As 2018 is only weeks away, we take a look at the top sectors that increased dividends in 2017. Companies that regularly increase their dividend payout could offset the negative effect of stock price appreciation on their dividend yield. It also shows that the company is investor-friendly and wants to reward shareholders.
Major talking points of 2017 include low oil prices, banks getting the Fed’s nod for clearing stress tests, Donald Trump’s “America First” policy, elevated geopolitical risks and an interest rate tightening environment.
These events had a positive impact on REITs, banking, aerospace & defense, technology and the airlines industry, which announced significant dividend increases this year.
Below, we have highlighted the key sectors that witnessed a meaningful rise in dividends.
Dividend.com has a dedicated tool where you can track every company that has increased/decreased its dividend on a date by date basis.
2017 was a year in which interest rates were hiked three times by the Fed. Interest rate tightening is both good and bad for REITs. REITs typically finance their property acquisition through a lot of debt. Debt as a proportion of their capital structure is higher for REITs compared to other industries. This tends to put pressure on REITs’ income statements as interest expenses on those debt increases. As a result, income left for distribution in the form of dividends can decrease.
At the same time, higher interest rates mean more Americans continue to rent rather than purchase a property of their own. This also means occupancy rates of REITs should continue to climb during a rising interest rate cycle.
REITs with a high DARS rating that increased their dividends this year include:
- Digital Realty Trust (DLR ) increased its dividend from 88 cents per share to 93 cents per share in March of this year.
- W.P. Carey Inc (WPC ) had a modest increase in its dividend of 1% from 99 cents per share to $1 per share in June this year.
- Mid-America Apartment Communities (MAA ) increased its dividend payout in January from 82 cents to 87 cents per share.
- P.S. Business Parks (PSB ) increased its payout from 75 cents per share to 85 cents per share in March, representing an increase of more than 13%.
Technology as a sector has never been known to pay massive dividends. In fact, some of the biggest names such as Facebook, Amazon, Netflix and Alphabet have never paid a dividend before. However, those stocks that recently initiated a dividend or those stocks that have been paying a dividend for quite some time raised their payouts in double digits.
Some of the standout performers this year are as follows:
- Apple (AAPL ) initiated a dividend in 2012 and has, ever since, grown it by 600%. The company had an excellent 2017 as it increased its dividend by more than 10%. Apple is speculated to enjoy its best-ever year in terms of iPhone sales as the company sold 3 million units in 20 mins on launch day.
- Cisco (CSCO ) has three product areas that are sources of strength for the company. These are data centers, wireless and security, all of which posted revenue growth in 2016. The company has $70 billion of cash and investments, compared with $30 billion in long-term debt. It has excess cash on the balance sheet, which it can deploy through share buybacks and dividends to enhance shareholder returns. It announced an increase in its dividend from 26 cents per share to 29 cents per share in April of this year, which is an increase of 11%. Get Cisco’s complete dividend-payout history here.
- Microsoft (MSFT ) is engineering a successful turnaround, in its cloud business. Microsoft is seeing strong growth across other product categories, such as tablets and video gaming. The company is growing sales of its Surface and Xbox devices.The company is still highly reliant on the personal computer, but global PC sales continue to decline. It will need to further its shift into cloud-based computing. This year, the company increased its payout from 39 cents per share to 42 cents per share, which is an increase of 7.6%.
Find out all the companies that have increased their dividends for more than 25 consecutive years, in our 25-Year Dividend Increasing Stocks page.
The Fed this year gave the green light for 34 banks that have the capital buffer needed to keep going in case an economic downturn hits. This was the first time in 7 years that all 34 banks were granted permission to increase their dividends and announce share buybacks. The nations top 5 banks by assets all increased their dividends after the Fed’s clearance.
- Citigroup (C ) doubled its payout from 16 cents per share to 32 cents per share in August.
- Bank of America (BAC ) increased its dividend from 7 cents per share to 12 cents per share in August of this year, which was an increase of 71%.
- Goldman Sachs Group (GS ) increased its dividend from 65 cents per share to 75 cents per share in May, which was an increase of 15%.
- J.P. Morgan Chase & Co (JPM ) increased its dividend twice this year. Its dividend on January 4 was 48 cents per share. In April this year it went up to 50 cents per share and in October this year it increased by 12% to 56 cents per share.
- Wells Fargo (WFC ) increased its dividend by more than 2%. Its previous payout was 38 cents per share, while its new payout is 39 cents per share, which was announced in August.
On a dividend-increase basis, banking stands out, but it lags on several other parameters such as dividend yields and payout ratios, which has kept investors at bay as they prefer to invest in companies that have a healthy yield, even if their payout increases aren’t that great.
The Bottom Line
A lot of the stocks mentioned above are currently being watched by the dividend investing community, which we track through on the Most Watched Stocks page. Aerospace & defense, REITs and technology have been standout performers on that list.
Be sure to visit our complete list of the Best Dividend Stocks.