers by offering more items for under $1.

According to the agreement, Dollar Tree will be paying $74.50 in cash and stock for Family Dollar. Shareholders are set to receive $59.60 in cash, as well as $14.90 in Dollar Tree stock per share. The company is said to continue operating both the Dollar Tree and Family Dollar stores.

But will this merger be good for consumers? Experts have said that in general, mergers made by companies in the same consumer retail business are generally poor for the consumer. By having more rivals in the same business, competition arises which ultimately drives prices down. The low prices previously seen by Dollar Tree may not be as low as they once were after there are fewer competitors.

End Notes

Disclosure: No current position held at the time of writing.

Disclaimer: The opinions and ideas in this article are for informational and educational purposes only. They are not a recommendation to buy or sell any stock at any given time. As always, it is imperative for each individual investor to do their own due diligence and perform their own research on any and all stocks before making an investment decision.

About the author:David KerrPreviously licensed to sell securities, David now utilizes his knowledge and experience solely for the purpose of growing his own personal portfolio and educating those around him.

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Monster Beverage (NASDAQ: MNST) shares moved up 26.98% to $90.98. The volume of Monster Beverage shares traded was 1610% higher than normal. Coca-Cola Company (NYSE: KO) and Monster Beverage announced a long-term strategic partnership. As part of the deal, Coca-Cola will buy a 16.7% equity stake in Monster.

Kinder Morgan (NYSE: KMI) surged 2.78% to $40.99. The volume of Kinder Morgan shares traded 449% higher than normal. Kinder Morgan's trailing-twelve-month revenue is $15.61 billion.

Red Robin Gourmet Burgers (NASDAQ: RRGB) shares climbed 3.04% to $54.23. The volume of Red Robin shares traded was 398% higher than normal. On Thursday, Red Robin reported downbeat second-quarter profit.

Paylocity Holding (NASDAQ: PCTY) shares rose 5.95% to $23.49. The volume of Paylocity shares traded was 381% higher than normal. Paylocity reported upbeat quarterly results.

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Google's Q2 Earnings Release

Google Inc. (GOOG) last month announced financial results for the quarter ended June 30, 2014. "Google had a great quarter with revenue up 22% year on year, at $16.0 billion," said Patrick Pichette, CFO of Google. "We are moving forward with great product momentum and are excited to continue providing amazing user experiences, with a view to the long term," he added.

Q2 financial summary

Google Inc. reported consolidated revenues of $15.96 billion for the quarter ended June 30, 2014, an increase of 22% compared to the second quarter of 2013. The company reports advertising revenues consistent with GAAP on a gross basis without deducting traffic acquisition costs (TAC). In the second quarter of 2014, TAC totaled $3.29 billion, or 23% of advertising revenues.

GAAP operating income in the second quarter of 2014 was $4.26 billion, or 27% of revenues. This compares to GAAP operating income of $3.47 billion, or 26% of revenues, in the second quarter of 2013. Non-GAAP operating income in the second quarter of 2014 was $5.14 billion, or 32% of revenues. This compares to non-GAAP operating income of $4.21 billion, or 32% of revenues, in the second quarter of 2013. GAAP net income (including net income [loss] from discontinued operations) in the second quarter of 2014 was $3.42 billion, compared to $3.23 billion in the second quarter of 2013. Non-GAAP net income in the second quarter of 2014 was $4.18 billion, compared to $3.36 billion in the second quarter of 2013. GAAP EPS (including impact from net income [loss] from discontinued operations) in the second quarter of 2014 was $4.99 on 686 million diluted shares outstanding, compared to $4.77 in the second quarter of 2013 on 677 million diluted shares outstanding. Non-GAAP EPS in the second quarter of 2014 was $6.08, compared to $4.96 in the second quarter of 2013.

Revenues and other information

Google Inc. revenues for the quarter ended June 30, 2014 were $15.96 billion, representing a 22% increase over second quarter of 2013 revenues of $13.11 billion.

· Sites Revenues – The company's sites generated revenues of $10.94 billion, or 69% of total revenues, in the second quarter of 2014. This represents a 23% increase over second quarter of 2013 sites revenues of $8.87 billion.

· Network Revenues – The company's partner sites generated revenues of $3.42 billion, or 21% of total revenues, in the second quarter of 2014. This represents a 7% increase over the second quarter of 2013 network revenues of $3.19 billion.

· Other Revenues – Other revenues were $1.60 billion, or 10% of total revenues, in the second quarter of 2014. This represents a 53% increase over second quarter of 2013 other revenues of $1.05 billion.

