3 Stocks That Could Hike Dividends In July

Each month, I make a point to screen for stocks that are likely put more cash in your pocket. As Chief Investment Strategist of High-Yield Investing, it’s part of my job.

In each issue of my premium newsletter, I scan the market for potential dividend hikes. We’re looking for hikes likely to happen 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.

We’ve had a pretty good run of finding solid ideas from this exercise, so it pays to follow these ideas. Some of them pay off big time.

If you’re looking for a potential portfolio addition 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. Kroger (NYSE: KR) – I don’t know how many shopping carts your average Kroger store holds. 100? 200? However many, they were all in use the other day when I stopped in. Coincidentally, I was there to buy bread and milk, yet somehow walked out with $200 in groceries.

Is that a reason to buy KR? Of course not. But I’ll give you 122 billion other reasons. That was the grocery giant’s sales last year (even before the pandemic forced shoppers to start pillaging supermarkets). Even on a slow day, the company serves 10 million hungry customers.

While margins can be lean in this competitive business, Kroger pockets $3 billion in annual profits and maintains strong returns on capital. And with an investment-grade balance sheet, it has been rewarding stockholders with double-digit dividend increases since 2006. Last year’s hike was the 13th in a row, lifting payments by 14% to $0.16 per share.

These hikes are typically announced in July. With restaurants still at limited capacity and more families cooking, I see no reason why this pattern won’t play out again next month.

2. Illinois Tool Works (NYSE: ITW) – Founded over a century ago, this industrial manufacturer sells auto parts, welding equipment, restaurant ovens and coolers, and other specialized products. It’s not a terribly exciting field. But as I’ve said before, boring can be great.

ITW generates $15 billion in annual revenue and maintains best-in-class margins across many of its core product lines. Despite trade disputes, raw materials price inflation, and other headwinds, earnings continue to reach new highs, expanding 15% annually on average since 2013.

Keep in mind, management likes to return 50% of its profits to stockholders. So quarterly dividends have been climbing just as fast, most recently rising to $1.07 per share. That’s the 56th consecutive annual increase and puts the yield at about 2.5%.

That track record reflects an ability to navigate through economic downturns. ITT also has ample liquidity and routinely converts more than 100% of its net income to free cash flow. With that stout financial position, I think we’ll see yet another dividend hike before the end of the summer.

3. Norfolk Southern (NYSE: NSC) – For a “stodgy” railroad, NSC boasts one of the market’s faster-growing dividends. Quarterly payments have marched from $0.61 to $0.94 per share over the past three years – a healthy cumulative increase of more than 50%.

Norfolk Southern operates a network of 20,000 miles of track, most of which strategically link with busy East Coast shipping container ports. That vital transportation infrastructure helps facilitate the movement of chemicals, agricultural commodities, lumber, auto parts, construction materials, and other important goods.

Norfolk Southern serves key corridors such as New York to Chicago, and Cleveland to Kansas City. As you might expect, the shutdown of the national economy put downward pressure on freight tonnage, but loadings should begin to recover as activity picks back up.

As it stands, NSC yields about 2.1%. But I think NSC will reach a key threshold in 2020, returning over $1 billion in dividends to stockholders for the first time.

Action To Take

Remember, just because these stocks are likely to increase dividends doesn’t necessarily make them “buys.” These are merely ideas to get you started in the hunt for high yields.

Also, I’d like to extend an invitation… If you have any names on your watchlist that have announced dividend hikes, drop me a line. While I can’t answer each and every request, I’ll try to give my take on as many as I can.

While I can’t give personalized investing advice, I’m always on the lookout for good ideas. We have one of the savviest, sophisticated income investing communities in the country. So a little crowd-sourcing can be a good thing.

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.