The dog days of summer are almost over. And the fall is perhaps the best time of year for sports fans. The pennant race in baseball heats up, college football stadiums fill up with fans on Saturdays, and pro football kicks off throughout the week.
But as investors, we also know that the fall is also one of the best times for dividend hikes. That makes it the perfect time to take a look for stocks that could hike their dividends soon.
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. It’s part of my job. 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 premium 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 three stocks I’d like to highlight. If you’re looking for a potential addition to your income portfolio, I can’t think of a better place to start. Here’s what I’ve found this month…
2 Upcoming Dividend Hikes
1. Starbucks (NYSE: SBUX) – You gotta love the fall. The air is suddenly crisp and the leaves begin to turn. The World Series gets underway. And cash generators like Starbucks reward their faithful shareholders with dividend hikes.
The ubiquitous coffee chain raised its distributions from $0.20 to $0.25 per share in November 2016 and then to $0.30 in November 2017. The 2018 hike lifted the payout to $0.36 per share. And then last year, it was boosted another 14% to $0.41. The company is well on track to meet its three-year goal of returning $25 billion in capital to shareholders by the end of 2020.
So what can we expect in 2021 and beyond?
Well, let’s just say that Covid hasn’t stopped Starbucks’ aggressive expansion plans. Management still intends to open 300 new stores in the Americas and 500 in China by year’s end. For now, fully 97% of the 32,000 global locations have reopened. And while store traffic is down, the average customer is spending about 23% more per ticket.
A few months ago, management released a very wide full-year earnings forecast range of $0.55 to $0.95 per share, reflecting extreme uncertainty. The outlook was about as clear as mud. But as the effects of Covid moderate, that range has now been tightened to between $0.83 and $0.98 per share.
Meanwhile, Starbucks recently closed a $3 billion bond issuance (at cheap borrowing rates) to boost liquidity and prefund next year’s bond maturities. That balance sheet flexibility may help pave the way for a modest hike next month to around $0.43 per share.
2. Visa (NYSE: V) – Most dividend investors take a quick glance at Visa’s sub-1% yield and walk right on by. That’s a mistake – and not just because the stock has delivered market-crushing annual returns of 24% over the past five years.
What Visa lacks in current income, it makes up for in distribution growth. Payouts have risen more than 100% since 2015, doubling from $0.14 to $0.30. That’s a compound annual growth rate of 16%. But the stock has also nearly tripled, climbing from $70 to $200.
So it’s wrong to suggest that Visa has a stingy dividend. The yield has simply been pinned down because the relentlessly rising share price has been rising in lockstep. Faster actually, 24% to 16%.
Not a bad problem to have.
Visa’s dominant card processing network forms a near-impenetrable economic moat – one that can handle 65,000 transactions per second. The payment processor also has a long growth runway as the world continues to shift towards contactless electronic transactions.
Visa has faithfully raised dividends for 13 straight years. And with a conservative payout ratio around 25%, there is ample room to extend that streak. Before the pandemic, dividends were systematically raised by about 18% to 20% annually. A similar growth trajectory would drive annual payouts past $2.00 per share over the next three years.
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…
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.
With that said, we’re talking about two well-known powerhouses this month. Investors can’t go wrong with either of them over the long run. But 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.