Not all dividend stocks are equivalent. Among the traps that investors fall under is the yield trap. That is, they purchase a stock due to the fact that it has a high dividend yield. But a dividend yield is really simply a math problem. That is, the dividend yield is the revealed per share annual dividend divided by the existing share price.
So a company with a $2 annual dividend and a share cost of $35 has a dividend yield of 5.7%. That’s in fact an amazing yield.
However, the business has real control of just one element of that equation. And, as we discovered in 2020, when things get rough, a dividend is typically the first thing to get cut.
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A much better way to shop for dividend stocks is to try to find business that are increasing the amount of their yearly dividend. With an increasing dividend the money you generate from that stock will continue to increase no matter what takes place to the stock rate. And financiers that don’t need that earnings right now can, in most cases, reinvest the dividends back into the stock to optimize their overall return.
Lots of stock screeners let you arrange for business that have, or will be, increasing their dividends. Here’s a list of eight stocks that have just recently increased their dividend, or will be quickly. And a few of the business on this list have increased their dividend rather substantially.
Nucor (NYSE: NUE )
Ternium (NYSE: TX )
Procter & Gamble (NYSE: PG )
Johnson & Johnson (NYSE: JNJ )
Tractor Supply Company (NASDAQ: TSCO )
Costco (NASDAQ: EXPENSE )
Whirlpool (NYSE: WHR )
Anthem (NYSE: ANTM).
Dividend Stocks: Nucor (NUE)
The first of the dividend stocks on this list is Nucor, the biggest steel manufacturer in the United States. Steel rates began increasing in 2020 fueled by an absence of supply and remarkably high need. A proposed facilities plan is likely to keep need high.
What the final infrastructure plan will look like is anyone’s guess. However it’s particular to develop a favorable environment for steel demand. Which demand needs to put a floor under NUE stock even if steel costs move lower as production continues to come online.
Nucor has increased its dividend for 48 successive years. This makes it a dividend aristocrat and puts it two years shy of being in the much more exclusive club of dividend kings. The average boost of the business’s dividend over the last three years has actually been 6.61%. By applying the Guideline of 72, that means the company will double its dividend payment in around ten years.
Sticking to steel stocks, I’ll offer up Ternium as a complementary stock to Nucor. Ternium is the leading steel company in Latin America. The company is ending up being more expense competitive and has taken actions to increase its liquidity and overall balance sheet throughout the pandemic.
The stock is near its all-time high. Ternium reports earnings in late April and is expected to show incomes development of 154.4% for the quarter. Both of these indications offer support to TX stock getting ready to press into record territory.
Ternium pays a yearly dividend. The business did not increase its dividend in 2020, but simply raised it 90 cents on April 15. This averages out to 41.81% of the company’s trailing 12-month earnings. Typically, financiers should beware when a business breaks a string of dividend increases. Nevertheless, 2020 was a hard year for the majority of business. Ternium didn’t cut its dividend, nor did it suspend it. It simply kept it the exact same and had a history of increasing it prior to the pandemic.
Dividend Stocks: Procter & Gamble (PG)
Source: monticello/ Shutterstock.com.
Consumers are anticipated to continue the deep cleansing routines they initiated during the pandemic. That’s a positive catalyst for Procter & Gamble. As a protective stock, the business had a great year in 2020 as more Americans made sure their medication cabinets were well supplied. In truth, at one point, PG stock was imitating an authentic development stock, skyrocketing 41% from its pandemic low.
The stock has actually given that given up those gains, however it still sports a 14.5% gain over the last 12 months. Nevertheless, this is an article about dividend stocks and that’s where PG stock continues to shine. The company recently revealed a 10% boost in its dividend, raising the dividend from 79 cents to 86 cents per share.
That makes it 59 successive years of raising its dividend payout for this dividend king. And the company has been raising its dividend at a pace of 13.87% over the last 3 years.
Johnson & Johnson (JNJ)
Source: Niloo/ Shutterstock.com.
Do not let the current time out in the company’s vaccine rollout discourage you from taking a close take a look at JNJ stock. Unlike the other biotech business that brought a novel coronavirus vaccine to market, Johnson & Johnson has a host of other income streams.
