3 Stocks That Could Hike Dividends In February
Part of my mandate as Chief Investment Strategist of High-Yield Investing is to find stocks that will put more cash in your pocket. It’s that simple. And as the end of another month approaches, that means it’s time for my monthly check-in on companies that are likely to do just that…
If you’re new to this, here’s how it works… In each issue of my premium newsletter, I scan the market for potential dividend hikes over the next four to six weeks. We also highlight noteworthy special distributions on the horizon. I give special attention to outsized double-digit increases and reliable dividend-payers that have been steadily growing payouts for a decade or more.
I flag these stocks first for my premium readers. Then, I share them with the public. It’s that simple.
If you’re looking for potential portfolio additions to research further, I can’t think of a better place to start. So without further delay, here’s what I’ve found this month…
3 Upcoming Dividend Hikes
1. Amgen (Nasdaq: AMGN) – Amgen is a leading global biotech developer with special expertise in cancer research and renal failure (kidney disease) treatments. Its biggest blockbuster is the anti-inflammatory drug Enbrel. This is used primarily for rheumatoid arthritis, which is in the top-five worldwide with over $5 billion in annual sales.
Amgen hauled in more than $23 billion in total revenue last year. And with a highly efficient manufacturing platform, it converts every dollar of sales into 50 cents of free cash flow. That profit margin is off the charts, allowing for generous returns to stockholders.
Amgen has one of the strongest dividend growth trajectories around. Over the past five years, quarterly distributions have surged from $0.79 to $1.45 per share, an increase of 83%. Meanwhile, the share price has marched from below $160 to $240 over the same time frame.
With a flurry of new product launches to combat patent erosion and bio-generic competition, analysts expect earnings to top $14 per share this year. That doesn’t include any contribution from Otezla, a top psoriasis drug. This was just recently acquired from Celgene and is available in more than 50 countries.
With a confident outlook and a modest payout ratio, dividends will soon climb by about 10% to $1.60 per share, or $6.40 annually. While the rising share price has kept a lid on the yield, that’s still good for a market-beating yield of 2.65%.
2. Vail Resorts (NYSE: MTN) – Vail is the corporate parent of 37 winter playgrounds. That includes its namesake resort, along with others such as Breckenridge, Beaver Creek, Keystone (Colorado), Stowe (Vermont), and Lake Tahoe’s Heavenly. Aside from lift tickets and equipment rentals (which seem to get pricier every year), the company has a lodging division that owns and manages thousands of slope-side condos.
For a company associated with speeding downhill, Vail’s dividends have been rising at a steep trajectory. They typically ratchet higher in the first quarter, most recently jumping by 20% to $1.76 per share. That’s an impressive four-fold increase from where they stood in 2014. (Shares currently pay nearly 3%.)
Through early December, season ticket sales are running 17% ahead of last year’s pace. Between lift tickets, ski school, dining venues, and retail, management is anticipating more than $800 million in cash flow in 2020.
That bodes well for another dividend hike next month.
3. Air Products and Chemicals (NYSE: APD) – APD is a leading global supplier of industrial gases. The company provides oxygen, nitrogen, and carbon dioxide, as well as rarer gases such as neon and xenon. These products are marketed to many fields, including aerospace, food/beverage, metals fabrication, and healthcare.
With stronger sales volumes and pricing, Air Products has expanded its profit margins by 400 basis points over the past year. The company just posted a healthy 10% earnings increase in 2019. That growth rate could accelerate to as much as 17% in 2020. Even the low-end of guidance would project to a 14% increase to $9.60 per share.
With a healthy balance sheet and strong cash flow, I fully expect this Dividend Aristocrat to lift distributions next month. That would mark 38 straight years of rising dividends. A similar increase to last year would bump the quarterly payout to $1.22 per share.
Action To Take
Remember, just because these stocks are likely to increase dividends doesn’t necessarily make them “buys.” We won’t be adding them to the High-Yield Investing portfolio right away without doing our own due diligence first, and neither should you. That said, we’ll be watching these names closely.
In the meantime, if want to know about my absolute favorite high-yield picks, then I invite you to check out my latest report right here.