Looking for larger dividends? Here are five stocks ready to lift theirs

 

Every investors should have some level of exposure to dividend-paying stocks. Dividends are a crucial component to a portfolio’s ability to outperform the overall market long-term.

Dividends are very important, but there are a couple different approaches dividend investors can take to handling their income. Some investors prefer to collect the dividends as pure income, while others use dividend reinvestment programs to gradually build up their holding in the underlying security.

Regardless of which approach you take to handling your dividends, it is always nice to see one of your stocks boost their quarterly distribution. Investors that accept dividends in cash see a little higher payment once a year, and investors using DRIPs are able to buy a fractionally higher amount of shares with the new distribution.

Not all dividend-paying stocks boost their dividends, but by focusing on those stocks that do, you can put yourself in a great position to grow your income through the years.

Dividend stocks not only produce income, they also tend to be slightly less volatile than the overall market since investors put faith in companies that are able to return value to shareholders. Stocks that have histories of dividend increases are viewed even more favorably because investors realize the increases are a result of strong management and management’s bullish outlook on the future of the company.

If you like dividends, and want to see larger quarterly payments, here are five companies that are about to announce their next dividend increases.

W.W. Grainger

W.W. Grainger, Inc. (GWW) is a true dividend aristocrat, boasting a 46-year streak of dividend increases. The company operates and repairs industrial equipment for companies, and a strong underlying economy is expected to drive demand and lead to higher profits for the company. Analysts forecast earnings will rise 20% during the current year, and by 13.5% per annum over the next five years. The company has already reported this earnings season, topping estimates on both the top and bottom line. With a low 34.4% payout ratio, the company can easily afford to build on its streak of increases when it announces its next distribution any day now. GWW currently has a yield of 1.8%. Last year it boosted its distribution by 4.9%, and I would expect a similar increase this year. Look for the quarter distribution to rise from $1.28 to around $1.35 for a 5.4% increase. Expect the announcement this week, with the stock trading ex-dividend during the first week of May.

Chart courtesy of www.stockcharts.com

Bunge Ltd.

Bunge Ltd. (BG) has a 16-year streak of dividend increases. Bunge is an agricultural and food company, and the stock currently offers a 2.5% dividend yield. It has been a volatile year for the stock, which has fallen sharply over the last two months after a big gap higher at the beginning of the year. The stock began to sell off mid-February after a disappointing quarterly report, with the company missing wildly on both the top and bottom line. Bunge will next report earnings May 2, with the consensus calling for $0.30 per share. Investors will need to see an in-line or better set of numbers for the stock to find support and trend higher. The stock has a 16-year streak of increases, and currently offers a 2.51% yield. With a payout ratio of 48.9%, the company can afford another increase to bring optimism back into the stock. Look for the company to boost its distribution from 46 cents per share to around 50 cents, for a 8.7% increase. Expect the news during the third week of May, with the stock trading ex-dividend mid-August.

Chart courtesy of www.stockcharts.com

Pepsico

Soft drink maker Pepsico (PEP) will almost certainly extend its impressive 45-year streak of dividend increases when it announces its next quarterly distribution. The stock has been under pressure, and is currently trading just above its 52-week low. The company will report its first-quarter numbers April 26, and it will need a solid quarter in order to bring enthusiasm back into the stock. The consensus calls for earnings of $0.92, down slightly from $0.94 during the same period last year. The street does expect a positive report, with a whisper number of $0.95 for the quarter. The good news for investors is that so much bearish sentiment has been priced into the stock that any positive earnings news will bring investors back into the stock and allow shares to erase some of its recent losses. The company will announce its next distribution during the first week of May, and given the recent bearish outlook on the stock the company is unlikely to end its streak of increases and risk even more bearish sentiment. The stock has a yield of 3.14%, and last year it boosted its dividend by 7.0%. Look for the company to boost its dividend from $0.805 to around $0.875 for an increase of 8.7%. The stock will trade ex-dividend during the final week of May.

Chart courtesy of www.stockcharts.com

Phillips 66

Oil and gas company Phillips 66 (PSX) has a modest six-year streak of dividend increases. The stock currently yields 2.5% and has a 40.5% payout ratio. With the low payout ratio, the company can easily afford another increase this year, but with shareholders already enjoying a 2.5% yield, they should not expect a huge increase this year. The stock has been moving higher with rising oil prices, and shares are currently sitting just shy of their all-time high. The company will announce dividends April 27, with the street expecting a big beat for the quarter. The consensus calls for earnings of 88 cents per share, but the street has a much higher whisper number of 95 cents, which would drive shares even higher. Last year the company boosted its dividend by 11.1%, and by 12.5% the previous year. Look for the company to boost its distribution from $0.70 a share to around $0.77 for an increase of 10%. Expect news of the higher distribution during the first week of May, with the stock trading ex-dividend about two weeks after the announcement.

Chart courtesy of www.stockcharts.com

Marriott Int’l

Lodging company Marriott Int’l (MAR) has a seven-year streak of dividend increases, which it will look to extend when it announces its next dividend during the first week of May The stock currently has a 0.96% yield, with a low 24.8% payout ratio. Given the low payout ratio, shareholders are almost guaranteed to get rewarded with another increase this year. The stock has trended sideways over the last two months in sympathy to a volatile broader market, but shares remain in the upper end of their 52-week high. The company will next report earnings May 8, and it will announce its next distribution around that time. Last year the company boosted its dividend by an even 10%, and this year’s increase should be roughly in-line with last year’s. Look for the quarterly distribution to rise from 33 cents to around 37 cents, for an increase of 12.1%. Look for the announcement during the first week of May, with the stock trading ex-dividend about 2 weeks after the announcement.

Chart courtesy of www.stockcharts.com

Symbols: BG GWW MAR PEP PSX
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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