Those income streams in addition to its vaccines propelled the stock to its all-time high in late 2020. The business is just up about 8% in 2021, however it’s up 38% because the onset of the pandemic. And the business just posted a double beat on incomes that might act as an additional driver for the stock.
JNJ recently increased its dividend by 5% from $1.01 to $1.06. That matches Procter & Gamble with 59 consecutive years of dividend development. And over the previous three years, the business has been increasing its dividend by an average of almost 20% (19.88%).
Dividend Stocks: Tractor Supply Business (TSCO)
After providing strong results in 2020, Tractor Supply Company is gaining from a couple of current analysts’ upgrades that may present investors with another year of growth, albeit at a slower rate than in 2020.
However, a little bit of slower development shouldn’t be a big concern when the company rewards its investors with a whopping 30% dividend boost. An increase of this magnitude would usually be a warning. Sometimes company’s will issue a large dividend increase to make up for a bad development story.
Nevertheless, in the case of TSCO stock, the company has a routine pattern of increasing its dividend payout. In reality, this increase makes it 10 straight years for the business and gives it an average increase of 42.86% over the last 3 years. An excellent strategy would be to accept the company’s kindness and get on board the stock for some share cost growth and to capture what amounts to a $2.08 yearly dividend.
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Costco was another seller that was a pandemic entertainer. But the business has been providing investors a lot to be delighted about even before 2020. The storage facility club operator has actually balanced income development of nearly 9% in the last couple of years. And it achieves this growth while still expanding into various locations (its footprint now includes more than 800 stores). Plus, the business enjoys a subscription retention rate of more than 90%.
Throughout the pandemic, the company added e-commerce to its bag of techniques. This positions it for future growth even as competitors like Amazon (NASDAQ: AMZN) and Walmart (NYSE: WMT) continue to nip at its heels.
Costco is a fine example of not being too hung up on a yield. EXPENSE stock has a pretty weak one; it yields just about 0.72% at the time of this writing. Nevertheless the company simply increased its dividend by 9 cents in April 2021. And over the past three years, it’s delivered 41.03% dividend development. On top of that, Costco released a $10 per share unique dividend in December 2020.
Dividend Stocks: Whirlpool (WHR)
As a Michigander (yes, that’s a term) I seemed like I needed to consist of Whirlpool on this list of dividend stocks. But it’s not like they have not earned it. WHR stock is up 136% in the last 12 months. And the reason is obvious. When people purchase brand-new homes, they tend to buy brand-new devices. Which, in addition to cost-cutting procedures used by the business, is equating to strong development on the leading and bottom lines.
In the company’s first-quarter profits report, the home appliance maker made $7.20 in adjusted EPS and posted revenue of $5.4 billion. Analysts were expecting a $5.40 EPS on income of $4.9 billion.
Whirlpool also rewarded its investors with a 12% dividend boost. This begins the heels of a five cent per share boost that the company provided to shareholders in the third quarter. The company has actually now delivered 12.79% dividend payout development in the last 3 years.
Source: Jonathan Weiss/ Shutterstock.com.
Health care has stayed a red-hot sector. Anthem is the biggest for-profit managed healthcare business in the Blue Cross Blue Shield (BCBS) Association. ANTM stock is up 45% in the last 12 months and 20.7% in 2021.
Anthem just recently released an 18.95% dividend increase from 95 cents per share to $1.13. This brought the company’s three-year dividend development to 40.74%. This is another example where if you just pay attention to the yield, you’re missing out on the underlying story.
Anthem simply reported first-quarter incomes and beat incomes expectations. Quarterly revenue came in as a small miss out on, but was still 9% higher than the previous quarter.
In a sector like health care, long-lasting trends can say a lot more about a stock’s prospects than short-term efficiency. In Anthem’s case, the company has actually seen its yearly earnings grow at a 16.5% clip over the previous five years. This is significantly higher than the 11% industry average. And more remarkably it outpaces the more comprehensive market which averages 12%.
On the date of publication Chris Markoch did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Chris Markoch is a freelance financial copywriter who has actually been covering the market for 7 years. He has actually been writing for Financier Place because 2019.
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