After years of a low interest rate environment, many investors have turned to equities not only for the growth potential but also for solid and dependable dividends, which help to provide an income stream. What this equates to is total return, which is one of the most powerful investment strategies going.
We like to remind our 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%: a 10% for the increase in stock price and 3% for the dividends paid.
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Four top large-cap companies that are Wall Street favorites are expected to raise their dividends this week, so we screened our 24/7 Wall St. research universe and found that all are rated Buy at some of the top analysts. While it is always possible that not all four do indeed raise their dividends, analysts expect them to, and generally the data is based on past increases in the firm’s dividend payouts.
It is important to remember, though, that no single analyst report should be used in making a buying or selling decision.
A.O. Smith
The Baird team thinks this off-the-radar pick has big upside potential. A.O. Smith Corp. (NYSE: AOS) manufactures and markets residential and commercial gas and electric water heaters, boilers, tanks and water treatment products in North America, China, Europe and India.
The company offers water heaters for residences, restaurants, hotels and motels, office buildings, laundries, car washes and small businesses, as well as residential and commercial boilers for space heating applications in hospitals, schools, hotels and other commercial buildings. Its water treatment products include on-the-go filtration bottles, point-of-use carbon and reverse osmosis products, point-of-entry water softeners and whole-home water filtration products for residences, restaurants, hotels and offices.
It also provides food and beverage filtration products; expansion tanks, commercial solar water heating systems, swimming pool and spa heaters and related products and parts; and heat pumps, combi-boilers, solar tank units and air purification products.
A.O. Smith shareholders currently receive a 1.61% yield. The company is expected to raise the dividend to $0.28 per share from $0.26.
Last week, Baird upgraded the shares to Outperform from Neutral, and it has an $85 price target The posted consensus target is $75.67, and shares traded at $65.00 early Tuesday.
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IDACORP
This is another lesser known stock with outstanding potential for more conservative investors. IDACORP Inc. (NYSE: IDA) engages in the generation, transmission, distribution, purchase and sale of electric energy in the United States. The company operates 17 hydropower generating plants located in southern Idaho and eastern Oregon and three natural gas-fired plants in southern Idaho, and it has interests in two coal-fired steam electric generating plants located in Wyoming, Nevada and Oregon.
As of December 31, 2020, it had approximately 4,833 pole-miles of high-voltage transmission lines; 23 step-up transmission substations located at power plants; 21 transmission substations; nine switching stations; 31 mixed-use transmission and distribution substations; 186 energized distribution substations; and 28,201 pole-miles of distribution lines.
The company provides electric utility services to approximately 587,000 retail customers in southern Idaho and eastern Oregon. It serves commercial and industrial customers that are involved in food processing, electronics and general manufacturing, agriculture, health care, government and education.
Shareholders currently receive a 2.79% yield. The company is expected to raise the $0.71 per share dividend to $0.75.
Sidoti’s Buy rating comes with a $101 price target. The $111.75 consensus target is higher, and shares traded at $99.40 Tuesday morning.
International Paper
If one product never goes out of style, despite digital age advances, it is this company’s main seller. International Paper Co. (NYSE: IP) operates as a paper and packaging company, primarily in the United States, the Middle East, Europe, the Pacific Rim and elsewhere. It operates through three segments.
The Industrial Packaging segment manufactures containerboards, including linerboard, medium, whitetop, recycled linerboard, recycled medium and saturating kraft. The Global Cellulose Fibers segment provides fluff, market and specialty pulps that are used in absorbent hygiene products, such as baby diapers, feminine care, adult incontinence, and other non-woven products. It offers tissue and paper products and non-absorbent end applications, including textiles, filtration, construction material, paints and coatings, reinforced plastics and other applications.
The Printing Papers segment produces printing and writing papers, such as uncoated papers for end-use applications comprising brochures, pamphlets, greeting cards, books, annual reports and direct mail, as well as envelopes, tablets, business forms and file folders. It sells its uncoated papers under the Hammermill, Springhill, Williamsburg, Postmark, Accent, Great White, Chamex, Ballet, Rey, Pol and Svetocopy brands.
The current dividend yield is 3.79%. International Paper’s dividend is expected to be raised to $0.525 per share from $0.5125.
The $80 Stephens price target on the Overweight-rated stock is well above the $66.49 consensus target. The stock recently traded at $55.55 a share.
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Sensient Technologies
Hedge funds have been buying the shares of this top stock. Sensient Technologies Corp. (NYSE: SXT) develops, manufactures and markets colors, flavors and other specialty ingredients in North America, Europe, the Asia Pacific and elsewhere.
The company offers flavor-delivery systems and compounded and blended products; ingredient products, such as essential oils, natural and synthetic flavors and natural extracts; fragrance products; and chili powder, paprika and chili pepper, as well as dehydrated vegetables comprising parsley, celery and spinach, to the food, beverage, personal care and household-products industries.
Sensient Technologies also provides natural and synthetic color systems for use in foods, beverages, pharmaceuticals and nutraceuticals; colors and other ingredients for cosmetics, such as active ingredients, solubilizers and surface-treated pigments; pharmaceutical and nutraceutical excipients, including colors, flavors, coatings and nutraceutical ingredients; and technical colors for industrial applications under the Sensient Food Colors, Sensient Pharmaceutical Coating Systems, Sensient Cosmetic Technologies and Sensient Industrial Colors trade names.
Shareholders currently are paid a yield of 1.72%. The $0.39 per share dividend is expected to rise to $0.42.
Stephens has an Overweight rating and a $110 price target. The consensus price objective is just $96.75, and the stock traded at $89.65 on Tuesday.
These four top companies are expected to lift the dividends they pay to shareholders, and their stocks are rated Buy across Wall Street. 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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