Foreign exchange impact on revenues

Excluding gains related to a foreign exchange risk management program, foreign exchange rates remained constant from the first quarter of 2014 through the second quarter of 2014, Google's revenues in the second quarter of 2014 would have been $77 million lower. Excluding gains related to their foreign exchange risk management program, had foreign exchange rates remained constant from the second quarter of 2013 through the second quarter of 2014, Google's revenues in the second quarter of 2014 would have been $120 million lower.

Depreciation and loss on disposal of property and equipment and amortization expenses

Depreciation and loss on disposal of property and equipment and amortization expenses were $1.08 billion for the second quarter of 2014, of which $1.07 billion was related to Google, compared to $1.03 billion in the second quarter of 2013. Of the $1.07 billion, $116 million was related to amortization of Motorola intangibles, which Google will retain subsequent to the disposal of Motorola Mobile.

Stock-Based Compensation (SBC) – In the second quarter of 2014, the total charge related to SBC was $880 million compared to $743 million in the second quarter of 2013. The analysts currently estimate SBC charges for grants made to employees prior to June 30, 2014 to be approximately $3.42 billion for 2014. This estimate does not include expenses to be recognized related to employee stock awards that are granted after June 30, 2014 or nonemployee stock awards that have been or may be granted.

Operating Income – GAAP operating income in the second quarter of 2014 was $4.26 billion, or 27% of revenues. This compares to GAAP operating income of $3.47 billion, or 26% of revenues, in the second quarter of 2013. Non-GAAP operating income in the second quarter of 2014 was $5.14 billion, or 32% of revenues. This compares to non-GAAP operating income of $4.

Is This 'Game Over' for Video Game Consoles?

AOL Well, it had a good, long life. At the beginning of 2013, Sony (SNE) halted production of its iconic game console, the PlayStation 2, after more than a dozen years on the market. Its successor, the PlayStation 3, probably won't even be around as long: The company introduced the PlayStation 4 at the end of 2013. Sony has pledged to support the PS3 (released in 2006) for "as long as there is a good business there for us." It's a rather tepid promise. Most likely, by the time of its demise, PS3 won't be the blockbuster its older brother proved to be. The latter's total global sales were in the neighborhood of 160 million units. Now, toward the apparent tail end of its life, the PS3 has sold just something a bit north of 80 million consoles. Dedicated consoles like the PS2 were nearly synonymous with video gaming earlier this decade, but competing platforms have eaten away at their dominance. And that chomping looks set to continue. Losing the Game The big two combatants in the console market are Sony and Microsoft (MSFT), which in line with its rival unveiled its own new-generation machine, the Xbox One, prior to last year's holiday season. On the surface, both companies have so far enjoyed smashing business with their latest models, moving millions of units. However, zooming in a bit on those sales reveals some cause for concern. According to popular IT news website Tech Crunch, parsing data from researcher NPD, around 271,000 PS4s were sold this past January. For January 2007 -- the month just after the previous generation of consoles (PS3, Xbox 360, etc.) were introduced -- the figure isn't much higher than the PS3's tally of 244,000, and it's beaten by the PS2's nearly 300,000. Remember, at that point PS2 was yesterday's model for Sony. The numbers for Microsoft are more stark. January saw the company sell roughly 141,000 Xbox Ones -- less than half of the 294,000 in sales of the then-fresh Xbox 360 the same month seven years ago. Worse still is the tally for the once-mighty Nintendo (NTDOY). Back in early 2007, the company's then-new, innovative Wii ruled the January sales charts with around 436,000 units sold. Fast-forward nearly seven years. Nintendo's current-generation machine, the Wii U, sold only around 49,000 units in January 2014. Xboxed In Those declines are symptomatic of a market squeeze. Segments that house cheaper, less involved gaming options such as mobile apps have surged. According to the Entertainment Software Association, these days 44 percent of gamers use smartphones as a platform for at least some playing. No wonder certain operators in this segment are raking in the bucks. King Digital Entertainment (KING), creator of the addictive Candy Crush Saga, nearly tripled its gross bookings on a year-over-year basis in its first quarter of 2014, from $219 million to $641 million.

Candy Crush Saga follows the modern trajectory for video game success, which often cuts consoles out of the scene entirely.

