24/7 Wall St.

With stocks having hit all-time highs and with the bull market now six years old, investors have to consider carefully which stocks and sectors they want to invest in. One area that has remained a favorite is companies growing their dividends year after year. 24/7 Wall St. has identified 12 stocks that are likely to increase their dividends in the next 30 to 60 days.

Please note that this story has been updated to reflect the dividend hikes as they have been announced.

Before thinking that dividends can increase forever, one has to consider each company’s earnings per share, its growth rates and its payout ratios. Then what must be considered is which companies might have limitations on their cash, such as commitments for acquisitions or overseas capital that might be taxed too highly if repatriated.

The long and short of the matter is that investors love dividend hikes. They love buybacks as well, but by raising their dividends companies send the message to investors that they have earnings and cash flow visibility for years and years. Under corporate governance, this may be one of the single best tools for corporate executives to communicate to shareholders.

One thing that investors need to consider in dividend hikes is that these may have become so routine that investors just expect them no matter what. That is a dangerous game, and that is why we have looked at growth rates, balance sheets and stability before making predictions.

Of the 12 expected dividend hikes, four are banks — with two being layups for approval and two being less exact. Despite the oil price woes, we see two dividend hikes coming soon from oil patch giants. We also have three technology stocks on the list, as well as one airline, one consumer products giant and one credit card issuer.

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Is it possible that not all these companies will raise their dividends? Sure it is. After all, these are forecasts. Still, these companies have either raised dividends for years or they are in serious need of a dividend hike. For those that might not raise their dividends, let’s just say that they are unlikely to have happy shareholders.

Don’t Leave Home Without an AmEx Dividend Hike!

American Express Co. (NYSE: AXP) caters to higher credit quality clients than many credit card issuers. It maintains a healthy valuation at 15 times expected 2015 earnings, but the stock was the worst performing Down Jones Industrial Average (DJIA) stock year to date as of the end of February. By our take, the company needs to raise its payout by even more to get back on par. This is a DJIA component, and it is one of the top holdings of Warren Buffett. Its past dividend hike was to $0.26 per share from $0.23, with a yield at the time of only about 1.2%. American Express remains among the lowest dividend yields of the Dow.

Over time, American Express has been slow to raise its dividend. The company can boast that its largest shareholder by far is Buffett’s Berkshire Hathaway. It also generally has been able to boast of continued improvements in credit quality since the end of the recession, yet its old $0.18 per share quarterly dividend was held static from just before the recession until 2012, when it was raised to $0.20, then to $0.23 in 2013 and ultimately to $0.26 in 2014.

American Express is still growing its earnings, but it has yet to adequately raise its dividend by an amount worthy of a company that has been in the DJIA for as long as it has been a member. Its annualized $1.04 per share dividend still generates a paltry 1.25% yield. Its consensus earnings estimate is $5.51 per share for 2015 and $5.80 for 2016. It is not under the government’s thumb like the big banks, yet it is not even paying out 20% of its earnings per share in dividends. It seems a safe bet that it will raise its dividend to $0.30 per share in April, but shareholders could — and should — demand more of a dividend hike. Maybe much more.

Apple Dividend and Buyback Coming in April

Apple Inc. (NASDAQ: AAPL) is the darling of Wall Street, as well as every other street you can find outside of Redmond, Wash. Many reports have been issued on Apple, with analysts chasing their tails and stepping all over themselves to raise their price targets. This is about dividends, however, and that of course also includes buybacks. The company has more cash on its balance sheet than the market cap of all but about 30 U.S. companies.

What investors are expecting is a serious dividend hike. China was a huge boost, the iPhone 6 drove the cart and continues to do so, and there are new initiatives from the Apple Watch and whatever they are working on in cars. Apple’s recent stock performance is almost half of the Nasdaq 100 gain so far in 2015, but Apple now yields only 1.5% because its stock has been so strong.

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So, what will CEO Tim Cook do? Our guess is that in April, with its fiscal second-quarter earnings, he will boost Apple’s buybacks and dividend handily. As far as what the dividend will go up to, our estimate is that the dividend rises from $0.47 per share to about $0.60, or even higher — and that only gets the yield to almost 1.9%, based on a $129 share price.

Recently, Barron’s predicted that Apple shares would rise to $160 over the next year. One of the driving forces is a juiced up dividend to aid and abet that share price gain.

