Buy these stocks before they raise their dividends

 

It's that time again…Time to look ahead and see which stocks are likely to boost their dividends next month. We like to follow the stocks that may be about to boost their quarterly payments, because dividend growth is such a strong indicator of a company's underlying business.

Of course, dividend growth as an indicator of a strong underlying business is only part of the reason to track dividend growing stocks. The second, and more obvious, reason is the added income.

Dividends play a vital role in the health of any portfolio.  A fact that is made crystal clear in the role dividends have played in the overall growth of the market through the years. From 1913 to 2012, dividends accounted for a massive 41.8% of total stock market gains. This is a clear indicator of just how important dividends are to growing an overall portfolio.

This week we are going to take a closer look at five stocks with a high likelihood of dividend increases next month. In each case, we will look at the company's history of dividend increases, the possible timing of the upcoming announcement, and what sort of raise in dividends investors can expect.

Expeditors International of Washington

Expeditors International of Washington (EXPD) is likely to hike its dividend towards the start of May. EXPD is now paying a quarterly dividend of 32 cents per share, for a yield of 1.4%. The company has boosted its dividend for 20 consecutive years, and has a payout ratio of just 29.9%. It is safe to assume that the streak will continue this year. What sets EXPD apart from most of the companies we follow is its unusual payment schedule. Most companies pay quarterly dividends, however, EXPD only announces two dividend payments per year: once in late-November; and again in late-May. It is in May that EXPD announces its dividend boost. Last year, EXPD lifted its dividend 6.6%; and the year before was 7.1%. This year's increase is likely to fall around that same range. I expect news of the payment rising from 32 cents to around 34 cents, which would mark a 6.3% increase. Look for the announcement in late-May with the stock trading ex-dividend at the end of the month.

Charts courtesy of www.stockcharts.com 

Ace Limited

Ace Limited (ACE) has a six-year history of dividend increases, and is likely to continue this when it announces its next dividend mid-May. The stock already has a nice dividend yield of 2.3%, and a very low payout ratio of just 28%. With such a low payout ratio, you would normally expect a hefty increase. However, historically the company has not made big increases. Last year it boosted its dividend just 3.2%. The dividend is currently 65 cents, which is likely to rise to around 68 cents, marking a 4.6% increase. Expect Ace to announce its dividend increase mid-May with the stock trading ex-dividend in the latter part of July.

Charts courtesy of www.stockcharts.com

Bunge Limited

Bunge Limited (BG) currently has a 1.6% dividend yield, and a decent 13-year streak of dividend increases. With a payout ratio of just 22%, there is a very high probability of another increase this year. As it currently stands, the stock has a dividend yield of 1.6% with a quarterly distribution of 34 cents per share. Last year, Bunge increased its dividend 13.3%, and the year before the increase was 11.1%. With such a low payout ratio, I expect another double-digit increase this year. Look for the distribution to climb from 34 cents to around 38 cents, which would translate to an increase of 11.7%. The increase should be announced in the latter part of May with the stock trading ex-dividend mid-August. Distribution would be payable at the beginning of September.

Charts courtesy of www.stockcharts.com  

Clorox Co.

Consumer goods manufacturer Clorox Co. (CLX) has boosted its dividend for 37 consecutive years.  The company is likely to continue this streak when it announces its next dividend mid-May. The company has a payout ratio of 65.5%, which is a bit high, and an indicator that investors should not be looking forward to a big increase. Last year the company boosted its dividend 4.2% and I expect news of a similar nature this year. The current dividend sits at 74 cents per share and is likely to rise to around 78 cents, marking a 5.4% increase. Expect the announcement mid-May with the stock trading ex-dividend in the latter part of July and the distribution payable early-August.

Charts courtesy of www.stockcharts.com  

JP Morgan Chase

Whether or not JP Morgan Chase (JPM) will boost its dividend in May is not a very big mystery. Like all other major financial institutions, JP Morgan is required to pass an annual stress test–a part of which involves gaining approval for its capital plan for the year. JP Morgan passed this year's stress test and when it reported first quarter earnings in April it also stated that investors should expect a 10% dividend increase. The company currently pays a dividend of 40 cents per share. However when it reports quarterly dividends in May, its quarterly distribution is going to rise to 44 cents. Look for the news to come mid-May with the stock trading ex-dividend at the start of July and the distribution payable toward the end of July.

Charts courtesy of www.stockcharts.com 

Michael Fowlkes is a financial writer who has been with the Fresh Brewed Media family since 2004. Over the course of his tenure with Fresh Brewed Media, he has worn many hats, including portfolio manager, options analyst, and writer. Michael received his undergraduate degree from Virginia Tech in Accounting and got his start in finance working as a stock trader for six years at Chase Investment Counsel in Charlottesville, Va.


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Michael Fowlkes

Michael Fowlkes

Michael Fowlkes is a financial writer who has been with the Fresh Brewed Media family since 2004. Over the course of his tenure with Fresh Brewed Media, he has worn many hats, including portfolio manager, options analyst, and writer. Michael received his undergraduate degree from Virginia Tech in Accounting and got his start in finance working as a stock trader for six years at Chase Investment Counsel in Charlottesville, Va.

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