3 dividend stocks likely to increase their payouts in April

By | March 29, 2024

Dividend growth stocks often follow predictable patterns of when their next increase will occur. As long as their financials remain strong and there is room for a dividend increase, there’s a good chance a company will increase its payout at about the same time as the year before.

Based on when they last increased their dividend payments, here are three stocks that are likely to announce dividend increases next month Costco Wholesale (NASDAQ: COST), Johnson & Johnson (NYSE: JNJ)And Procter & Gamble (NYSE:PG). Let’s take a closer look at their track records and see if these are good dividend stocks to buy today.

1. Costco Wholesale

Big-box retailer Costco doesn’t offer investors the highest yield of 0.6%, but it does make for an undervalued dividend investment. That’s because it occasionally surprises investors with a special dividend. Last year it announced a special dividend of $15 per share. That’s huge when you consider that the regular dividend pays out just $4.08 per share annually.

But the other reason it makes for a good dividend play is that Costco routinely increases its payouts. In April 2023, the company announced a 13% increase in its quarterly dividend, which now pays $1.02 per share. The dividend has more than doubled since early 2018, when the stock paid out $0.50 per quarter.

Costco’s modest 27% payout ratio makes it nearly impossible to announce another rate hike in April. While its returns may seem modest, long-term investors can still generate a lot of income from its dividends as the company has shown that it doesn’t hesitate to reward its shareholders through interest rate hikes and special dividend payments. Costco isn’t a cheap stock, trading at 48 times earnings, but if you buy and hold for decades, it could still be a great investment to add to your portfolio today.

2. Johnson & Johnson

Johnson & Johnson has been increasing its payouts for decades. It’s a Dividend King, and it would be big news if the company it didn’t increases dividend in April. Continued dividend increases are a major reason why investors buy and hold the stock, as it offers a fairly high yield of 3.1%, and the rate increases mean that investors can collect more dividend income in the future.

On April 18, 2023, Johnson & Johnson announced a 5.3% increase in its quarterly dividend. It was the 61st year in a row that the company increased its payout. Although the stock’s payout ratio is close to 90% (due to high litigation costs in 2023), Another interest rate increase is likely in April. The healthcare giant projects adjusted operating revenue growth of at least 5% in 2024 and adjusted profits to rise more than 6%.

While a rate hike is likely, this could prove to be one of the riskier dividend stocks given the ongoing talc lawsuits and the risks Johnson & Johnson faces on that front. And that’s the main reason why, while this may otherwise seem like a great stock to own, it may not be worth investing in right now.

3. Procter & Gamble

Top consumer company Procter & Gamble, known for popular brands such as Pampers, Bounty and Tide, has also built a reputation over the years as a growth stock with a top dividend. The impressive series of dividend increases even surpasses Johnson & Johnson. Last April, the company announced a dividend increase, extending the streak to the 67th consecutive year. The 3% increase to the payout was modest, but over five years the dividend has grown 31%.

Procter & Gamble’s payout ratio is around 63%, which is where you would expect the ratio to fall for a company that prioritizes dividends but also has a strong, growing business. At 2.3%, the return is still higher than that of the S&P500 on average 1.4%, while investors are given an incentive to maintain the expected interest rate increases.

Over the next twelve months, the company generated $14.5 billion in profits on revenues of $83.9 billion, for a solid profit margin of 17%. The stock trades at an estimated earnings multiple of 23, making Procter & Gamble a reasonably priced option for investors looking for a safe dividend stock to add to their portfolios today.

Should You Invest $1,000 in Costco Wholesale Now?

Consider the following before buying shares in Costco Wholesale:

The Motley Fool stock advisor The analyst team has just identified what they think is the 10 best stocks for investors to buy now… and Costco Wholesale wasn’t one of them. The ten stocks that survived the cut could deliver monster returns in the coming years.

Stock Advisor provides investors with an easy-to-follow blueprint for success, including portfolio building guidance, regular analyst updates, and two new stock picks per month. The Stock Advisor service has more than tripled the return of the S&P 500 since 2002*.

View the 10 stocks

*Stock Advisor returns March 25, 2024

David Jagielski has no position in any of the stocks mentioned. The Motley Fool holds positions in and recommends Costco Wholesale. The Motley Fool recommends Johnson & Johnson. The Motley Fool has a disclosure policy.

3 Dividend Stocks Likely to Increase Their Payouts in April was originally published by The Motley Fool

Leave a Reply

Your email address will not be published. Required fields are marked *