Will Bank of America Overcome Regulatory Worries?

Bank of America Corp. (NYSE: BAC) finally was allowed to boost its dividend in 2014. The payout rate went to $0.05 per quarter from $0.01. That took five years to come back, and it obviously will be many years before Bank of America gets back to the old $0.64 per quarter dividend prior to the recession. From every indication we had at the time in 2014, the bank wanted more of a dividend hike than it was allowed, but it was effectively just off of the list of the Federal Reserve’s Comprehensive Capital Analysis and Review (CCAR).

In short, Bank of America took what it could get and would fight for a higher payout on a future day. This year is looking more stable for Bank of America in earnings, and along with Buffett’s investment, the bank seems to be on better grounds with regulators. The bank is almost certainly in the second half of the game by far on legal settlements tied to financial crisis and mortgage crisis from the Great Recession. Still, it seems almost silly to expect that Bank of America could raise its dividend by another 400% like we saw last year.

What does not seem silly is that it could raise its dividend to $0.075 per quarter, or maybe to $0.10. The wild card is that its litigation expenses were $16.4 billion in 2014, versus $6.1 billion in 2013. Also there was a disclosure in its 10-K of mandated modifications to its Basel models, which recently prompted UBS to downgrade the stock to Neutral from Buy. Bank of America’s common stock currently yields only about 1.2%, far lower than the 2.7% for J.P. Morgan Chase and the 2.5% at Wells Fargo.

BofA Update March 11 – Dividend hike denied, Buyback approved

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Chevron’s Dividend Conundrum With Low Oil Prices

Chevron Corp. (NYSE: CVX) last announced a dividend hike with a 7% payout raise at the end of April in 2014, long before the world had to deal with drastically lower oil prices. The company most recently kept its $1.07 per share dividend, and our take is that the company will make every effort to commit to a dividend hike to maintain its “dividend grower” strategy. In fact, Chevron just raised $6 billion in a debt offering to shore up its balance sheet.

What investors should consider here is that earnings were over $10 per share in 2014, and the consensus estimate is now $3.93 per share for 2015. That consensus target was over $9 just 90 days ago. Given the longstanding dividend race going on with Exxon Mobil and other oil giants, investors have to be very tame in expectations here — maybe only a 1% or so dividend hike, versus the seen 7% last year. That would be nominal, but at least it lets management say they had a hike.

Of course, investors have to consider that this projected dividend hike is price-dependent on the oil market. If oil goes back under $40 and there appears to be no end in sight, let’s just say all bets are off and the company will say that it will raise that payout when higher energy prices permit. The current yield is now about 4.0%, so it is not as if the company has a paltry yield on its hands.

Citigroup MUST Get Back on the Dividend Track

Citigroup Inc. (NYSE: C) may be a bit in the same place that Bank of America was last year, except that it still has not yet formally been allowed to resume higher dividends. The Federal Reserve gave it a failing grade for higher capital allocations in the CCAR of 2014. That left the $0.01 dividend in effect since early 2009.

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Citi investors were not very happy when the CCAR review kept Citi from raising that payout. The bank has seen many moves in management in recent years, and it is still opportunistically looking to divest international and domestic operations that it has deemed noncore assets. A wild card is the huge charges that Citi recently took. Regulators may treat the bank differently, but this will be a known outcome by mid-March on the next CCAR at the Fed.

Having a $0.01 payout and a $52 stock price handle does not lend much to dividend investors. In fact, that payout is so low that it is meant to be an honorary dividend that prevents income-only investment funds from being forced out of the stock.

Before we get too ambitious on thinking that Citi is expected to earn over $5.00 in 2015 and 2016, all we can do is remember back to the Bank of America dividend move that went from one cent to a nickel per quarter. Maybe the Fed will be nicer this time around, but we just do not see the bank getting to magically pay a 1.2% dividend ($0.60 per share annualized, or $0.15 per quarter) just to be nice. A hike seems to be in the cards this time, but we will leave the predicted outcome up to the regulators.

Citi Dividend Update – March 11, Approved by Fed!

