Stocks continue their multi-year bull run with the major indexes currently hitting new all-time highs. Investor sentiment remains bullish, but investors are becoming increasingly worried over the market's valuation and fears of a possible correction hitting the entire market.
Low interest rates have played an important role in the market's strong run as investors continue to seek higher yields in dividend-paying stocks. A market correction would impact all stocks, but dividend-paying stocks, and in particular those stocks with a strong track record of annual dividend increases, will be partially shielded which makes them very attractive in the current market environment.
The earnings season has been positive so far, but there are plenty of big-name stocks left to report and there is always the possibility of a string of earnings disappointments hitting the market and driving stocks lower. There are also geo-political risks, coronovarius, and ongoing trade negotiations between the U.S. and China. Any of these risk factors could lead to a correction, so it is understandable that investors are a little cautious.
If you are worried about an upcoming selloff and are looking for safety in stocks with a history of dividend increases, consider the following stocks that are expected to announce their next increases before the end of February.
Coca-Cola (KO)
Soft drink giant Coca-Cola (KO) has an impressive streak of dividend increases which spans the last 57 years. The stock currently yields 2.7% and KO has a 70.9% payout ratio. The company will certainly extend its streak of increases this year but given the high payout ratio, investors should not expect a huge increase from its current payout. KO stock has traded steadily higher over the last year, and shares are currently trading just shy of their all-time high and the company has already reported earnings this season with in-line profits and better than expected sales. Last year the company boosted its quarterly dividend by $0.01 after a three-year streak of $0.02 increases. With the high payout ratio this year's increase will likely be another $0.01 increase, taking the payout from $0.40 to $0.41. The company announces its dividend increases during the third week of February and the stock trades ex-dividend mid-March.
Wal-Mart (WMT)
Mega retailer Wal-Mart (WMT) is a dividend aristocrat with a 45-year streak of dividend increases. WMT stock has traded sideways over the last six months and the stock has the chance to move higher when it reports its next set of quarterly numbers on February 18. The retailer is expected to report earnings of $1.44 per share, but the street expects Wal-Mart to post its eighth-straight earnings beat with a whisper number of $1.48. Wal-Mart will announce its next dividend increase when it announces its Q4 numbers, and unlike most companies, Wal-Mart will announce all four of its 2020 payments at the same time. The stock is currently yielding 1.8% with a 42% payout ratio. The company has a long streak of boosting the dividend payments by a penny, and investors should expect the same increase this year with the quarterly distribution rising to $0.54 per share. Look for the announcement on February 18 when the company reports earnings and for the stock to trade ex-dividend mid-March.
The Home Depot (HD)
Home improvement goods retailer The Home Depot (HD) has traded steadily higher over the last five years in sympathy to the strong housing market, and with the housing sector still strong the stock should continue to build on recent gains. In addition to the stock's impressive gains, HD also has a solid capital program. The company has a 7-year streak of dividend increases, is yielding 2.2%, and has a 51% payout ratio. Last year the company boosted its dividend by 32%, and in the previous year, the company lifted its dividend 15.7%. I would not look for this year's increase to be in the range of last year's increase, but instead for the quarterly distribution to rise more in-line with the 2018 increase. Look for the quarterly dividend to rise from $1.36 a share to around $1.56 for an increase of 14.7%. Look for the announcement during the final week of February with the stock trading ex-dividend mid-March.
Foot Locker (FL)
Athletic footwear and apparel retailer Foot Locker (FL) has a modest 9-year streak of dividend increases. FL stock currently yields 3.9% with a low 29% payout ratio. With such a low payout ratio the company can easily afford to extend its streak of dividend increases this year. Last year Foot Locker boosted its payout by 10.1%, and in the previous year to company gave shareholders an 11.2% increase. Given the low payout ratio, this year's increase is likely to fall in line with recent increases. Look for the quarterly dividend to rise from $0.38 to around $0.42 for an increase of 10.5%. The announcement will come shortly ahead of the company's next earnings report which is scheduled for February 28. The stock has traded sideways in the lower end of its 52-week range for the last eight months. The company has reported weaker than expected sales the last three quarters, and earnings have fallen short of estimates two of the last three quarters, and the company needs a strong set of numbers in its upcoming report to break out of its sideways trend and build on any momentum that it receives from its dividend increase. The stock will trade ex-dividend mid-April.
