As the raging bull market died and turned into a major bear market, investors were spooked. The peak of the selling waves took the Dow Jones industrials down almost 40% and the S&P 500 down 35% from their highs. While stocks have come roaring back, there is still an economic recession, millions of people have become unemployed, businesses are strapped for cash and raising liquidity, and many companies are slashing or suspending their dividend payments to their shareholders to conserve cash.

It turns out that, even in the toughest times, some companies still manage to generate dividend growth and prove that they have safe dividends. Raising dividends during a recession is always an impressive way to show confidence in long-term earnings. Moreover, if a company has seen annual dividend increases for 30 years, it has managed to navigate through four recessions now, implying that the company has a strong balance sheet and strong free cash flow.

One fear from the instant recession that came up in February through March was that even the safest dividends were suddenly considered at risk. Investors in the safest of the stable and defensive stocks were hearing earnings warnings and withdrawn guidance for 2020. The market was spooked into thinking that the payout ratios in top utilities, telecom giants and consumer products companies were suddenly in a climate in which their earnings and dividends might be at risk and not as safe as they were thought to be.

Many companies already have announced that they would lower or suspend their dividend payments because of the sudden recession. Many more companies also will have to lower or suspend those payments in the coming weeks. More companies have lowered, suspended or canceled their dividends so far in 2020 than in the past 10 years combined.

It appears with the stock market recovery that the major pandemic scare under the COVID-19 recession appears to have gone too far when it comes to the highest quality companies. Again, some companies still are managing to raise their dividends. Investors need to keep in mind that dividend-paying stocks may see half of their total returns over time come from quality dividend hikes.

The S&P 500 Dividend Aristocrats is a list of companies that have managed to raise their dividends for 25 consecutive years or more. While not all companies raising dividends are counted as “aristocrats,” it is impressive for a company to be able to raise its payouts when unemployment is rising, consumer spending is shifting downward and away from traditional retail, and when much lower business spending and hiring have all culminated into an instant recession.

24/7 Wall St. has tracked 15 companies that have announced dividend hikes in April. While the stock market peak was in February, many companies and individuals were not forced into operating as though they were in a deep recession until after the first or second week of March. Any company raising its dividend after that time already had full understanding that unemployment might reach 20% and that gross domestic product would face a major contraction.

Proof That Life Does Require Water

American Water Works Co. Inc. (NYSE: AWK) announced a 10% payout hike on April 29 to $0.55 per common share. Its stock was weak a month ago on concerns that nonpaying customers would not be cut off as the recession fears grew. Almost all utilities have seen big recoveries in their stock prices, and the top water utility has recovered as well.

American Water Works now has more than a 1.7% dividend yield for new investors, based on its current share price. It has committed to higher dividends and higher earnings, along with a targeted payout ratio of 50% to 60% of net income.

IBM’s 5.2% Yield for Big Blue Shareholders

International Business Machines Corp. (NYSE: IBM) announced a dividend hike of one cent per share on April 28, 2020. While that may sound like an unimpressive hike, the yield is close to 5.2%, and this marked the 25th straight year that IBM has hiked its dividend and marked more than 100 years of continuous dividend payments.

MetLife Inc. (NYSE: MET) announced on April 28 that it was raising its dividend to $0.46 per common share from a prior $0.44 payout, a hike of 4.5%. The insurance giant’s shares have recovered handily from the March lows, but the insurance stocks are still way down from their highs due to the low interest rate environment and fears of underlying bond defaults. MetLife shares were still down 34% from their peak when the dividend hike was announced. Its new yield will be about 4.7% after the dividend hike reaction.

Raytheon’s Strong Post-Merger Defense Leader

Raytheon Technologies Corp. (NYSE: RTX) announced on April 27, that it was declaring a $0.475 dividend on its common stock. After adjusting for the 2.33 factor in the post-merger situation with United Technologies, this was confirmed as an effective dividend hike after a call into the company. Raytheon’s dividend yield is now 2.8%, based on the current share price.

No Kiddie Pool for Growth

Pool Corp. (NASDAQ: POOL) announced on April 23 that its board had approved a 5% hike on the quarterly cash dividend to $0.58 per share. This is the largest wholesale distributor of swimming pool and related products. It still only represents a 1% dividend yield, as the stock was recently just trading 3% or so under its 52-week high. It is also up about 250% in the past five years alone, and it is about 1,500% or so higher since the 2009 selling zenith of the Great Recession.

Nasdaq Loves the Market Volatility

Nasdaq Inc. (NASDAQ: NDAQ) announced on April 22 that it was raising its common share dividend by 4% to $0.49 per share. It looks like higher trading volumes are helping to bolster the exchanges. Nasdaq’s $1.96 annualized payout is roughly a 1.75% dividend yield, and it is not quite 40% of its trailing normalized earnings.

