3 Stocks That Could Raise Dividends In March

Each month I make a point to screen for stocks that are likely put more cash in your pocket in the form of dividends. 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. 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 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. While there are no guarantees, with a set-up like that, our chances for success should be pretty good.

If you’ve followed along with us, then hopefully you’ve benefitted from these ideas in the past. Some of them end up paying off big time.

So if you’re looking for a potential addition to your income portfolio, I can’t think of a better place to start. Without further delay, here’s what I’ve found this month…

3 Upcoming Dividend Hikes

1. Best Buy (NYSE: BBY) – Just five years ago, Best Buy stock was languishing near $30 and the electronics retailer was viewed as a mere showroom for customers to window shop before purchasing items online. Not anymore. The company has successfully reinvented itself, as evidenced by a quadrupling of the stock to $120.

Concurrent with this transformation is a steady upward climb in dividends. Quarterly payouts have been rising at an impressive 14% annual clip, doubling from $0.28 to $0.55 per share. Increases have been approved in March in each of the past five years.

Could that streak be extended again next month? Most likely.

The pandemic hasn’t dented Best Buy’s financials. Comparable same-store sales last quarter ran 23% ahead of the prior year’s pace. Revenues for the full fiscal year will likely top the $40 billion mark once again. Meanwhile, general overhead expenses have fallen by nearly 200 basis points (from 20% of sales to 18%), so the bottom line has been climbing even faster.

Operating income is up 30% year-to-date to $1.4 billion. And management has temporarily curbed share repurchases, leaving more cash on the table for dividend distributions.

Best Buy has made great strides in its digital sales channel. But in-store traffic has been resilient as well, with customers showing strong interest in “products that help people learn, work, connect and cook at home”. Most notably, that includes big-ticket items such as kitchen appliances and home theater systems.

Keep in mind, before the pandemic struck, Best Buy posted 12 straight quarters of positive “comps” and was on track to lift revenue to $50 billion by 2025. That will keep the swiftly-rising dividends on an uphill trajectory.

2. General Dynamics (NYSE: GD) – There are good customers, there are great customers, and then there’s the Pentagon. The U.S. Military spends colossal sums of money each year to equip our fighting forces. The 2021 federal budget has set aside $740 billion in national defense spending.

For perspective, that’s more than the GDP of Finland and Hong Kong, combined. A few billion here. A few billion there. It’s a windfall for defense contractors such as General Dynamics, which lands plum contracts for everything from Abrams tanks to advanced weapons systems to nuclear submarines.

General Dynamics enters 2020 with a book-to-bill ratio of 1.8. This means for every $1.00 in products shipped out the door, it received $1.80 in new incoming orders. Huge contract awards (particularly in the aerospace and marine divisions) have driven the firm’s backlog to $89 billion – a new record high.

How many businesses have nearly $90 billion in future revenues already inked and on the books? And it continues to win new contracts, most recently a $3.3 billion order from the U.S. State Department for overseas IT work.

GD generated $2.2 billion in free cash flow last quarter – or 221% of reported net income. That allowed management to eliminate $1.7 billion in debt, plow $300 million back into the business, and distribute $315 million in dividends.

I think we’re looking at another dividend hike within the next few weeks. If so, it would be the 24th straight annual increase, putting GD just one more away from achieving dividend aristocracy.

3. UPS (NYSE: UPS) – You may have seen more brown delivery vans out on the road than usual the past few months. A few of them may have even dropped off a parcel or two on your doorstep.

UPS just capped off the best year in its history, notching new record highs in both revenues and earnings. The company somehow exceeded its already optimistic fourth-quarter guidance – which called for a staggering 32 million package deliveries per day during the holidays.

UPS serves more than 90% of the nation’s largest online retailers, many of which are enjoying unprecedented demand of their own as consumers avoid crowds and do more shopping from the comfort of home. UPS is also chipping in with vaccine delivery efforts.

Domestic revenues registered a healthy 17% uptick last quarter, but UPS is seeing even stronger growth abroad – where average daily volume jumped 22%. The company finished out 2020 with $5.1 billion in free cash flow, $3.6 billion of which was returned to shareholders via dividends.

With the e-commerce boom showing no signs of slowing, the board has just approved another uptick in the dividend to $1.02 per share. At $4.08 annually, that bumps the yield to an above-average 2.5%.

Action To Take

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.

With that said, 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.

To learn more, check out my latest report right here.