Five stocks that will raise their dividends before 2018

 

As hard as it is to believe, the summer months are behind us, and 2017 is quickly coming to an end. While there are a few months left in the year, there are still plenty of big name stocks set to announce dividend increases before the New Year.

Dividend investors love the income that dividend stocks bring into a portfolio, but the value is compounded when you search for companies that have solid track records of annual dividend increases. Whether you use dividends for income, or to reinvest in the underlying security, investing in stocks that increase their payout each year mean that once a month the amount of money you receive, or the value of additional stock you are able to buy grows.

Just because a company pays a dividend, that does not necessarily mean it is a better investment than stocks that do not pay dividends. However, companies with solid capital programs are viewed as a bit safer than their counterparts since the ability pay dividends, and ideally increase those payment each year, shows the company’s underlying business remains sound, and that management believes the future is bright enough to warrant continuing to reward investors with dividend payments.

If you find yourself with a little extra cash you want to invest in a dividend stock at this time, consider the following stocks that have histories of dividend increases, and are likely to announce their next increase before the end of the year.

Philip Morris

Tobacco company Philip Morris (PM) has a nine-year streak of dividend increases. Like most tobacco companies, Philip Morris already has a hefty dividend, and currently offers a 3.54% yield to investors. The tobacco sector recently took a hit when the FDA announced its was looking into limiting the nicotine levels in cigarettes to non-addictive limits, but Philip Morris does its business internationally, so the stock avoided the major sell off that U.S. tobacco companies endured. The stock remains in the upper end of its 52-week range, and trades with a P/E of 26.2. Last year the company boosted its distribution by a modest 2.0%, and given the current yield I see this year’s increase falling basically in-line with last year’s. Look for the quarterly payment to rise from $1.04 to around $1.06, for an increase of 1.92%. Look for the announcement to come mid-September, with the stock trading ex-dividend during the final week of September.

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Charts courtesy of www.stockcharts.com

Microsoft

Tech giant Microsoft (MSFT) has a nice 13-year streak of dividend increases, and currently offers a 2.12% yield. With a relatively low 48.8% payout ratio, investors should expect the company will build on its streak of increases when it announces its next dividend. The company tends to announce dividend increases during the third week of September, and there is no reason to expect it will stray from that schedule this year. Last year the company boosted its dividend by 8.3%, and in the previous year by 16.1%. Given the current yield, I would expect this year’s increase to fall in-line with last year’s increase. Look for the quarterly distribution to rise from $0.39 to around $0.43, for a 10.2% increase. Look for the announcement during the third week of September, with the stock trading ex-dividend mid-November.

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Charts courtesy of www.stockcharts.com

McDonald’s

Fast food leader McDonald’s (MCD) has seen its stock come to life over the last year as the company’s turnaround program has resulted in rising U.S. sales. The company faced a lot of pressure in 2013 and 2014 as a shift in U.S. appetites moved away from fatty fast foods, but the company did a fantastic job bringing customers back with a revamped menu, and all-day breakfast offerings. McDonald’s is a true dividend aristocrat, with a 40-year streak of increases, and the stock currently has a 2.37% yield with a 57.8% payout ratio. Last year the company boosted its dividend by 5.6%, and in the previous year it lifted its payout by 4.7%. Expect a similar increase this year, with the quarterly payment rising from $0.94 per share to around $1.00, for an increase of 6.4%. Look for the announcement during the final week of September, with the stock trading ex-dividend late November.

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Charts courtesy of www.stockcharts.com

Texas Instruments

Texas Instruments (TXN) has a 13-year streak of dividend increases, and currently has a 48.4% payout ratio, so it can easily afford another increase when it announces its next distribution. The stock has appreciated steadily in value over the last five years as earnings have risen, on average, 18.9% per year during that time period. Looking ahead, analysts expect more growth, with the consensus calling for annual earnings growth of 10.5% per year for the next five years. Texas Instruments tends to announce its dividend increases during the latter part of October, and it should keep to that basic timeline this year as well. Look for the company to boost its quarterly distribution from $0.50 to around $0.55, for an increase of 10%, and the stock to trade ex-dividend during the first week of November.

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Charts courtesy of www.stockcharts.com

International Paper

Our final stock, International Paper (IP), has been growing its dividend for the last five years, and the stock currently offers a 3.38% yield with a 53.9% payout ratio. The current year does not look so great for the company, with analysts forecasting earnings growth of just 3.6%, but next year looks a lot better, with the consensus calling for earnings growth of 23.9%, and over the next five years earnings are expected to rise 10.16% per annum. The future earnings growth, in tandem with a 27.7 P/E suggests the stock could trend higher. Last year the company boosted its quarterly dividend by 5.2%, and in the previous year by an even 10%. Given the stock’s current yield, I would expect this year’s increase to be closer in range to last year’s increase. Look for the quarterly payment to rise from $0.463 to around $0.49, for an increase of 5.8%. Look for the announcement during the first half of October, with the stock trading ex-dividend mid-November.

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Charts courtesy of www.stockcharts.com

Symbols: IP MCD MSFT PM TXN
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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