Candy Crush Saga follows the modern trajectory for video game success, which often cuts consoles out of the scene entirely. In 2012 it debuted as a playable add-on in Facebook (FB). Several months later, King Digital released app versions of the title. These days, Candy Crush Saga is available for all major mobile operating systems on the "freemium" model (it's free to download, but selected in-app options must be paid for). Meanwhile, at the higher end of the spectrum, many dedicated gamers eschew consoles for tricked-out PCs. These machines, rigged with state-of-the-art CPUs and video cards, can produce a richer and more immersive experience than an Xbox or PlayStation. These serious players spend serious money on their gear. A report from Jon Peddie Research reveals that they shelled out around $20.7 billion for this hardware in 2013. The top and bottom ends of the market aren't small. According to industry observer Charles Sizemore of Sizemore Capital Management, at the moment high-end PC gaming comprises roughly 20 percent of the market, with mobile gaming apps taking around 17 percent. Playing a Brand, Not a Box This squeeze has led to some dark mutterings that this current generation of video game consoles -- the eighth, for those counting -- could be the final one. Even the top manufacturers hint at such a future, with Sony saying last year that PlayStation will likely evolve into more of a service brand than a piece of hardware. So the consoles are still hanging in there, but their glory days do seem to be over. They did well while they lasted. Anyone up for getting out the old Xbox for a nostalgic Halo death-match while we still have the gear? More from Eric Volkman
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U.S. Stocks Rise; Nu Skin Shares Tumble On Downbeat Results

Related BZSUM Markets Mostly Flat; Viacom Posts Downbeat Earnings Markets Slip A Percent; Walgreens Falls

Midway through trading Wednesday, the Dow traded up 0.20 percent to 16,462.45 while the NASDAQ surged 0.41 percent to 4,370.65. The S&P also rose, gaining 0.22 percent to 1,924.49.

Leading and Lagging Sectors

In trading on Wednesday, basic materials shares were relative leaders, up on the day by about 0.93 percent. Top gainers in the sector included Aluminum Corporation Of China (NYSE: ACH), AuRico Gold (NYSE: AUQ), and Coeur Mining (NYSE: CDE).

Utilities shares fell by 0.78 percent in Wednesday’s trading. Meanwhile, top decliners in the sector included Ormat Technologies (NYSE: ORA), down 3.8 percent, and AGL Resources (NYSE: GAS), off 3.1 percent.

Top Headline

Viacom (NASDAQ: VIAB) reported weaker-than-expected fiscal third-quarter earnings.

The New York-based company posted quarterly earnings of $610 million, or $1.40 per share, versus $643 million, or $1.31 per share, in the year-ago period. Its adjusted earnings per share rose 10% to $1.42, missing analysts’ estimates of $1.44 per share.

Its revenue declined 7% to $3.42 billion from $3.693 billion, versus expectations of $3.56 billion.

Equities Trading UP

Criteo SA (NASDAQ: CRTO) shares shot up 6.52 percent to $31.53 after the company reported record Q2 results and raised its full-year forecast.

Shares of Itron (NASDAQ: ITRI) got a boost, shooting up 9.53 percent to $39.87 after the company reported Q2 earnings of $0.54 per share on revenue of $489.40 million.

Twenty-First Century Fox (NASDAQ: FOXA) shares were also up, gaining 5.14 percent to $32.91 after the company announced Tuesday that it is withdrawing its bid for Time Warner (NYSE: TWX). Instead, the company’s board authorized a $6 billion share repurchase program.

Equities Trading DOWN

Shares of Rocket Fuel (NASDAQ: FUEL) were down 27.27 percent to $18.00 after the company reported a Q2 loss of $0.11 per share on revenue of $92.60 million. Rocket Fuel also announced the acquisition of [x+1] for $230 million.

Nu Skin Enterprises (NYSE: NUS) shares tumbled 22.75 percent to $44.74 after the company reported downbeat quarterly results and issued a weak forecast.

Groupon (NASDAQ: GRPN) was down, falling 15.97 percent to $5.94 after the company reported downbeat revenue for the second quarter and issued a weak earnings forecast for the current quarter.

Commodities

In commodity news, oil traded down 0.16 percent to $97.22, while gold traded up 1.77 percent to $1,308.00.

Silver traded up 1.07 percent Wednesday to $20.05, while copper fell 1.17 percent to $3.17.

Eurozone

European shares were lower today. The eurozone’s STOXX 600 fell 0.88 percent, the Spanish Ibex Index dropped 1.04 percent, while Italy’s FTSE MIB Index tumbled 2.70 percent. Meanwhile, the German DAX fell 0.65 percent and the French CAC 40 declined 0.61 percent while UK shares dipped 0.69 percent.

