2 Stocks That Could Raise Dividends In May
Longtime readers know that we make a habit each month of featuring stocks that are set to put more cash in investors’ pockets. It’s part of my job over High-Yield Investing, my premium newsletter. 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.
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.
This month, I have two stocks I’d like to highlight. If you’re looking for a potential addition to your income portfolio, I can’t think of a better place to start. Here’s what I’ve found this month…
2 Upcoming Dividend Hikes
1. Medtronic (NYSE: MDT) — Based in Dublin, this medical device maker sells a wide range of medical tools and surgical instruments to healthcare facilities in 150 countries. And it has been a model of consistency, boasting 44 straight years of uninterrupted dividend hikes.
Will we get another? The odds are good, especially given the firm’s prodigious cash generation and ambitious new product launch schedule. Medtronic took in $7.7 billion in revenue last quarter and churned out $1.8 billion in profits. Earnings ticked up 6% to $1.37 per share, enough to cover the quarterly $0.63 dividend two times over.
While ventilator sales have slacked off a bit from the Covid peaks, the return to normalcy has also ended the widespread deferral of elective surgical procedures. Medtronic’s sales often exhibit a high correlation to surgery volumes.
Source: Yahoo Finance
The company typically sets dividend policy in May (the end of the fiscal year). Quarterly payouts have stepped up from $0.54 to $0.58 to $0.63 since 2020 and could be headed up again next month, possibly to $0.68 per share.
2. Camping World (NYSE: CWH) — Camping World is the nation’s premier vendor of travel trailers and other recreational vehicles, sold through 200 dealerships nationwide. Incidentally, a few of these locations are owned by Store Capital.
The pandemic may be winding down, but Americans’ newfound love of the outdoors continues to heat up. As discussed last month, RV manufacturers have been struggling to meet demand, with wholesale shipments soaring to a record-shattering 600,000 units last year.
Camping World has been a key beneficiary, producing nearly $7 billion in revenues over the past 12 months. The top line has increased by 26%, and with margins expanding, the bottom has risen even more, shooting up 88%.
Management has three top priorities for all that cash.
1.) Grow the Business
2.) Repurchase Shares
3.) Return capital to shareholders via dividends.
Before Covid, investors were accustomed to seeing quarterly payouts of $0.15 per share, split 50/50 between regular and special dividends. But distributions ratcheted up to $0.25 last May and then doubled to $0.50 a few months later. And they’re headed even higher.
The board recently approved an increase to $0.625 per share, which coupled with an overdone selloff in the stock, has elevated the yield to 8.8%. Those distributions are supported by earnings of $6.88 per share, for a moderate payout ratio of 36%. Rising EBITDA has also reduced leverage, although there is still a fair amount of debt on the balance sheet.
Source: Yahoo Finance
Despite record-breaking earnings, this industry leader is trading at less than five times earnings. This one should merit serious consideration for risk-tolerant investors.
Action To Take
We’ve had a pretty good run of finding solid ideas from this exercise, so it pays to follow along each month. Some of them end up paying off big time. So if you’re looking for a potential addition to your income portfolio, then I can’t think of a better place to start your research…
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.
If you want to know about my absolute favorite high-yield picks, you need to check out my latest report…
In it, you’ll find 5 “Bulletproof Buys” that have weathered every dip and crash over the last 20 years and STILL handed out massive gains. And each one of them carry high yields, with dividends that rise each and every year. Go here to check it out now.