3 Stocks That Could Hike Dividends In December
We’re starting to get into holiday mode — and that’s usually the time of year when things slow down in the market and investors turn their attention to more important matters.
That’s in a normal year, of course.
But there’s one thing that never changes — sometimes it’s just plain difficult for individual investors to keep up with everything.
But hey, that’s why I’m here.
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. Triton (Nasdaq: TRTN) – This one’s a done deal. Starting with the next scheduled payment on December 23, TRTN shareholders will collect $0.57 per share each quarter. That’s a 10% bump over the previous distribution of $0.52.
Triton owns the world’s largest fleet of leased shipping containers — over 6 million standard twenty-foot equivalent units (TEUs) – which are used to haul seaborne cargo from port to port around the globe. You might recognize that this is a former portfolio holding. I sold TRTN in early March at the onset of the pandemic – a worldwide economic lockdown isn’t exactly conducive to global trade.
In the days that followed, the stock sank from the mid-$30s to a low of $22.78 on March 11. But it has made a strong recovery in recent weeks and just broke out to a new all-time high. The rising tide of the market deserves some of the credit, but the real catalyst has been a sharp improvement in demand for shipping containers.
With forced lockdowns ending (or at least easing) across the U.S. and Europe, the volume of goods being shipped by container has risen faster than expected – eclipsing pre-Covid levels in China. Triton is seeing a spike in demand, with most of its customers (major shipping lines) adding capacity to keep up. Utilization of the company’s rental fleet of containers has climbed to 97.4%, with 500,000 TEUs booked under new leases last quarter.
Citing “exceptionally strong” demand, Triton has invested $800 million in new and used containers so far this year. That amount would be even higher, but manufacturing facilities haven’t been able to crank them out fast enough. The market for available containers is in a state of shortage, so shipping lines have become increasingly reliant on leases.
Booking levels haven’t just recovered, but set new record highs last quarter. And management sees a strong start to 2021, given the lack of spare capacity and elevated freight rates. In the meantime, earnings jumped 33% last quarter to $78 million, or $1.14 per share.
The balance sheet has also been solidified by a recent refinancing at the low rate of 2.2%, which retired existing borrowings at 3.8% — saving $25 million in annual interest expense. Relative to cash flows, debt currently stands near an all-time low.
With all this in mind, you can see why management had the confidence in these uncertain times to hike dividends by 10% – elevating the yield to 5.5%.
As for the long-term outlook, most of my previous bullish arguments still apply. The volume of blue jeans, bananas, furniture, and other goods being loaded into shipping containers is expanding at a steady 5% clip, with global annual port throughput tripling from 200 million TEUs in 2000 to 600 million today.
2. Mid-America Apartment Communities (NYSE: MAA) – Mid-America owns and operates 300+ apartment complexes containing more than 102,000 units. Most are located in desirable markets from Florida to the Mid-Atlantic region. Particular emphasis is placed on cities with strong population growth and job creation such as Orlando, Nashville, and Washington, DC.
Mid-America has enjoyed steady occupancy, rising rental rates, and an expanding portfolio. This has given the company the financial fortitude to make 107 consecutive quarterly dividend payments over the past quarter-century. Over that time frame, distributions have more than tripled.
Last year, I predicted an increase in the quarterly payout from $0.96 to $1.00 per share. And the company delivered – to the penny. The current annual payout of $4.00 per share throws off an above-average yield of 3.0%.
Like many landlords, Mid-America is working with tenants that have lost wages due to the pandemic, amending leases and waiving late fees in most cases. Resident turnover remains modest, with occupancy rates remaining north of 95%. Still, the company collected 98.6% of its rent payments last month. And funds available for distribution (FAD) actually rose to $139 million last quarter, or $1.17 per share.
That provides a healthy distribution coverage of 117% on the current dividend.
Mid-America has renovated over 3,300 units this year, adding smart home technologies and other upgrades. In turn, it has been able to reap a solid 9% increase in rental rates from these apartments. And with a strong, investment-grade balance sheet, I think we could see another modest dividend hike next month.
Action To Take
While Covid remains a wild card, the storm appears to have passed for TRTN. And with a higher dividend on the way, I just added it to our High-Yield Investing portfolio a few days ago.
Consider that one a freebie — I don’t usually like to reveal the names of our portfolio pick out of fairness to my premium subscribers.
But remember, just because I highlight stocks that 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.
All of these stocks are worthy candidates for more research as a potential addition your portfolio. But if you want to know about my absolute favorite high-yield picks, then you’ll need to be a member of High-Yield Investing.