Economics

The MBA reported that its index of mortgage application activity gained 1.6% in the week ended August 1.

The US trade deficit declined 7% to $41.5 billion in June, versus a slightly revised $44.7 billion in May. However, economists were expecting a deficit of $45 billion.

Crude-oil supplies dropped 1.8 million barrels in the week ended August 1, according to the Energy Information Administration. Gasoline inventories declined 4.4 million, while distillates stockpiles dropped 1.8 million. However, analysts were estimating crude oil stocks to fall 1.9 million barrels.

Posted-In: Earnings News Guidance Eurozone Futures Commodities M&A Hot

© 2014 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.

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5 Stocks to Buy for August

Popular Posts: 5 Stocks to Sell for August3 Dividend Stocks Juicing Returns With Buybacks3D Systems Chokes – Dump 3D Printing Companies at Will (DDD, SSYS, XONE) Recent Posts: 5 Stocks to Buy for August So Much for Q2! Groupon Blasted After Earnings (GRPN) Why Apple & Visa Should Join in Mobile Payment Matrimony (AAPL, V) View All Posts 5 Stocks to Buy for August

Contrary to popular belief, August is not a bad month for the stock market — which means it’s OK to keep looking for stocks to buy with any dry powder you might have. Trading volume might be sleepy thanks to vacationing market participants, but that hasn’t prevented stocks from posting gains in the past.

Indeed, since 1928, the S&P 500 has gained an average of 0.7% in August, according to Yardeni Research. Hardly heady returns — August stands as only the sixth-best month for market performance — but it does mean you should be able to find stocks to buy for short-term outperformance.

However, finding stocks to buy for August also means keeping an eye on September — by far the worst month for market performance. During the past 86 years, the S&P 500 has lost an average of 1% in September. That means you’ll want to target equities with the technical strength to maintain price momentum through next month’s expected broader weakness.

Technical analysis comes in handy when looking for stocks to buy. Strong technicals and superior seasonality tilt the odds in your favor for fining winners.

We screened the S&P 500 for stocks showing everything from price momentum to positive historical returns to find stocks with compelling technicals. Based on these strengths, here are five stocks to buy for August:

Next Page

Stocks to Buy for August – Apple (AAPL)

Click to Enlarge The best reason Apple (AAPL) belongs on many investors’ lists of stocks to buy these days is that it’s being propelled higher by the anticipated launch of iPhone 6. (It’s expected to land in September.)

Happily, AAPL technicals make a good case for the stock too.

Apple stock recently broke above its 50-day moving average, sitting 1.5% above that line. This suggests momentum will deliver more immediate upside in the weeks ahead. AAPL also trades a comfortable 16% above its 200-day moving average.

Seasonality is very much in favor of AAPL, as well. Over the last decade, Apple stock has posted an average gain of 4.3% in August and 5% in September, according to data from Thomson Reuters Stock Reports.

As for relative strength, AAPL has a relative strength index (RSI) reading of 50, making it neither overbought nor oversold. Expect that indicator to inch up as traders pile in ahead of the iPhone launch.

Next Page

Stock to Buy for August – Dr Pepper Snapple (DPS)

Click to Enlarge Summer is entering its final month, but Dr Pepper Snapple (DPS) usually finishes in style.

During the past 10 years, DPS has returned 3.4% in August on a price basis, and another 2% the following month.

Meanwhile, the beverage maker just broke above its 50-day moving average by 0.2%. That alone positions DPS for gains on price momentum — after all, it has found support at that level twice in the past few weeks. DPS stock also stands 12% above its 200-day moving average.

Like AAPL stock, DPS is neither overbought nor oversold, with an RSI of 48. However, a little more than a week ago, Dr Pepper shares hit overbought territory and are cooling off from that technical milestone. It looks like buyers should step in fairly soon as DPS stock nears oversold conditions.

Next Page

Stocks to Buy for August – Lowe’s (LOW)

Click to Enlarge Lowe’s (LOW) gets some last licks as we head toward the end of the outdoor season, putting up some strong gains as summer gives way to fall.

Shares in the home-improvement retailer deliver solid gains through August and September. Or at least they have in the past. LOW stock rises an average of 3.2% in August and 2.1% in September. Those kind of returns land any equity on a list of stocks to buy.

Like AAPL and DPS, LOW stock recently busted through its 50-day moving average on the way up. It’s trading 0.7% above that key level. Although it’s been coming up against resistance at the 50-day, seasonality suggest LOW should finally be able to use it for support. LOW stock is also fractionally above its 200-day MA.

