3 Stocks That Could Hike Dividends In September

Even during the Covid-19 pandemic, companies are raising their dividend payments to shareholders. Kind of remarkable when you think about it.

But that’s what you get when you have a stable business model, rising cash flows, and a management culture that’s committed to rewarding shareholders year after year.

As you may know, 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. Ideally, I’m looking for hikes that could happen over the next four to six weeks. I also highlight noteworthy special distributions on the horizon.

We don’t do this just for fun. In a perfect scenario, we find great ideas for consideration in our premium portfolio… Companies posting 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 so that they can research them and get a head start. Then, I share them with the public.

We’ve had a pretty good run of finding solid ideas from this, so it pays to follow along each month. Some of them end up paying off big time.

If you’re looking for a potential addition to your income portfolio, then 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. Microsoft (Nasdaq: MSFT) – What can you say about Microsoft that hasn’t already been said? Sure, the company still rakes in more cash from its ubiquitous Windows architecture and Office products in a month than most software companies could dream of in a year. But it’s the Azure cloud computing division that is propelling the company to new heights.

Commercial cloud revenue has climbed by more than 30% over the past 12 months, surpassing the $50 billion mark for the first time. Gaming is another bright spot, with 100 million Xbox live players driving revenue up 65% last quarter. And thanks to sky-high gross margins near 70%, the software giant is returning $9 billion to stockholders every three months.

Microsoft likes to boost dividends in September. A similar increase to last year would lift the quarterly payout to $0.56 per share, or $2.24 annually.

2. Texas Instruments (NYSE: TXN) – Many companies can claim to have raised dividends in each of the past five years. But only a select few have increased them by 200%. TXN is one of them. Last year’s 17% hike lifted the payout to $0.90 per share – triple the $0.31 level from 2015.

Thanks to efficient manufacturing, TXN is enormously profitable, turning every dollar of sales into nearly 40 cents of free cash flow (FCF). That FCF generation ranks in the 91st percentile, outperforming more than nine out of every 10 U.S. companies. And returns on invested capital have risen to the top of the charts (97th percentile).

As a key holding in my former Daily Paycheck advisory, I’ve watched Texas Instruments consistently return 100% of FCF to stockholders. Management intends to deliver between 50% and 60% via annual dividends (right in my sweet spot) and the rest through continued stock buybacks to shrink the share base even further.

While Covid has taken a bite out of analog chip sales in certain end markets (namely the automotive sector), demand has been on the upswing in recent weeks. Meanwhile, free cash flow of $5.7 billion over the past 12 months is roughly on par with the same period last year.

I suspect TXN has another nice dividend surprise in store for investors next month.

3. McDonald’s (NYSE: MCD) — I thought it fitting to include McDonald’s in this month’s roundup. There’s something to be said for brand loyalty, and the Golden Arches stays packed with devoted customers morning, noon, and night.

The typical location generates about $2.6 million in annual sales – more than double the industry average for quick-serve restaurants. And there are nearly 40,000 locations worldwide. Independent franchisees own 95% of those stores, feeding the parent company a steady, annuity-like stream of cash.

After 43 straight years of dividend hikes, this Dividend Aristocrat is now serving up $900 million in dividends ($1.25 per share) each quarter. And starting next month, that payout just might approach the $1 billion mark.

The relentlessly rising share price has kept yields below 2.5% (not that shareholders mind). But that rate could inch closer to an above-market 3% with another hike in late September.

Action To Take

As always, remember that 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.

With that said, we’ve got three very solid candidates this month. It’s hard to find any reason to knock any of these names other than the fact that their relentlessly rising share prices might leave a little to be desired in the yield department. But each has a history of raising payouts consistently — so you could end up with a nice “yield on cost” in just a few short years. They’re all worthy candidates for the core of your portfolio.

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.