It is that time of year when investors and consumers alike are starting to think about the end of this year and the start of next one. So far, 2015 has been a year of stock gains and givebacks, with the Dow and S&P 500 up marginally. What has worked well for investors during the greatest phase of the bull market and during the whipsaws of volatility is in the companies where assured dividend hikes are playing a role now and in the years ahead.
Income-oriented investors know that through time they get one-third to half of all of their total returns via dividends. Companies that will keep raising those dividends for years into the future are the best ways to generate income today and going forward.
24/7 Wall St. recently identified up to 10 potentially large or at least symbolic dividend hikes that would be announced before year’s end. Some of the dividend hikes we have seen were even larger than what was expected. Now that list is down to five remaining dividend hikes, but this is not an assured five hikes. Four of the stocks are almost certain to see hikes, and there are two runners-up — with a 50% chance on each making it five expected dividend hikes!
The list of dividend hikes expected between the start of December and the start of 2016 is made up of Dow Jones Industrial Average components and companies that could have been (or were previously) Dow components. AT&T Inc. (NYSE: T) is likely to bring a dividend hike, and it will make it the king of dividends among the largest telecom stocks. Boeing Co. (NYSE: BA) should deliver a dividend hike for aerospace and defense investors, and 3M Co. (NYSE: MMM) and MasterCard Inc. (NYSE: MA) both also are expected to deliver a dividend hike.
Then there is the runner-up group of potential dividend hikes. Walt Disney Co. (NYSE: DIS) has a payment timing issue to consider, and no not over Star Wars. General Electric Co. (NYSE: GE) remains a wild card, with a dividend status that simply remains too difficult to predict.
Keep in mind that recent dividend hikes have been announced by the likes of Intel, Nike, Merck, Visa, Starbucks and more. Here are four almost assured dividend hikes, with two wild cards at a 50% chance of each making five dividend hikes expected in December.
AT&T Inc. (NYSE: T) is still rather fresh off of acquiring DirecTV. 24/7 Wall St. believed long before the deal closed that DirecTV actually would bring stronger dividend coverage due to cash flow and income. AT&T’s third-quarter earnings report showed that its free cash flow dividend payout ratio was 57% year to date, improved from 67% in the second quarter.
The company also increased its adjusted earnings and free cash flow outlook for the year to adjusted earnings per share (EPS) in the $2.68 to $2.74 range and that free cash flow would be roughly $15 billion. The corresponding dividend hike in prior years has been in mid-December, and 2014 was AT&T’s 31st straight annual hike, with a 2.2% payout hike.
Shares of AT&T recently traded at $33.77, with a consensus analyst price target of $37.12 and a 52-week trading range of $30.97 to $36.45. The company has a dividend yield of 5.6% and a market cap of $208 billion.
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