LOW stock has an RSI of 48, as it has been cooling off from overbought conditions in July. Seasonality suggest LOW stock will soon come close enough to oversold territory to bring traders in.

Next Page

Stocks to Buy for August – Microsoft (MSFT)

Click to Enlarge Microsoft (MSFT) isn’t really wowing anyone with its seasonality and technical strength, but it has been very reliable for market-beating performance when stocks hit broad turning points.

MSFT stock sits comfortably above above its 50- and 200-day moving averages, by 2% and 10%, respectively. Indeed, the 50-day has been providing support for six straight months. And it hasn’t come close to testing its 200-day moving average all year.

Even better, with an RSI of 36, MSFT stock is getting very close to entering oversold conditions. Although it usually takes a while for that to suck in opportunistic traders, you can bet that they will come soon.

Lastly, MSFT stock has a good track record at this time of the year. It’s gained an average of 1.3% in August and 0.4% in September over the last decade. Those are solid, market-beating returns, landing MSFT on our list of stocks to buy.

Next Page

Stocks to Buy for August – Under Armour (UA)

Click to Enlarge Under Armour (UA) has been blasting past a key level on the way up (and on the way down) throughout 2014, but for now the technicals say it has enough momentum to post gains for the next couple of months.

UA stock resides 15% above its 50-day moving average. Although it broke below that level for a couple of months in the spring, these days it’s offering support. Meanwhile, UA stock hasn’t come close to testing its 200-day moving average in almost three months, trading a very comfortable 34% above that marker.

UA’s relatively short trading history shows it to be a positive underperformer in August, gaining an average of 0.2%. The seasonality really kicks in next month, when UA typically rises nearly 6%.

If there’s a caveat, it’s that UA’s RSI of 79 puts it well within overbought territory. However, stocks can stay overbought for weeks or months at a time, as UA stock has done repeatedly this year. Shares are coming off Street-beating earnings with a number of fundamental catalysts, as well.

As of this writing, Dan Burrows did not hold a position in any of the aforementioned securities.

What Could NLRB’s Decision Mean To McDonald’s Business?

McDonald's Corp. (MCD), world's largest fast food restaurant chain, was recently put under the scanner for faulty labor and wage practices in its franchised operations. The National Labor Relations Board's (NLRB) general counsel declared that McDonald's along with its franchisees could be held responsible for violating employee rights in its U.S. eateries. The decision on the matter is pending. Does it spell trouble for the fast food giant, and pave the way for unionizing in the country? Is the Illinois-based company in big trouble? Let's take a closer look.

What's the Hullabaloo All About?

McDonald's employees accused it of several charges including treating workers badly, threatening and unlawfully dismissing them. As many as 181 such complaints were brought to the notice of the NLRB in the last 21 months, out of which 43 drew greater attention from the board. Labor groups raised their voices demanding McDonald's to be declared a joint employer at its franchised outlets, hoping for more power at the workplace. Other demands included immediate unionization and increase in their hourly pay to $15.

McDonald's restaurant, Source: www.flickr.com

Richard F. Griffin Jr., general counsel of the board announced that McDonald's could be made accountable for all the decisions taken inside the franchise-held restaurants. In other words, the company runs the risk of being tagged as a joint employer that would take care of everything ranging from labors' interests and rights to wages and impending unionization. However, the employees holding strikes for their rights claimed that McDonald's was indeed a co-owner as it apparently kept a strict tab on the cleanliness, food and labor operations at the franchise-held eating joints.

Speaking on behalf of McDonald's employees on a conference call, Micah Wissinger, one of the lawyers said that there are strong reasons why the company should be liable for the franchise activities. He said the fact that the fast food giant uses "computer systems that measure and track every aspect of the store's operations" was proof enough for it.

McDonald's feels that the announcement by NLRB forces to change "the rules for thousands of small businesses and goes against decades of established law regarding the franchise model in the United States." NLRB has already started investigation on the matter with its five presidentially appointed members onboard. In case their verdict matches with that of the general counsel, McDonald's could move to the federal court.

What Could the Impact Be?

McDonald's has thousands of restaurants across the country, 90% of which are run by franchise owners. The company could find itself in a soup if the law gets a green signal, as it could mean a figurative win for the employees. Labor forces could get strong support from public, which could have an adverse impact on McDonald's reputation.

Final Thoughts

NLRB's decision would be extremely important as far as McDonald's business is concerned, since it could decide the fate of how employees at fast-food corporations would be treated in future. As Fast Food Forward Organizing Director Kendall Fells said, "At some point, McDonald's and the industry as a whole will decide that it makes sense to sit at the table with these workers, because the workers have now changed the power dynamic between them and the actual corporations."

