2020 is here. The bull market continues to rage, but there are reasons for investors to be cautious.
Tensions in the middle east are flaring, stocks are trading at high valuations, and the Federal Reserve has cut interest rates three times in the last year to spur economic growth.
Lower rates have helped keep strength in the market as yield hunters look for higher returns, but as stock valuations rise investors will start to demand more from their investments. High yielding dividend stocks will remain attractive, and stocks with a long and proven track record of boosting their dividends will become incredibly attractive.
The year is just getting started, and we are just now entering the first earnings season for the year. There are a lot of potential pitfalls for the market, which makes stocks with solid capital programs all the more attractive.
Here are a few stocks that will boost their quarterly dividends early in the year.
Consolidated Edison (ED)
Utility company Consolidated Edison (ED) has a lengthy 44-year streak of dividend increases. Like most utility companies, Consolidated Edison offers a nice yield and currently pays out 3.3%. The stock has a slightly high payout ratio of 69%, but that will not prevent the company from extending its streak of increases. After hitting a 52-week high in September the stock sold off a little in November on a disappointing quarterly report and shares have traded sideways over the last two months. Last year the utility company boosted its quarterly dividend by a modest 3.5%, and given the high payout ratio investors should expect a similar increase this year. Look for the quarterly dividend to rise from $0.74 to around $0.77 for a 4.0% increase. The company tends to announce its dividend increases during the third week of January, so this year's increase could come any day, and the stock will trade ex-dividend mid-February. ED trades at $87.45 with an average price target of $93.63.
Archer-Daniels (ADM)
Archer-Daniels (ADM) is an agricultural company. The company is a true dividend aristocrat and has boosted its dividend over 40 years straight. The stock currently offers a yield of 3.1%. The stock has risen sharply since hitting a 52-week low in August after a disappointing quarterly report. The stock rebounded and with better than expected earnings and sales in October shares hit a 52-week high at the end of the year. The stock has an attractive valuation with a forward P/E of 13, but profits are forecast to fall 8% annually over the next five years. The lower earnings growth forecast has already been priced into the stock, and with the low valuation there remains upside potential but the company has to report quarterly profits that are at least in-line or better than expected. Last year Archer-Daniels boosted its distribution by 4.5% to $0.35, and a similar increase this year would lift the quarterly distribution to $0.37. Look for the announcement during the first week of February with the stock trading ex-dividend mid-February. ADM is currently trading at $44.54 and analysts have an average price target of $47.50 on the stock.
Foot Locker (FL)
Athletic footwear and accessories retailer Foot Locker (FL) has an 8-year streak of dividend increases and the stock currently yields 3.8%. The company has historically announced its annual dividend increases mid-February, and with a low payout ratio of just 30%, Foot Locker can easily afford to extend its streak of increases when it announces its next quarterly distribution. FL stock has lingered in the lower end of its 52-week range over the last 7 months with the company posting a string of disappointing quarterly numbers. Earnings have fallen short of estimates two of the last three quarters, and revenues have disappointed the last three quarters. Last year the company boosted its dividend by 10.1% and given the low payout ratio investors are likely to see a similar increase this year. Look for the dividend to rise from $0.38 to around $0.42 for a 10.5% increase. The stock will trade ex-dividend mid-April. The stock is trading at $38.50 with a very bullish $49.53 average price target.
