After years of a low interest rate environment, which currently is trending much higher, many investors have turned to equities not only for the growth potential but also for solid and dependable dividends that help to provide a passive income stream. What this equates to is total return, which is one of the most powerful investment strategies going. While interest rates have risen, these companies still make sense for investors looking for solid growth and income potential.
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We like to remind readers about the impact total return has on portfolios because it is one of the best ways to help improve the chances for overall investing success. Again, total return is the combined increase in a stock’s value plus dividends. For instance, if you buy a stock at $20 that pays a 3% dividend, and it goes up to $22 in a year, your total return is 13%: 10% for the increase in stock price and 3% for the dividends paid.
Three top companies that are Wall Street favorites are expected to raise their dividends this week. We screened our 24/7 Wall St. research universe and found that two are rated Buy at some of the top firms on Wall Street. While it is always possible that not all of them do raise their dividends, top analysts expect them to, given past increases in each firm’s dividend payouts.
It is important to remember that no single analyst report should be used as a sole basis for any buying or selling decision.
Darden Restaurants
The return to sit-down dining in restaurant locations has been huge for this industry leader, and the trend continues to improve. Darden Restaurants Inc. (NYSE: DRI) owns and operates full-service restaurants in the United States and Canada.
As of May 30, 2021, Darden Restaurants owned and operated 1,834 restaurants, including 875 under the Olive Garden banner, 533 LongHorn Steakhouse, 170 Cheddar’s Scratch Kitchen, 81 Yard House, 63 The Capital Grille, 44 Seasons 52, 42 Bahama Breeze, and 26 Eddie V’s Prime Seafood.
Investors currently receive a dividend yield of 2.92%. The company is expected to raise the dividend to $1.25 per share from $1.21.
Bank of America Securities has a $187 price target on Darden Restaurants stock. That is well above the $169.50 consensus target and Tuesday’s final print of $165.82.
24/7 Wall St.Kroger
This grocery chain giant is always a solid idea when the going gets rough as people tend to go out less, and it is a big Warren Buffett holding. Kroger Co. (NYSE: KR) operates as a retailer in the United States with a focus on combination food and drug stores, multi-department stores, marketplace stores and price impact warehouses.
Its combination food and drug stores offer natural food and organic sections, pharmacies, general merchandise, pet centers, fresh seafood and organic produce. Its multi-department stores provide apparel, home fashion and furnishings, outdoor living, electronics, automotive products and toys.
The company’s marketplace stores offer full-service grocery, pharmacy, health and beauty care, and perishable goods, as well as general merchandise, including apparel, home goods, and toys. The price impact warehouse stores provide grocery and health and beauty care items, as well as meat, dairy, baked goods and fresh produce items.
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Kroger also manufactures and processes food products for sale in its supermarkets and online, and it sells fuel through 1,613 fuel centers. As of January 29, 2022, the company operated 2,726 supermarkets under various banner names in 35 states and the District of Columbia.
Shareholders currently receive a 2.25% dividend. The $0.26 per share dividend is expected to increase to $0.28.
The BofA Securities target price is $65. Kroger stock has a consensus target of $51.02, and the closing share price on Tuesday was $45.83.
Saul Centers
This dividend-paying real estate investment trust is a strong play in an inflationary environment. Saul Centers Inc. (NYSE: BFS) is a self-managed, self-administered equity REIT headquartered in Bethesda, Maryland. It currently operates and manages a real estate portfolio of 60 properties, which includes 50 community and neighborhood shopping centers, seven mixed-use properties with approximately 9.8 million square feet of leasable area, and three land and development properties. Approximately 85% of the Saul Centers’ property operating income is generated by properties in the metropolitan Washington/Baltimore area.
The company posted solid earnings, and large institutional investors have added the shares as expectations going forward have strengthened. Plus, the strong presence in the nation’s capital area is a plus as the economy remains strong due to the omnipresent government spending and high net worth consumers.
The current dividend yield is 6.40%. The expected increase is to $0.60 per share from $0.59.
While B. Riley Securities has a Hold rating on the shares, its $42 target price is higher than the consensus target of $38.00 and Tuesday’s close at $36.87.
Three top companies with stocks rated Buy across Wall Street are expected to lift the dividends they pay to shareholders. Not only is increasing dividends and returning capital to investors important, but it also shows that the company is doing well and has the earnings and cash flow strength to increase the payouts.
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