Buy these stocks now before they increase their dividends again!

 

2016 is rapidly coming to a close, but for dividend investors, there are still plenty of big names expected to boost their distributions before the end of the year.

Dividend investors love the yield that dividend-paying stocks provide, and stocks with track records of dividend increases are particularly attractive.

While income is the primary reason to invest in dividend-paying stocks, another reason is the perceived safety that comes with stocks that reward their investors with quarterly dividends. This is because it is understood that a company would not give back money to its investors unless the company was confident in the present and future state of the company’s underlying business.

When a company announces a dividend increase, it is a sign to Wall Street that the company is very confident in the company’s future, and expects earnings to rise moving forward.

Whether you collect your dividends as cash to do with what you please, or have your dividends automatically reinvested in the underlying security, dividend increases result in a nice bump in your quarterly payments once a year, which is why a lot of dividend investors specifically seek out companies that are known for annual dividend increases.

Despite there being only two months left in the year, there are some big names expected to announce dividend increases, and we want to take a look at five such companies that should announce increases before the New Year.

Automatic Data Processing

Automatic Data Processing (ADP) is a true dividend aristocrat, with a 41-year streak of dividend increases. The stock currently has a yield of 2.42%, but that yield should rise a bit when the company announces its next dividend. The company tends to announce its dividend increases during the second week of November, and this year should be no different. The stock has a payout ratio of 58.4%, which is low enough to warrant another increase, but high enough to keep investors from expecting a huge increase this year. Last year the company boosted its dividend by 8.1%, and in the previous year it boosted its payout by just 2.0%. I expect a small increase this year, with the dividend rising from $0.53 to around $0.55, for an increase of 3.8%. The stock will trade ex-dividend mid-December.

adp161031

Chart courtesy of www.stockcharts.com

Becton, Dickinson and Company

Medical instrument and supply company Becton, Dickinson and Company (BDX) will extend its lengthy 44-year streak of dividend increases before the end of the year. The company announces its dividend increases during the latter part of November. The stock has a very low payout ratio of 30.8%, so the company can easily afford another increase this year. The stock is currently yielding 1.57%. Last year, the company boosted its quarterly distribution by an even 10%. The previous year’s increase was also 10%, and with the low payout ratio I expect this year’s increase to fall in-line with the last two increases. Look for the dividend to rise from $0.66 to around $0.73, which would translate to an increase of 10.6%, and the stock to trade ex-dividend during the second week of December.

bdx161031

Chart courtesy of www.stockcharts.com

Merck & Co.

Drug maker Merck & Co. (MRK) has boosted its dividend the last four years, and while the company has not been making huge increases to its quarterly distribution, it will most likely extend its streak another year when it announces its next payment in November. The company tends to announces its increases during the third week of November, with the stock trading ex-dividend during the second week of December. The last four years it has boosted its dividend by a penny, and I expect a similar outcome this year. The stock has a payout ratio of 48.9%, so it can afford another increase, but with a current yield of 3.1% there is no reason to expect a big increase. Look for the dividend to climb from $0.46 to $0.47.

mrk161031

Chart courtesy of www.stockcharts.com

Nucor Corp.

Nucor Corporation (NUE) is a dividend aristocrat, boasting a 42-year streak of dividend increases. The stock does have a slightly high payout ratio of 64.9%, so investors should not look for a huge increase this year. In each of the last two years it has lifted its dividend by 0.67%, and I would not expect to see this year’s much higher. Look for the quarterly payment to rise from $0.375 to $0.3775, for a 0.67% increase. The company will announce its increase at the start of December, with the stock trading ex-dividend during the final week of the year.

nue161031

Chart courtesy of www.stockcharts.com

Ecolab

Consumer goods maker Ecolab (ECL) has a nice 30-year streak of dividend increases, and with a low 31.7% payout ratio, the company will almost certainly extend its streak of increases when it announces its next dividend. Ecolab historically announces its dividend increases during the first week of December, and there is no reason to expect the company to stray from that timetable this year. Last year the company boosted its dividend by 6%, and in the previous year it boosted its payout by 20%. The stock has been in a downward trend, and currently has a modest 1.2% yield. I would expect to see a higher increase than the one announced last year, but nothing as high as the 20% we witnessed back in 2014. Look for the dividend to rise from $0.35 to around $0.39, which would translate to an increase of 11.4%. The news should come during the first week of December, with the stock trading ex-dividend about a week after the announcement.

ecl161031

Chart courtesy of www.stockcharts.com

Symbols: ADP BDX ECL MRK NUE
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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