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End of the Year Dividend Increases

Wednesday, November 13, 2019 08:00 AM | Michael Fowlkes

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End of the Year Dividend Increases

Investors remain bullish on the market, with all the major indices trading near record highs. With interest rates falling, and strong overall economic conditions the outlook remains favorable for the market, and particularly dividend-paying stocks.

As the markets continue to trade near record highs investors want to keep their money at work in the market, but there are uncertainties in the market that raise some red flags. The longer the trade war between the U.S. and China lingers, the greater the possibility of a U.S or global recession.

The Federal Reserve is cutting rates in order to combat slowing corporate growth, which makes dividend-paying stocks more attractive. Lower rates will lead to a money transfer out of fixed-income assets and into dividend stocks as yield investors seek higher yields, and stocks with long track records of dividend increases will be especially attractive.

2019 is rapidly coming to a close, but there are still plenty of dividend aristocrats that will announce their next increase before the end of the year. Here are four stocks that are about to announce their 2019 increase.

McCormick & Company (MKC)

McCormick & Co. (MKC) has boosted its dividend each of the last 32 years and the stock has a yield of 1.4%. The company reported mixed Q3 numbers at the start of October, with a big earnings beat and small sales miss. The big earnings beat pushed the stock to its 52-week high, but shares have pulled back a bit over the last month. The stock's valuation is a bit of a concern with the stock trading at 30 times earnings, but analysts forecast profits to rise at an annual rate of 8.4% over the next five years which should keep strength under the stock barring any negative quarterly surprises. The company announces its dividend increases during the final week of November with the stock trading ex-dividend in the last week of December. The stock has a payout ratio of 42% so it can easily afford to extend its streak of increases this year when it announces its next distribution. Look for the dividend to rise from $0.57 to around $0.62 for an increase of 8.7%. MKC trades at $160.60 with an average price target of $157.33.

Ecolab (ECL)

Ecolab (ECL) has a 33-year streak of dividend increases and the stock is currently yielding 1.0%. ECL stock has traded sideways over the last six months after hitting an all-time high in August. The stock's valuation is a concern with shares at 36 times earnings. Analysts expect profits to rise 13.2% per annum over the next five years and with shares priced for perfection, the company has to consistently post numbers in-line or better than expected for shares to remain in the upper end of the 52-week high and eventually break out to the upside. With interest rates falling, stocks with long histories of dividend increases have become more attractive, and with a payout ratio of 31.3% the company can easily afford to extend its 33-year streak of increases. The company announces its increases during the first week of December with shares trading ex-dividend about a week after the announcement. Look for the company to boost its quarterly distribution from $0.46 per share to around $0.50 for an 8.7% increase. The stock is trading at $188.03 with an average price target of $201.47.

Abbott Labs (ABT)

Abbott Labs (ABT) has an impressive 46-year streak of increases with a current yield of 1.5%. ABT stock hit an all-time high over the summer after a strong quarterly report in July, but the stock has traded sideways over the last three months. ABT stock trades at 45 times earnings, and the company is forecast to grow earnings at an annual rate of 11.5% over the next five years. The forecast growth is strong enough to push shares higher, and with the company's long streak of annual dividend increases the stock has become more attractive as interest rates have been cut three times this year with more cuts possible. The company will announce its next dividend increase mid-December with the stock trading ex-dividend mid-January. Abbott has a low payout ratio of 39% so it can easily afford another increase. Look for the quarterly distribution to rise from $0.32 to around $0.36 for a 12.5% increase. ABT trades at $84.46 with an average price target of $92.82.

Becton Dickinson & Co. (BDX)

Medical instruments maker Becton Dickinson (BDX) has a 1.3% yield with a 47-year streak of dividend increases. BDX has traded sideways over the last four months after hitting an all-time high over the summer. The stock's sideways pattern is partially due to shares trading at 62 times earnings, which are expected to rise at an annual rate of 9.6% over the next five years. The company has historically announced its annual increases mid-November, so this year's increase could come any day now, with the stock trading ex-dividend during the first week of December. The last two increases have been $0.02, and a similar increase this year would boost the quarterly distribution from $0.77 to $0.79 for a 2.6% increase. The company last reported earnings the first week of November, with better than expected profits and a small sales miss. The stock trades at $242.85 with an average price target of $269.00.

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