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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:
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:
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.
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.
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.