If you want to see big dividend hikes, these companies have
delivered.
Dan
Caplinger Oct 12, 2019 at 12:20PM
If you want portfolio income, dividend stocks have been the place to
look lately. With yields on alternatives like bank CDs and bonds coming down,
it's hard to get the income you need without looking to the stock market.
Stocks can be risky, though, and so adding
dividend payers to an investment portfolio makes some people nervous. That's
why sticking with blue-chip stocks like the members of the Dow Jones
Industrial Average (DJINDICES:^DJI) can be a great way to
manage risk while still getting the income you need.
The 30 companies in the Dow are all well-known,
mature businesses. But that doesn't mean you have to give up your hopes for
growing payouts over time. Over the past year, Home Depot (NYSE:HD), Boeing (NYSE:BA),
and UnitedHealth Group (NYSE:UNH) have all delivered dividend
increases of 20% or more. They also have demonstrated their ability to stay
strong even in the face of challenging conditions in the past -- a sign of
security that any income investor can appreciate.
This dividend stock
feels like home
Home Depot is the king of the home-improvement
retail sector, but from a dividend standpoint, it plays second fiddle to its
biggest competitor. Lowe's Companies is a Dividend Aristocrat with decades of
annual dividend increases under its belt. But Home Depot has tried to catch up,
and it's put together a streak of 10 consecutive payout boosts and pays a yield
of 2.3%.
Home Depot's 2019 dividend increase was
the largest that shareholders have seen in a while. The new quarterly payout of
$1.36 per share marking a 32% increase from the previous $1.03 per share
dividend.
Fundamentally, Home Depot's long-term growth has
been strong, but short-term factors have held back the company recently. Even
though slowing same-store sales growth has
troubled some investors, Home Depot remains confident that temporary headwinds
like bad weather and unfavorable movements in commodity prices will reverse
course in the long run and allow the company to reap the rewards of its
operational excellence.
Flying higher despite
turbulence
Boeing's record of annual increases doesn't go
back as far as Home Depot's, but the aerospace giant has still put in a
respectable performance. For eight straight years, the aircraft manufacturer
has delivered larger dividend payments to its shareholders, including a more
than 20% boost in early 2019 that brought the quarterly payment to $2.055 per
share. That works out to a yield of about 2.2%.
Obviously, most of the news about Boeing lately
has centered on the status of its 737 MAX line of aircraft. Having been grounded
in March after two major accidents, the MAX still doesn't have a firm date at
which investors can expect the aircraft to return to service. That's hurt Boeing's cash flow, which
eventually could force the aerospace giant to consider whether to reduce
dividends. With capacity to borrow money at attractive interest rates, however,
it's likely that Boeing will instead preserve its dividend in order to avoid
the loss of investor confidence that a cut would bring.
Healthy dividends
UnitedHealth Group rounds out the list of top
Dow dividend raisers, having celebrated a 20% payout hike around midyear. The
health insurance and healthcare services provider has rewarded shareholders
with annual dividend increases for 10 straight years, although its current
yield of just under 2% gives UnitedHealth the lowest yield of these three Dow
stocks.
The healthcare industry has been in the
crosshairs of regulators for a long time, with many looking to impose
limitations in an effort to reduce costs of key healthcare needs like
prescription drugs. Yet UnitedHealth has continued to grow, getting
balanced performance from its health insurance unit and its Optum health
services division. With an aging population needing ever greater amounts of
healthcare, UnitedHealth has the experience and determination to keep finding
new ways to serve customers no matter what happens on the regulatory front.
Be smart with your
dividend investing
Many dividend investors just go with the stocks
that pay the highest yields, but that's not always the best idea. By focusing
on companies that are looking to grow their dividends at a sharp rate, you can
often get in before the yield-seeking crowd takes notice.
UnitedHealth, Boeing, and Home Depot have their fair share of challenges, but
they've been able to keep paying shareholders consistently, and that's a mark
of distinction in today's stock market environment.
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Dan Caplinger owns shares of Boeing. The
Motley Fool has the following options: short February 2020 $205 calls on Home
Depot and long January 2021 $120 calls on Home Depot. The Motley Fool
recommends Home Depot, Lowe's, and UnitedHealth Group. The Motley Fool has a disclosure policy.
ReplyDeleteNice, Thank you for sharing useful information to get benefit out of it.
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