Five summertime dividend hikes

 

Value and yield… two of the most powerful concepts in investing. Value comes in the form of buying into stocks that the market trades at a discount to its true value, and yield comes in the form of dividend payments to shareholders.

Some investors solely seek out value, while others seek out yield.

Dividend hunters have to constantly seek yield in the market, but they have to keep in mind that current yields are not good enough, and a priority should be given to stocks that proven track record of dividend increases.

Companies that boost their dividends each year are attractive for multiple reasons. For one they tend to be less volatile than the overall market because traders realize a company would not be able to grow its dividend unless the company’s underlying business warranted doing so.

Dividend increases also give the market confidence in the stock because it illustrates that the company’s management team has a positive outlook on the future of the company or else it would not be able to justify the annual increases.

The summer months tend to slow down in terms of dividend increases, but there are plenty of big name companies expected to lift their distributions. Here are five stocks that will be boosting their dividends this summer.

General Mills

Consumer goods maker General Mills (GIS) has a 14-year streak of dividend increases. GIS stock took a big hit earlier in the year, and while the stock appears to have found a floor and attempting to reverse its trend, the stock remains in the lower end of the 52-week range. After missing its quarterly estimate in December, the company did post better than expected sales and profits when it last reported quarterly numbers in March. The report did not encourage Wall Street, and the stock fell sharply. General Mills will next report earnings June 27 and should announce its next dividend hike at that time, with the stock trading ex-dividend during the first week of July. GIS has a 63.8% payout ratio, with a 4.5% yield, so investors should not expect a big hike this year. Expect the quarterly distribution to rise from $0.49 to $0.50. GIS trades at $43.89 with an average price target of $50.69.

Chart courtesy of www.stockcharts.com

Brinker International

Restaurant chain operator Brinker Int’l (EAT) has a modest seven-year streak of increases, which it will likely extend when it announces its next distribution in the first part of August. Last year the company boosted its distribution by 11.7%, and in the previous year by 6.3%. With a payout ratio of 43.1%, I would expect this year’s increase to fall somewhere between the last two increases. Look for Brinker to boost its dividend from 38 cents per share to around 41 cents, for a 7.9% increase. EAT has been a solid performer in 2018, with the stock currently trading just shy of its 52-week high. EAT trades at $48.14 with an average price target of $42.62.

Chart courtesy of www.stockcharts.com

J.M. Smucker

Consumer goods maker J.M. Smucker (SJM) has fallen steadily over the last several months along with any other big-name consumer goods makers. The company reported quarterly numbers on June 7, disappointing on both the top and bottom line. The stock initially sold off on the news, but quickly recovered and has made back much of its post-report losses, and with a forward P/E of just 9.4, the downside is likely limited at this time. The company has a 16-year streak of dividend increases, and a low 36.6% payout ratio. With the low payout ratio the company can easily afford another increase, but with the stock already offering a 3.0% yield investors should not look for a huge increase. Look for the quarterly distribution to rise from $0.78 to around $0.81 for a 3.8% increase, which is basically in-line with last year’s increase. Expect the announcement during the latter part of July with the stock trading ex-dividend early August. SJM trades at $105.43 with an average price target of $117.44.

Chart courtesy of www.stockcharts.com

Dover Corp.

Dover Corp. (DOV) manufactures diversified industrial products. The company has a very lengthy 62-year streak of dividend increases, with the stock currently offering a 2.4% yield. The stock lost some ground earlier in the year in sympathy to a weak overall market, but the stock has rebounded and as trended higher over the last month. The company reported better than expected sales and profits for its most recent quarter and will next report on July 27. Look for the news of the increase about a week following the report. Last year Dover boosted its dividend by 6.8%, and with a low 39.1% payout ratio the company can easily afford another increase of that level this year. Look for the dividend to rise from 47 cents to around 50 cents for a 6.4% increase. The stock will trade ex-dividend in the final week of August. DOV trades at $79.12 with an average price target of $97.80.

Chart courtesy of www.stockcharts.com

Kellogg

Kellogg (K) sold off with the overall market earlier in the year, but enthusiasm has returned to the stock which has bounced nearly 15% from its 52-week low hit in just over a month’s time after a positive quarterly report at the start of May. Kellogg has a 13-year streak of dividend increases, and currently offers a 3.33% yield and a 48.5% payout ratio. The company is likely to extend its streak of increases when it announces its next distribution in the final week of July. Last year the company boosted its dividend by 3.8%, and considering the stock’s current yield, this year’s increase is likely to fall in-line with its previous increase. Look for the dividend to rise from 54 cents per share to 56 cents, for an increase of 3.7%. The stock should trade ex-dividend during the last week of August. K trades at $64.90 with an average price target of $72.42.

Chart courtesy of www.stockcharts.com

Symbols: DOV EAT GIS K SJM
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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