While many folks are busy making their shopping lists for the holiday season, my readers and I have been busy making a different type of shopping list.
You see, each month I update my readers on what companies I think are likely to announce a dividend hike in the coming month. I scan the market for noteworthy dividend hi on the horizon, as well as for potential dividend hikes over the next four to six weeks. 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 readers of my premium newsletter, High-Yield Investing. Then, I share them with the public.
So without further delay, here are three potential dividend hikes I'm looking at right now...
1. Kimberly Clark (NYSE: KMB) – Kimberly Clark is one of the world's leading suppliers of diapers and feminine products. The company owns five different billion-dollar brands, with products on the shelves in more than 175 countries worldwide.
It has been estimated that one-fourth of the world's population uses KMB products on a daily basis. And that steady demand generates $18+ billion in annual sales. Despite rising commodity prices and foreign currency headwinds, the company just raised its outlook. It's now targeting earnings of $6.75 to $6.90 per share this year.
This should pave the way for a dividend hike in January. That would mark the 48th consecutive year of rising payments. A similar increase to last year would lift the quarterly payment to $1.06 per share and the yield to 3.2%.
2. Boeing (NYSE: BA) – This hasn't been the best year for Boeing or its shareholders. The commercial jet maker has seen its reputation marred by flight control software and hardware glitches on its 737 MAX aircraft, which led to two fatal crashes and a subsequent grounding by the FAA until the faulty equipment can be fixed.
Aside from the tragic loss of life, this has been a costly financial setback. But Boeing has an exceptional long-term safety record and will most assuredly learn from this rare mistake.
Just this month, the company landed an order from SunExpress for ten more 737 MAX planes valued at $1.2 billion. The Turkish airline had already ordered nearly three dozen previously and continues to show unwavering support. Shortly before that, Korean Air placed an order for twenty 787 Dreamliner jets worth $6.3 billion.
As it stands, Boeing has 5,500 commercial planes in its order backlog that will yield $387 billion in future revenue. And it's moving jets through the assembly lines more efficiently, with a delivery goal of 1,000 units next year.
At full speed, the company generates over $20 billion in annual operating cash flow. And it diligently returns the lion's share back to stockholders. Boeing hiked dividends by 20% last December, on top of a 30% surge in December 2017. Over the past six years, it has raised payouts by a cumulative 325% – while also repurchasing nearly 250 million shares.
There might be a dent in next year's cash flow. This is due to legal payments tied to the 737 MAX grounding as well as development costs for a new mid-size model. So I don't expect another hefty 20%-30% dividend increase. But this dominant manufacturer may have another hike in store – icing on the cake for a stock that has doubled from $180 to $360 over the past 30 months.
3. Air Products (NYSE: APD) – Air Products is one of the world's largest suppliers of industrial gases. This may not be the most glamorous industry, but APD has 170,000 hungry customers around the globe. And their supplies must frequently be replenished. Refineries, for example, need large amounts of hydrogen, welders use argon, and steel mills require oxygen.
With 750 production facilities, APD serves a wide range of clientele including hospitals, semiconductor foundries, and metals fabrication plants. Many are bulk customers served by on-site pipelines under long-term 20-year contracts.
EBITDA margins have marched steadily higher over the past five years, rising from 25% in 2014 to 35% in 2016 to 40% today. Earnings have climbed at a 13% pace over the same time frame. This drove quarterly dividends from $0.71 per share to $1.16.
With massive new projects underway from China to Saudi Arabia, management has just boosted its outlook. It now forecasts earnings to rise as much as 17% next year to $9.60 per share. Dividends are likely to follow suit, which would mark the 38th consecutive annual increase.
Look for an announcement in January.
Action To Take
Remember, just because these stocks are likely to increase dividends doesn't necessarily make them "buys." We won't be adding them to the High-Yield Investing portfolio right away without doing our own due diligence first, and neither should you.
That said, we'll be watching these names closely. 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.