3 Stocks That Could Raise Dividends In April
Each month I make a point to screen for stocks that are likely put more cash in your pocket in the form of dividends. As Chief Investment Strategist of High-Yield Investing, it’s part of my job.
In each issue of my premium newsletter, I scan the market for potential dividend hikes. Ideally, I’m looking for hikes that could happen over the next four to six weeks. I also highlight noteworthy special distributions on the horizon. I flag these stocks first for my premium readers so that they can research them and get a head start. Then, I share them with the public.
We don’t do this just for fun. In a perfect scenario, we find great ideas for consideration in our premium portfolio… Companies posting outsized double-digit increases, and reliable dividend-payers that have been steadily growing payouts for a decade or more. While there are no guarantees, with a set-up like that, our chances for success should be pretty good.
If you’ve followed along with us, then hopefully you’ve benefitted from these ideas in the past. Some of them end up paying off big time.
So if you’re looking for a potential addition to your income portfolio, I can’t think of a better place to start. Without further delay, here’s what I’ve found this month…
3 Upcoming Dividend Hikes
1. Procter & Gamble (NYSE: PG) — Procter & Gamble is a consumer products juggernaut with a stable of two dozen billion-dollar brands… Tide laundry detergent, Bounty paper towels, Crest toothpaste, Duracell batteries, and Gillette razors, just to name a few.
Nearly all of these hold a dominant number one or two market-share position in their respective fields. They are found in 180 countries around the globe and reach more than 5 billion households. Regardless of interest rates or other macro factors, consumers are constantly replenishing soap and toothpaste – which explains why P&G has been the “Old Faithful” of dividend payers.
The company hasn’t missed a distribution since 1890 (a streak of 130 years) and has raised the payout like clockwork for the past 64 years in a row. It has returned a whopping $135 billion to shareholders over the past decade alone, lifting annual distributions from $1.80 to $3.03 per share.
P&G has continued to prove its mettle during the pandemic, notching a solid 8% uptick in sales last quarter. Despite headwinds from currency exchange and higher freight costs, the company just upped its 2021 guidance and is now expecting earnings to climb 10%.
Keep in mind, P&G generates $1.13 in free cash flow (FCF) for every $1.00 in reported earnings. That’s why shareholders can count on seeing $18 billion in dividends and share repurchases this year – which would imply another hike in the coming weeks.
2. Southern Company (NYSE: SO) – Southern is one of the nation’s largest power generators, with a portfolio of wind, solar, hydro, nuclear, and natural gas power plants that have 42,000 megawatts of capacity. The company also provides electricity and gas utility services to 9 million residential and business customers.
If that weren’t enough, it even owns substantial midstream pipeline assets.
Southern has a pattern of hiking distributions in the second quarter, with the latest in April 2020 lifting quarterly dividends to $0.64 per share – or $2.56 annually. Odds are good that the trend will continue. While state lockdowns pinched electricity demand for a while, Southern has been enjoying lower fuel costs and solid customer growth. Municipal regulators have also approved rate hikes for many of the firm’s utility customers.
Earnings are expected to grow at a reasonable 4% to 6% pace over the next few years. This stock won’t make you rich overnight. Still, not many companies can claim to have paid dividends equal to or greater than the previous quarter every 90 days dating back to 1948.
That’s more than seven decades without a single dividend cut.
3. IBM (NYSE: IBM) – This classic blue-chip stock hasn’t missed a dividend payment since Woodrow Wilson was President over a century ago. And it’s increased distributions for 25 straight years now.
IBM is criticized in some circles for its flattish top line. But former readers of my Daily Paycheck newsletter can tell you that growth catalysts abound here. The game-changing $34 billion merger with Red Hat in 2019 has decreased reliance on legacy business lines and put Big Blue on a different path.
IBM pocketed $25 billion in cloud computing revenues last year, a healthy increase of 20%. The company now has 2,800 clients using its hybrid cloud platform, yet this market is still largely untapped. As more enterprise customers transition workloads to the cloud, management sees this being a $1 trillion market.
Artificial intelligence applications (which have a market penetration rate in the single digits) present another huge avenue of growth.
In the meantime, IBM continues to gush cash flow by the bucket. The company generated over $10 billion in free cash flow last year (in the teeth of a recession) and returned half of that to shareholders. The business is also sitting on $14.3 billion in cash on hand and has eliminated $11 billion in debt since the merger.
That points to another dividend hike on the horizon next month. I think we could see an increase to $1.70 per share, which would lift the yield to 5.3%, the market’s upper echelon.
Action To Take
Remember, just because I highlight stocks that are likely to increase dividends doesn’t necessarily make them “buys.” These are merely ideas to get you started in the hunt for high yields.
With that said, all of these stocks are worthy candidates for more research as a potential addition your portfolio. But if you want to know about my absolute favorite high-yield picks, then you’ll need to be a member of High-Yield Investing.