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Exxon Has to Outshine Chevron

Exxon Mobil Corp. (NYSE: XOM) sits in the same boat as rival Chevron, but there may be extra pressure for Exxon to lift its dividend more than Chevron. The oil and gas giant last announced that it would raise its dividend in April of 2014, but that was also long before lower oil prices took a toll. Our take is that Exxon wants to raise its dividend so that it can remain listed as a company that has endlessly raised its dividends over the years.

With the same longstanding dividend race with Chevron and other oil giants, and considering the much lower oil prices, Exxon Mobil shareholders should be very conservative when it comes to expecting dividends hikes in this climate. It is still likely to occur, but it could be a relatively token dividend boost and far less than the 9.5% hike seen in 2014. Exxon is likely to raise the dividend more on a relative basis than Chevron, because it has the lower yield of the two. This would allow management to say that they maintained their dividend hike trend.

Exxon Mobil earned $7.36 per share in 2014, yet the Thomson Reuters consensus estimate is $3.68 per share for 2015. Just 90 days ago, that 2015 consensus estimate was $6.70 per share. With a $2.76 annualized dividend as of now, how much can the dividend be raised? Exxon’s current 3.1% dividend yield compares to a yield of 4.0% for Chevron. Exxon could always spend less money buying back stock. Some companies have ceased buying back stock, just to accommodate a slightly higher dividend.

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If Exxon does not raise its dividend, let’s just say that is yet another reason why Buffett dumped his entire stake in the company.

HP Needs a Dividend Spin-Off Too

Hewlett-Packard Co. (NYSE: HPQ) remains in a long-run turnaround plan, under the guidance of CEO Meg Whitman, but now the company is on the path to split itself up. When HP announced its dividend hike in March of 2014, the payout was raised by just over 10% to $0.16 per share. HP may feel even more pressure to raise its payout in the weeks ahead after its latest earnings report failed to generate anything better than a 10% stock sell-off.

What investors need to consider is that the pending split could alter dividend hike plans, and maybe not for the better. Nomura recently pointed out that its forecast brings up concerns about cash flows ahead. Also, Pacific Crest pointed to lower free cash flow in the PC business.

The days of growth at Hewlett-Packard have come and gone (though note that it did just announce it will buy Aruba Networks). Much of that PC business spike in 2014 has already tempered. Still, with consensus earnings estimates of $3.68 per share this year, having a $0.64 annualized per share payout just is not very impressive. Spin-off or no, HP may have very little choice but to raise its dividend again. Having a 1.8% yield in technology used to be impressive. It used to be.

H-P UPDATE — 10% Hike March 19

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IBM Dividends and Buybacks to Grow

International Business Machines Corp. (NYSE: IBM) is a business that is riddled with little to no organic growth. The company now boasts having Buffett as a top shareholder. IBM’s earnings growth has been financially engineered by cost cuts and endless share buybacks, but its dividend payout was raised 16% in 2014 (to $1.10 from $0.95 per quarter). Now that the company has already come clean in 2014 that it will not live up to a $20 in earnings per share goal by the end of 2015, IBM’s earnings are expected to contract minimally in 2015 and grow marginally again in 2016.

Despite IBM’s woes, it is a dominant member of the DJIA. Its $4.40 annualized dividend already generates a 2.75% yield, based on a $160 share price. That is high on the surface, but IBM’s share price was closer to $185 at its previous dividend hike — and IBM is expected to earn over $16 per share in 2015 and 2016.

IBM has raised its dividend for 19 years in a row, and Big Blue boasted in 2014 that the dividend hike also represented the 11th year in a row of double-digit percentage increases on that dividend. If IBM wants to maintain double-digit dividend growth, then IBM’s $1.10 per quarter dividend will have to go up to a minimum of $1.21.

Its upcoming annual meeting of stockholders will be held April 28, 2015, and it also seems very safe to expect that IBM will bring word of even more share buybacks at that time.

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Jamie Dimon Wants a Higher J.P. Morgan Dividend

JPMorgan Chase & Co. (NYSE: JPM) is almost certain to get another dividend hike approval after the Fed’s 2015 CCAR. CEO Jamie Dimon is committing to lower deposits while keeping a fortress balance sheet, and the London Whale issue is now almost two years back.

What investors should know is that Dimon and the investment community were disappointed with the dividend hike that was allowed in the 2014 CCAR. It seems likely that J.P. Morgan will be freed up to announce another dividend hike after the CCAR review and that the payout will come in the summer. If Dimon’s voice and presentation in late February are correct, it hopefully will be a better hike than the paltry two cents to $0.40 per quarter approved in 2014. Still, J.P. Morgan yields close to 2.7% now.

