As 2017 draws to a close, we take a look at five stocks that recorded some of the highest dividend increases this year. Some sectors and industries outperformed the others this year, like banking, aerospace and defense, and airlines. The five stocks that we’ve handpicked all belong to sectors and industries that have outperformed this year.
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5. Texas Instruments - 24%
Texas Instruments (TXN ) has increased dividend by 24% in 2017. Its previous payout was 50 cents per share, which now stands at 62 cents per share. This payout increase was announced in late October this year. Track TXN’s complete payout history here.
Texas Instruments generates great a amount of free cash flow and the company uses it to reward its shareholders in the form of capital returns. The company’s high margins and continued growth allow it to raise its dividend at a high rate. Last year, the company raised its dividend by over 30%. Texas Instruments has more than $3 billion in cash and marketable securities on the balance sheet. It can use this cash to raise its shareholder dividend going forward. Moreover, almost 80% of its cash on hand is held in the U.S.
Some concerns for TXN in 2018 surround its highly concentrated product portfolio. Texas Instruments’ entire business is based on analog and embedded processing, which does not provide the company the benefits of diversification.
As a global technology company, the company is highly sensitive to the health of the global economy. A global recession in 2018 would have a significant impact on the company, including the dividend paying potential.
Use the Dividend Screener to find high-quality dividend stocks. You can even screen stocks with DARS ratings above a certain threshold. Moreover, you can apply the ‘Advanced Dividend Screening’ criteria to filter out stocks that pay dividends within a specific range of ex-dividend dates. This is especially useful for those looking to implement the dividend capture strategy.
4. Boeing - 30%
In December 2016, Boeing (BA ) declared to raise its dividend by 30% with a record date of February 10, 2017. Its previous quarterly payout was $1.09 per share, which now stands at $1.42 per share. Most aerospace and dividend companies did well this year; however, BA was the biggest dividend increaser. As of September 2017, Boeing’s backlog remains strong with more than 5,600 airplanes worth more than $400 billion.
As a major industrial manufacturer as well, Boeing is a bellwether for the global economy and specifically the U.S. economy. The average dividend increase by Boeing over the last three years has been more than 31%. One can expect strong double-digit dividend growth again in 2018 as geopolitical risk remains elevated across the world.
Check out all stocks that have increased their dividends for 25 years in a row, on our 25-Year Dividend Increasing Stocks page.
3. Delta Airlines - 50%
Delta Airlines (DAL ) increased its dividend from 20.25 cents per share to 30.5 cents per share in August of this year and announced a $5 billion share repurchase program. Delta’s operating margins have been better than its peers American Airlines (AAL ) and United Continental (UAL ). Delta also has lower debt than its peers. Warren Buffett also bet big on airlines in late 2016 when he announced stakes in DAL, AAL, UAL and Southwest Airlines (LUV ).
Moving into 2018, if oil and gas prices continue to stay as they are, then fueling costs that, according to the International Air Transport Association, make up approximately 15% – 20% of the total cost for this industry should continue to remain low. This, in turn, can generate more cash flow for the company to distribute as dividends.
2. Bank of America - 60%
Bank of America (BAC ) increased its dividend by 60% this year. Its previous quarterly payout was 7.5 cents per share. In August of this year, it raised its dividend to 12 cents per share, after the Fed cleared banks to increase their dividends following a successful stress test. Banks are one of the major beneficiaries from rising interest rates. Higher interest rates will help accelerate Bank of America’s earnings growth in 2018.
Bank of America has a low dividend yield of 1.7%, which is below that of the S&P 500. This makes Bank of America a relatively unattractive choice for income investors. Slowing U.S. economic growth is a key concern for banks, including BAC that remains sensitive to the financial health of its consumer base. On the flipside, if the economy stays stable in 2018 and interest rates continue to rise, then BAC should continue to raise its dividend at a modest pace.
1. Citigroup - 100%
Citigroup (C ) along with Bank of America was another banking stock that announced a major dividend increase in 2017. Its previous payout was 16 cents per share, which was raised to 32 cents per share this year in August after the stress test conducted by the Fed gave Citigroup the green light. Citigroup also announced a share buyback plan after the stress test.
Much like Bank of America, Citigroup also has a yield of 1.67%, which is lower than the broader market averages. This makes it unattractive for income investors. However, If the economy continues to expand, Citigroup will continue to raise its dividend again in 2018.
The Bottom Line
Even though these are the top stocks that increased their dividends, dividend investors prefer other dividend stocks in their portfolio. Through our Most Watched Stocks List, we track the most popular dividend stocks that are currently being watched by dividend investors.
Also be sure to check out stocks that pay monthly dividends in our dedicated page that lists the pay date and ex-dividend dates of all stocks that announce monthly dividends.
Disclaimer: All the data has been verified on December 6, 2017