It's that time again -- where I make an informed prediction on what companies could announce a dividend hike in the coming month.
As a refresher, I scan the market for noteworthy special distributions 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 my premium High-Yield Investing readers, and then share them with the public.
Here's what I'm looking at right now...
1. Starbucks (NYSE: SBUX) – You gotta love the fall. The air is suddenly crisp and the leaves begin to turn. The World Series gets underway. And cash generators like Starbucks reward their faithful shareholders with dividend hikes.
The upscale coffee vendor raised its distributions to $0.25 from $0.20 per share in November 2016 and then to $0.30 in November 2017. Last year's increase came a bit early (in August), lifting the payout to $0.36 per share. Perhaps management just couldn't wait to surprise investors. At the time, it upped its capital return program by $10 billion, pledging to return $25 billion in capital to shareholders by the end of 2020.
August came and went this year, so it looks as if we're back on track for a customary fall increase. And it will likely be another aggressive one.
With 30,000 locations, it may seem as if the industry is saturated. But growth opportunities abound. Management intends to open another 2,000 units next year, most of them in overseas markets such as China. In the meantime, domestic same-store sales growth is running at a healthy 7% pace, and active membership of Starbucks Reward customers has swelled by 14% to 17 million.
Given the modest payout ratio around 50%, there's a strong chance we'll see the dividend march above $0.40 per share soon.
2. Cintas (NYSE: CTAS) – Cintas is a leading supplier of company uniforms, delivering freshly laundered ones to businesses each week. The company also sells ancillary products such as janitorial supplies. It has more than a million customers, mainly in the hospitality, healthcare and foodservice industries.
This isn't a glamorous field, but demand is remarkably steady. In fact, Cintas has increased revenues and profits in 48 of the past 50 years. That growth has fueled one of the market's most impressive dividend track records. The company has hiked payouts every year since 1983, increasing at a 22% clip over the past five years.
Since 2015, distributions have nearly doubled to $2.05 per share from $1.05.
Cintas makes only one dividend payment a year. But it's coming up soon. Management is clearly pushing all the right buttons right now. CTAS shares have climbed from $165 at the beginning of the year to $250 today.
And with 2020 earnings expected to rise another 10% to around $8.40 per share (yet another record), there is ample room for another sizeable 20%-plus hike.
3. JP Morgan (NYSE: JPM) – This massive banking institution has come a long way since the dark days of the financial crisis. It was forced to slash dividends to a nickel per share back in 2009. But less than two years later, the distribution was hiked five-fold to $0.25 per share – and it has been climbing ever since.
Last year brought a hefty 40%-plus increase to $0.80 per share. There's no need to speculate about 2019. Management recently unveiled its capital return plan for the year ahead. The cat may be out of the bag, but don't let that dampen your enthusiasm – that's because the planned payout is extraordinarily generous.
In fact, it's among the largest in U.S. history.
Beginning this month, JP Morgan intends to return $40 billion (with a 'b') to stockholders through a combination of dividends and share buybacks over the next year. That includes upping the quarterly dividend to $0.90 per share, or $3.60 annually ($11 billion). And for every dollar of dividends, it will dedicate nearly three dollars ($29 billion) to buybacks.
According to Forbes, the bank has generated average annual profits of $19.7 billion over the past decade and returned about 63% of the take ($12.4 billion) to stockholders. Citing its "fortress-like" balance sheet, management is clearly taking it up a few notches this year.
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.