Following the banking crisis in 2009, J.P. Morgan slashed its dividend to a measly $0.05 from $0.38. It took roughly two years for the banking giant to raise the dividend to $0.25 in 2011. The next year, the dividend was increased again to $0.30, and then the following year to $0.38. It was not until July of 2014 that the dividend passed the $0.38 mark, from back in 2009, to $0.40.

JPM Update March 11 – Dividend and Buyback hike approved!

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Here is what is really important: Dimon said that J.P. Morgan wants to take its payout ratio up to 50% of normalized earnings from 30% or so now. The trick is that investors simply may have to wait for years before that is fully adopted. Dimon even warned about this regulatory framework taking a long time.

P&G Dividend Growth Nears 60 Years

Procter & Gamble Co. (NYSE: PG) has been in the business of raising its dividends for almost 60 years now, even during the recession. The problem is that the consumer products giant has reached a point where raising the dividend above its earnings growth is becoming a challenge. Its dividend hike in 2014 was announced in early April, and that was a 7% boost. Its smaller rival Kimberly-Clark only raised its payout by 4% in 2014, and then it announced in mid-February a 4.8% payout hike for 2015.

The reality is that the company has another issue to deal with. Selling Duracell was only one step. It has literally dozens of brands that are up for review to be sold or spun out of the company. It has so many brands that thinning out the portfolio is almost certain, to allow management to focus on its growth brands.

Procter & Gamble’s dividend is $2.57 on an annualized basis, and its consensus earnings per share estimates are $4.02 in 2015 and $4.35 in 2016. Earnings growth has stagnated, as has revenue growth. All we can do is assume a 5% or so baseline hike for the company to say it remains focused on dividend growth. It currently pays a yield of 3.0%.

Southwest: The King of Airline Dividends?

Southwest Airlines Co. (NYSE: LUV) was the first airline in modern years to even have a dividend. The company has managed to grow organically and also by its AirTran acquisition, and now it is looking to expand by growing routes outside of the U.S. core market.

At its annual meeting in May of 2014, Southwest raised its payout by 50%. It also accelerated share buybacks as well. What investors have to consider is that airline stocks have surged. Southwest shares are up 100% from a year ago. So the 50% payout of 2014 that generated a yield north of 1.0% is back to about 0.55%, now that shares have risen so much.

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Airlines have not been the biggest dividend payers in the market in recent years. Now the industry has consolidated, and the ability to charge ever more fees and higher ticket prices is changing the attitude of airline executives wanting to please shareholders.

It seems odd to expect a company to raise its dividend by 50% two years in a row, but the company may simply have little choice. The $0.24 per share annualized payout now compares to consensus earnings estimates of $3.50 per share for 2015. With Southwest having almost all of its business in the United States and no currency woes, the company has a lot of room for dividend hikes ahead — maybe even more than last year.

Wells Fargo Targets Much Higher Payout Ratio

Wells Fargo & Co. (NYSE: WFC) is now top dog in the banking sector because it has limited exposure to the financial trading caps and limitations that the other money center banks have. Wells Fargo is deemed to be the healthiest, or least problematic, of the major banks by regulators as well.

With the Federal Reserve’s CCAR review imminent, Wells Fargo seems a shoo-in to be approved for yet more dividend payouts. The question is by how much. Wells Fargo was forced to face the same financial storm in 2009 when it cut its dividend to $0.05 from $0.34. Similar to J.P. Morgan, Wells Fargo waited until 2011 to raise its dividend to $0.12, followed by a jump to $0.22 in 2012. After that, the dividend was increased in 2013 to $0.30 and then to its current level of $0.35 in 2014.

It seems safe to expect that Wells Fargo’s dividend will move up to $0.40 after the Fed’s CCAR in March. That would be annualized rate of $1.60, which is a payout ratio of about 40% of the $4.16 in earnings per share expected for 2015. But note that Wells Fargo last year said it ultimately wants to target a payout ratio of 55% to 75%. Just don’t expect that to all come at once — even from the safest of the large banks.

Wells Fargo update March 11 — Dividend and buyback approved!

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