The Other NextEra Dividend

NextEra Energy Partners L.P. (NYSE: NEP) announced on April 22 that it raised its quarterly distribution to $0.555 from $0.535 per unit. This generates a yield equivalent of 4.45% for the manager of contracted clean energy and renewable energy projects, along with a natural gas pipeline.

The partnership had announced back in January that it was looking to raise its distribution by 12% to 15% annually through at least 2024, but with April earnings it signaled it could meet long-term, distribution goals without acquisitions until 2022.

Kinder Morgan’s Dividend Hike Was Shy

Kinder Morgan Inc. (NYSE: KMI) announced on April 22 that it was committed to raising its dividend, although it was less than what had been previously communicated to shareholders. The new quarterly cash dividend of $0.2625 per share comes to a payout of $1.05 per share annualized, and it was a 5% dividend hike.

Shareholders previously expected the dividend to go up to $1.25 per share annually, but the company signaled that it was prudent to make less of an increase, considering the state of the energy business and the economy. Kinder Morgan also had posted a quarterly net loss after $950 million in noncash impairments of assets and goodwill. Kinder Morgan’s current yield based on the new payout is 6.9%.

Xilinx Hiked Its Dividend Despite Weak Trends

Xilinx Inc. (NASDAQ: XLNX) announced on April 22, along with earnings that were affected by the coronavirus, that its quarterly cash dividend was being raised by 2.7% to $0.38 per common share. The semiconductor maker also indicated that this reflects its commitment to growing the dividend. That said, Xilinx already had lagged its peer chip stocks ahead of the recession. Its current dividend yield is 1.75% based on the current share prices.

Newmont Corp. (NYSE: NEM) is the top gold player in the world, and gold has been hot while many assets classes in 2020 have been far from it. The company announced a new quarterly dividend payment of $0.25 per common share on April 21, 2020, and that is an increase of 79% from the prior $0.14 per share quarterly dividend.

Newmont was among the first of the larger gold companies to start paying a dividend, long before its Goldcorp-merger, and it has said in the past that its dividends would be tied to gold price bands. A forecast for a much higher gold price would likely bring even higher dividends ahead.

Travelers Bucks the Trends

Travelers Companies Inc. (NYSE: TRV) announced earnings of $2.33 net per share for its first quarter on April 21. Along with other key items was the announcement that Travelers was raising its dividend payout by 4% to $0.85 per share per quarter. Its prior payout was $0.82 and its new dividend yield based on the current share price is 3.2%.

The insurance and financial services giant, which we also call the “Dow stock no one knows is a Dow stock,” mentioned 16 consecutive years of dividend increases and a reflection of confidence in its business model in its press release.

Another Energy Win via High Yields

Delek Logistics Partners L.P. (NYSE: DKL) announced on April 21, 2020, that it was raising its quarterly cash distribution to $0.89 per common unit. This was only a 0.6% hike and took the distribution to $3.56 per unit on an annualized basis. While a small hike, not many players even in master limited partnerships (MLPs) are raising payouts in the energy sector these days.

This MLP also announced that it was reiterating its expectation to raise its distribution in 2020 by 5% over 2019 levels. Not all of this is an income distribution as is customary with MLPs, but that is close to a 19% yield equivalent when comparing MLP distributions to traditional dividends.

The Southern Dividend Goes North

Southern Company (NYSE: SO) announced on April 20 that it would raise its dividend by eight cents to an annualized $2.56 per common share. The electric and gas utility player claims to serve more than 9 million customers and shows that it is committed to dividend growth. To prove it, that has made 19 consecutive annual dividend hikes. The company now offers new investors a 4.4% dividend yield, and it is still down about 21% from its highs, with a $61 billion market cap.

Costco Proves Its Case as a Pandemic Spending Winner

Costco Wholesale Corp. (NASDAQ: COST) confirmed in mid-April 15 that its pandemic-driven sales boost was strong as customers continue to buy in bulk for their homes. Costco’s board approved a quarterly increase to $0.70 per share from $0.65 previously, with an annualized payout of $2.80 per share. Due to Costco trading at a premium against peers on earnings with higher price-to-earnings (P/E) valuations, and due to how much the stock has risen, this is currently only a 0.9% dividend yield.

Johnson & Johnson Keeps Delivering

Johnson & Johnson (NYSE: JNJ) announced a dividend hike by raising its payout 6.3% to a new $1.01 per share quarterly dividend. It may be a winner in some aspects of the coronavirus, but other business aspects may face pressure.  This defensive stock now yields close to 2.7%, and the mid-March dividend hike was the 58th consecutive year of dividend hikes. That makes it a double-Aristocrat, and it pays out close to half of its normalized earnings via dividends.

Get Our Free Investment Newsletter

I have read, and agree to the Terms of Use

Thank you for reading! Have some feedback for us?
Contact the 24/7 Wall St. editorial team.