Given the recent volatility in the overall market, and an environment of rising interest rates, a lot of investors are turning to dividend stocks as a defensive play and stocks that have a solid history of dividend growth offer the best protection against another possible market correction.
If you are looking for the best dividend stocks to buy consider these stocks that are about to announce their next dividend increase.
Retail leader Walmart (WMT) is a true dividend aristocrat with lengthy 44-year streak of dividend increases. What sets Walmart apart from most companies is that it announces its full year’s worth of dividends on the same day, which typically happens during the third week of February. In recent years the company has been increasing its quarterly distribution by just a penny, and there is no reason to expect it will stray from that when it announces this year’s dividend increase.
Walmart stock currently has a nice 2.2% yield, so the company is not under any pressure to make a big change. With a relatively low 43% payout ratio it can easily afford another increase and there is no risk of the streak ending. WMT rallied after selling off with the broader market in December and currently is trading at $95.64 with an average price target of $107.90. The stock will trade ex-dividend during the second week of March. The company reports earnings February 19.
Soft drink and snack giant Coca-Cola (KO) is a dividend king with 56 years of dividend growth. Coca-Cola stock has a high payout ratio of 75%, so investors should not expect to see a huge increase with this year’s announcement, but stock already offers a 3.2% yield. Coke historically announces its dividend increases mid-February with the stock trading ex-dividend mid-March. The last three years the dividend has increased by $0.02, which is likely to be the same increase investors get with the upcoming increase.
KO stock traded strongly during the second half of 2018 before selling off with the overall market. KO quickly recovered and is once again approaching its all-time high of $50.84. The stock is at $49.24 with an average price target of $51.00. The company reports earnings February 14.
Foot Locker (FL)
Athletic footwear and apparel retailer Foot Locker (FL) has grown its dividend the last 8 years, and the stock currently offers a 2.45% yield. The company will likely announce its next increase during the third week of February with the stock trading ex-dividend mid-April. Last year the company boosted its quarterly distribution by 11%, and with a current payout ratio of just 30.9% this year’s increase could easily be in that same range. Look for the dividend to rise from $0.345 to around $0.38 for a 10% boost.
Foot Locker stock made a big move following a better than expected quarterly report in November, and after taking a hit with the overall market in December quickly recovered and is back in the upper end of its 52-week range. Foot Locker will next report earnings on March 1, with the consensus calling for earnings to rise to $1.36 from $1.26 during the same period last year. FL stock is trading at $56.30 with an average price target of $59.89.
Sherwin-Williams (SHW) reported disappointing numbers at the end of January but the stock did not sell off on the results and is currently trading basically in-line with where it was ahead of the January 31 report. The company has long 40-year streak of dividend increases and with a payout ratio of just 17.8% it can certainly afford to extend that streak when it announces its next dividend mid-February.
Sherwin-Williams increased its quarterly distribution by a penny the last two years, and a similar increase this year would take the payout to $0.87 and the stock should trade ex-dividend during the third week of February. SHW stock is currently testing a major resistance level at $425, and if it breaks through this resistance there is a lot of upside potential. SHW is currently trading at $420.00 with an average price target of $449.19.
Home Depot (HD)
Home improvement retailer Home Depot (HD) will look to extend its six-year streak of dividend increases when it announces its next quarterly distribution during the third week of February. The stock currently has a yield of 2.2% and a 43% payout ratio. Last year the company boosted its quarterly dividend by just under 16%, and in the previous year the increase was an even healthier 29%. Look for this year’s increase to be around 14% with the quarterly payout rising to around $1.18. HD stock had a tough final three months in 2018, but shares started to recover in the new year as strength returned to the overall market.
Home Depot is scheduled to report its next set of quarterly numbers on February 26 which will determine whether or not the stock is able to hold its current gains and continue trending higher. Analysts are expecting earnings of $2.17, up from $1.69 during the same period last year. Rising interest rates have put pressure on housing-related stocks, but with the Federal Reserve signaling that it will boost rates less than expected in 2019 we should see beaten up stocks like HD continue to erase some of their recent losses. HD stock is now trading at $185.37 with an average price target of $205.85.