7 Dividend Stocks That Are Growing Their Payouts
The market’s bull moves since March have been amazing, if not historic. Yet the high-performers have been mostly in the tech sector. Value and dividend stocks have mostly lagged.
But I think this presents an opportunity. The fact is that there are many interesting high-yielding companies that have good long-term prospects.
Besides, as the markets get more volatile — which is certainly the case now — there will likely be a rotation to more stable stocks. Of course, timing this is no easy feat. But having some level exposure to dividend stocks is a smart way to diversify a portfolio.
So which dividend stocks look good right now? Which are the ones that have been known to keep increasing their payouts — year after year? Well, let’s take a look at seven:
- John Wiley & Sons (NYSE:JW-A, NYSE:JW-B)
- Coca-Cola (NYSE:KO)
- IBM (NYSE:IBM)
- Lockheed Martin (NYSE:LMT)
- McDonald’s (NYSE:MCD)
- Verizon (NYSE:VZ)
- Aflac (NYSE:AFL)
Dividend Stocks: John Wiley & Sons (JW-A, JW-B)
John Wiley & Sons is one of the oldest publicly traded companies in the U.S. The origins go back to 1807 when Charles Wiley launched a print shop, which would eventually turn into a publisher.
Some of its famed authors included Washington Irving, Herman Melville and Edgar Allan Poe. Before long, though, the business evolved once again, turning toward non-fiction books, textbooks and research publications.
It’s a fairly steady business and generates strong cash flows. In the latest quarter, revenue grew by 4% to $491 million and the EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) was $120 million. The balance sheet is also strong, with $740 million in available liquidity.
Over the years, the company has invested heavily in its digital capabilities. This has helped it manage through the Covid-19 pandemic. But these investments are likely to provide the groundwork for future growth.
JW-A stock also has a dividend of 3%, which the company has increased annually for 22 consecutive years.
Coca-Cola has an enviable track record with its dividend — the yield is currently 3.3% — which the company has increased every year since 1963! And this trend will likely continue for many more years. Then again, the company has more than 500 brands and 20 of them generate over $1 billion each.
It’s true that the Covid-19 pandemic has taken a toll on the business. During the most recent quarter, revenue fell by 9%. KO stock has not seen much of a rebound from the March lows, showing only a 6.3% gain.
Yet the company has been taking actions to reduce its cost structure and streamline its brand portfolio. As a result, Coca-Cola has continued to generate robust profits. In the latest quarter, the profits came to $2.59 billion.
On the most recent earnings call, CEO James Quincey noted: “The pandemic has been a catalyst for change for our company, but the initial work behind our strategic transformation was in motion for some time before the crisis hit. We’ve been challenging legacy ways of doing business, and the pandemic helped us realize we could be bolder in our efforts.”
But investors should not give up on IBM stock. During the past few years, the company has been engaged in a major restructuring — and it is more than cutting costs. IBM has been retooling its systems for the cloud and AI. There have also been investments in next-generation technologies like quantum computing.
Although, dealmaking may have the most impact. The company acquired Red Hat, which is the largest open source software company. What’s more, IBM is in the process of spinning off its infrastructure services division. This will mean there will be more resources for growth opportunities.
In the meantime, IBM has an attractive dividend yield of 5.2% and the valuation is only at 14.6 times earnings. The company has also increased the payout for 20 consecutive years.
Lockheed Martin (LMT)
Lockheed Martin is the largest U.S. defense contractor, with annual revenue of over $64 billion. The company’s biggest source of business comes from its fighter planes like the F-22 and F-35.
But Lockheed Martin also is the developer of advanced helicopters, ships, and missile defense systems. Oh, and then there are the efforts to expand the space business. To this end, the company recently shelled out $4.4 billion for Aerojet Rocketdyne Holdings (NYSE:AJRD), which is a manufacturer of rocket engines and propulsion systems.
While the bulk of the revenue comes from the Pentagon, the company has been gaining traction with other countries. This will be critical as defense budgets in the U.S. are expected to come under more pressure.
It’s also important to note that Lockheed Martin has a large backlog of orders. It’s about $150 billion. In other words, there will likely to be ongoing growth.
LMT stock has been a good source of dividends. The payout has increased for 17 consecutive years and the current yield is 3.1%. LMT stock also is trading at a reasonable valuation, with the forward price-to-earnings ratio at 14.6.
Like many other restaurant chains, McDonald’s has felt the pressures of the Covid-19 pandemic. But the company has some key advantages that have reduced the overall impact.
For example, the company has a long history with takeout. Then there have been the investments in automation technologies, such as with kiosks and mobile apps. But of course, the McDonald’s brand is one of the world’s most valuable in the world and the company has continued to innovate its menu.
During the fiscal Q3, revenue dropped only 2% to $5.42 billion and earnings reached $1.76 billion, or $2.35 per share. Same-store sales were off 2.2%. But there was actually a 4.6% increase in the U.S. A key was the successful promotional efforts, which included rapper Travis Scott.
The company also announced a 3% increase in the dividend to $1.29 per share, the 43rd consecutive increase for MCD stock. The current yield is 2.5%.
While rival AT&T (NYSE:T) has diversified into areas like entertainment, Verizon has remained primarily focused on its core wireless business. Granted, this may seem limiting. After all, isn’t the wireless business mature?
This is true. But the mobile market is a nice generator of cash flows. For the first three quarters of last year, they were a hefty $32.5 billion, up $5.7 billion on a year-over-year basis. The churn rate was also only 0.89%.
Next, 5G is likely to provide a long-term boost for Verizon. This new technology is not just about high speeds for streaming videos. The technology is expected to be transformative for businesses, such as with IoT (Internet-of-Things).
As for the dividend on VZ stock, it is an attractive 4.2%. The company has also increased the payout for 13 consecutive years.
Founded over 60 years ago, Aflac is an insurance company that provides benefits for accidents and illnesses. The company has more than 50 million members, primarily in the U.S. and Japan.
Even though the Covid-19 virus has had a negative impacted on the company, it has still been able to grow. In the third quarter, revenue reached $5.7 billion, up from $5.5 billion in the same period a year ago. A tax adjustment played a big part in net earnings more than tripling to $2.5 billion from $777 million in the same period a year ago.
The company has a rock-solid balance sheet. Note that the total investments and cash stood at about $146.1 billion during September.
And in terms of the dividend, AFL stock has been quite consistent. There have been increases in the payout for 39 consecutive years.
On the date of publication, Tom Taulli did not have (either directly or indirectly) any positions in any of the securities mentioned in this article.
Tom Taulli (@ttaulli) is the author of various books on investing and technology, including Artificial Intelligence Basics, High-Profit IPO Strategies and All About Short Selling. He is also the author of courses on topics like the Python language and COBOL.