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How One Fund Chases Dividend Growth Around The World

For many of the world's most successful stock pickers, management by committee is anathema. However, when you have four comanagers of a single mutual fund who spend the vast majority of their time on the road scouring foreign cities from Santiago to Kuala Lumpur for good stocks, the logistical nightmare of making timely buy/sell decisions would seem to be overwhelming.

David Ruff, manager of Forward International Dividend Fund, shrugs off the prickly obstacle. "We use the cloud," he says, referring to the daily practice he and his three comanagers, Randall Coleman, Bruce Brewington and Eric Sagmeister, have of reviewing one another's notes on meetings and analysis in real time using the mobile productivity application Evernote.

Indeed, his gang of four spends an inordinate amount of time quite literally in the clouds, logging about a million airline miles collectively each year. Rarely are all present in the San Francisco headquarters.

During a recent call, Ruff, 51, was about to embark on a 15-day trip to Hong Kong, Malaysia and India, while Coleman, 50, was topping off a vacation in Amsterdam with a few days of company meetings. Sagmeister, 44, a former stock analyst who joined the team in July 2013, was crisscrossing Europe to see retailers and food companies, and Brewington, 59, the firm's Americas expert, was heading to Mexico to kick the tires on a few financial firms.

Ruff and Co. are collecting passport stamps in an attempt to dig deeper into companies they've identified as most likely to deliver what Ruff calls the "triple play" of dividend yields higher than those of in-country competitors, dividend growth and price appreciation. Reflecting the managers' penchant for small- and mid-cap issues, portfolio companies in the Forward International Dividend Fund have a median market cap of $3.7 billion, compared with $11 billion for the benchmark.

Over the past five years Forward International Dividend has delivered 12% annually versus 9.8% for the MSCI MSCI All Country World ex-US Index. The $334 million fund holds about 96 stocks and has a 5.4% dividend yield. Overall, the four stock pickers manage just over $1 billion, out of $5 billion at the asset-management firm.

"The culture internationally is to pay higher dividends," Sagmeister says, noting the preponderance of family and government owners that prefer to get paid via dividends, even in companies enjoying rapid growth.

The starting point is a screening process that measures dividend yields of thousands of companies against the yields of their local markets. When that difference reaches one standard deviation above its historical average, it's the cue for the Forward team to investigate. They want to find companies with a stock price not keeping pace with dividend growth. That can happen for a variety of reasons, but frequently it's due to management change, a disappointing string of financial results or some broader market factor.

Ruff points to Jasmine International, a Thai telecom he bought in 2012 after floods prompted a major selloff. When Ruff visited, he was the first money manager they had seen in person in a decade. Management assured him the dividends would keep flowing as it worked through issues in its rural telecom business and that it had plenty of capital to build out its broadband network. Three years later the stock has more than tripled and still carries a 3% dividend yield, thanks to rising dividends in the past three years.

The team's globe-trotting and executive grilling is all aimed at determining management's commitment to sustaining and increasing its dividend, the single most important element in the team's strategy. They want a payout ratio between 30% and 60%, figuring a company paying out too much of its profits may stumble during tough times.

"There's no better way to gauge management's confidence than the cash they put in your pocket," says Sagmeister.

Take a company like German rental car chain Sixt. The nonvoting preferred shares the fund owns carry a 4% dividend yield, and the chain is expanding both within its domestic market and elsewhere, including markets in the U.S. like Miami.

Sixt is capitalizing on a revamping of German airports expected to increase traffic by at least 4% in the coming years and also acting as an outsourcing option for employers that provide company cars for their workers, a common practice in Germany.

Another opportunistic buy was Egypt's Eastern Tobacco. The stock was largely abandoned in the wake of Egypt's 2011 revolution, sending its dividend yield above 8% by the time Forward bought it in 2012. It has nearly doubled since then.

Things don't always work out. In 2012 the fund bought Brazilian electric utility Companhia Paranaense de Energia. With free cash flow increasing and new hydro-generation coming online, the team expected dividend growth to follow. Later that year Brazil's government cut rates for utilities by as much as 28% to tamp down inflation. Forward expected the utility to soften the blow by padding its dividend, but management chose not to.

For Ruff the investment reinforced the idea that the ability to increase a dividend isn't enough. "The company also has to have the willingness to increase the dividend in times of stress, which can send a powerful signal to the market," he says.