2 Stocks That Could Raise Dividends In April
Last week, the Federal Reserve announced the first of what are expected to be several interest rate hikes this year.
We all saw it coming, and it won’t be the last… In fact, we could have up to as many as six more hikes this year. And on Monday, Fed Chair Jerome Powell noted in a speech that he and the other Fed members may look to raise rates by more than the usual 0.25%.
“The labor market is very strong, and inflation is much too high,” he said.
While rising rates are generally a good thing for retirees and savers (some of who would prefer not to have to put their money in “risky” stocks, by the way), there’s just one little problem…
Taming the beast that is inflation will take some time. And right now, the Consumer Price Index is running hot… 7.9% in its latest reading.
Source: Bureau of Labor Statistics
All of this sheds further light on the importance of something that I’ve been saying for years…
The only thing better than a company that pays dividends… is a company that increases dividends year after year.
That’s why each month, over at my High-Yield Investing premium newsletter, I make a point to screen for stocks that are likely put more cash in your pocket. 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.
We don’t do this just for fun. In a perfect scenario, we find great ideas for consideration in our portfolio… Companies posting outsized double-digit increases, and reliable dividend-payers that have been steadily growing payouts for a decade or more. 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.
This month, I have two stocks I’d like to highlight. Here’s what I’ve found…
2 Upcoming Dividend Hikes
1. Bank OZK (NYSE: OZK) – About this time last year, I predicted a pending dividend hike for this well-run regional lender. I wasn’t exactly going out on a limb. The company had already raised dividends the prior quarter. And the quarter before that. And the quarter before that.
In fact, every quarterly payment has been higher than the one preceding it for the past eleven years. That streak now stands at 46 consecutive quarters… and counting.
Formerly known as Bank of the Ozarks, this Little Rock-based institution has built a network of 250 branches stretching from Arkansas to Florida. It has been named the #1 bank in the United States for its asset size 8 times in the past 9 years.
OZK has attracted $20 billion in low-cost deposits that support $18 billion in personal and commercial loans. The net interest margin (NIM) between the two has widened to 4.4%, well above the industry average.
Thanks to disciplined lending standards, the bank’s charge-offs for bad loans have also been lower than the industry norm every year since its 1997 IPO. And the lean efficiency ratio (overhead operating expenses as a percent of lending profits) has been in the top 10% of the banking clan for 19 consecutive years.
That helps explain why bank OZK has never had a money-losing year. It has now posted 42 consecutive years of positive net income. That’s zero annual losses in its entire history. I can’t think of many businesses that can make that claim. Even in economic slumps, this bank has been a well-oiled machine, delivering a 21% compounded annual growth rate (CAGR) in book value per share over the past decade.
Right on cue, OZK recently posted record 2021 profits of $579 million, or $4.47 per share – a powerful increase of 98%.
As you’ll recall, I took a position in OZK during the early stages of the pandemic and exited just six weeks later with a gain of nearly 50%. Since then, the bank’s lending profits (and dividends) have gone nowhere but up.
The rising stock price has pushed the yield below my 4% minimum, but OZK would be a strong candidate on a pullback.
2. Johnson & Johnson (NYSE: JNJ) – In the April 2021 issue of High-Yield Investing, I predicted an increase in JNJ’s quarterly dividend from $1.01 to $1.06 per share. We hit it right to the penny.
JNJ is one of the most reliable blue-chip dividend payers around and has been granted membership in the esteemed Dividend Aristocrats club. The healthcare giant has made 60 annual dividend hikes in a row, typically in April. And in recent years, the board has conservatively authorized a bump of about a nickel per share.
So if that precedent stands, we could be looking at another increase in the quarterly payout to perhaps $1.11 within the next few weeks, or $4.44 annually. If so, that would consume just 40% of this year’s earnings, which are forecast to reach $10.70 per share.
J&J has been in the news lately for its Covid vaccine, but the company generates mountains of cash from products that have nothing to do with the pandemic. The consumer division alone (which includes over-the-counter brands like Tylenol and Listerine) hauled in $14 billion in sales last year – and that’s the smallest unit.
Medical devices brought in $27 billion, and core pharmaceutical sales totaled $52 billion. Companywide, the top-line rose from $82.5 billion in 2020 to $93.8 billion in 2021. That’s a hefty increase of more than $10 billion. Who says large mature businesses can’t deliver growth?
With a talented research bench and a deep development pipeline, this dependable income producer should continue to throw off a rising stream of dividends for years to come.
Action To Take
We’ve had a pretty good run of finding solid ideas from this exercise, so it pays to follow along each month. Some of them end up paying off big time. So if you’re looking for a potential addition to your income portfolio, then I can’t think of a better place to start your research…
But 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.
If you want to know about my absolute favorite high-yield picks, you need to check out my latest report…
In it, you’ll find 5 “Bulletproof Buys” that have weathered every dip and crash over the last 20 years and STILL handed out massive gains. And each one of them carry high yields, with dividends that rise each and every year. Go here to check it out now.