Investing

8 Fresh Dividend Hikes That May Entice More Income Investors

Jon C. Ogg

Published: July 27, 2019 10:40 am

Last Updated: January 30, 2020 6:01 pm

It’s no secret that investors love dividends. Having a high dividend yield is one thing, but companies that manage to keep increasing their dividend payouts to shareholders are often the most desirable. There has been an analogy for many years that dividends account for close to half of all shareholder total returns over time.

With earnings season in full swing and with the stock market still close to an all-time high, 24/7 Wall St. has looked at eight solid dividend hikes by mostly multi-billion corporations that have been announced during the second half of July. Some announcements came along with earnings, and some companies have been hiking dividends for years.

It’s important to consider what dividend hikes mean, particularly at this time. Dividend hikes generally are a signal by a company’s management that they have earnings power that will sustain its dividend for years into the future. This is a time when the global growth story has slowed and when the United States and China are in a trade war. It’s also at a time right before Federal Reserve Chair Jerome Powell and the members of the FOMC are expected to embark on cutting interest rates.

For a reference point on all these hikes, note that the yield on the 10-year Treasury was last seen at 2.08% and the yield on the 30-year Treasury was at 2.60%. The median dividend of all S&P 500 members was at 1.86%, while the median dividend of the S&P 500’s 414 dividend-paying stocks was last seen at about 2.20%.

These are not all the dividend hikes that have been announced, but these stood out above and beyond others.

Aqua America

Aqua America Inc. (NYSE: WTR) announced on July 25 that its board approved its quarterly common share dividend to be raised to $0.2343 per share. The September 2019 dividend payout will represent a 7% hike, by $0.0153 per share from the $0.219 prior cash dividend. The water utility said that this represented its 29th dividend increase in the past 28 years.

The company has a stated long-term targeted dividend payout ratio in the range of 60% to 70% of earnings from operations, and the new annualized dividend rate of $0.9372 per share represents a 2.25% dividend yield. That yield may be low for utilities in general, but it’s about a 0.5% higher yield than the dominant American Water Works.

Hershey

Hershey Co. (NYSE: HSY) announced on July 25 that its quarterly dividend of $0.773 on the common stock was an increase of about 7% from its prior payout. Despite chocolate and candy not seeming to be the biggest growth engine, Hershey announced with earnings that its 2019 adjusted earnings would be up by 6% to 7% per share rather than the prior 5% to 7% range. The new $3.092 per share annualized payout will generate a yield of 2% based on the last closing price of $152.98.

Molson Coors

On July 18, Molson Coors Brewing Co. (NYSE: TAP) announced that it was raising its common dividend per share to $0.57 from $0.41 per share. Despite big corporate beer facing pressure in recent years from the rise of craft beers and changing consumer preferences, this is a 39% hike to its dividend payout. The $2.28 per share annualized payout represents a 4% dividend yield, based on Friday’s close of $56.59. Molson Coors shares are still down over 20% from their 52-week high, and the shares are down about 50% from their highs of late 2016.

Norfolk Southern

Norfolk Southern Corp. (NYSE: NSC) announced on July 26 that its board approved a 9% increase in its quarterly common stock dividend to $0.94 from $0.86 per share. This new $3.76 per share annualized payout. The stock closing price of $189.99 on Friday puts the dividend yield at 1.98%.

Northern Trust

Northern Trust Corp. (NASDAQ: NTRS) raised its quarterly cash dividend to $0.70 per share on July 23, an increase of approximately 17% from the prior $0.60 per share. The new $2.80 annualized dividend per common share represents a dividend yield of 2.98%, based on its $99.64 closing price on Friday. The parent company of Northern Trust has now more than doubled its dividend payout since 2015 alone.

Permian Basin Royalty Trust

Permian Basin Royalty Trust (NYSE: PBT) raised its monthly cash distribution to $0.044227 from $0.0397 per unit. This is an 11% payout hike, and it shows some oil companies are still winning big in the Permian despite oil’s gyrations in 2019. This month’s distribution hike was said to be due primarily to an increase of both oil and gas production from May’s production month. With a new annualized rate of $0.530724 and a unit price of $5.24 on Friday’s close, Permian Basin Royalty Trust joins the list of companies with a 10% payout. These are unit payouts and, due to monthly structure, can vary widely.

Regions Financial

On July 24, Regions Financial Corp. (NYSE: RF) announced that its board would increase its quarterly common stock dividend payout by almost 11% to $0.155 per share. This new $0.62 annualized per share dividend generates a dividend yield of 3.85%, based on Friday’s closing price of $16.04. What’s impressive here is that Regions already had doubled its dividend from 2017 thru early in 2019.

Wells Fargo

Wells Fargo & Co. (NYSE: WFC) formally announced on July 23 that the banking giant was increasing its quarterly dividend to $0.51 per share. This six cent per share hike represented an increase 13% from the prior payout. While the dividend increase announcement was made, this had been largely anticipated after the Federal Reserve’s recently concluded Comprehensive Capital Analysis and Review (CCAR) plan was given no objections by the Federal Reserve along with higher share buybacks.

What stands out here is that the money center bank is now yielding more than 4.1% for its dividend, based on Friday’s closing price of $49.30. This stock is still down about 17% from its 52-week high and is down about 25% from its peak prior to the Wells Fargo fake-account and incentivization scandals rocked the company and eventually forced John Stumpf out of his role leading the bank.