2017 was excellent for sectors and industries like utilities, REITs and banking, which benefited from a rising interest rate environment.
If Goldman Sachs’ prediction is to be believed – that interest rates will rise four times in 2018 due to an unemployment rate that is already below levels Fed officials believe to be sustainable – then 2017’s standout performers will likely continue to stand out again in 2018.
As more baby boomers approach retirement age, good dividend-paying stocks that generate passive income are going to grow in demand.
Below, we’ve hand-picked 7 quality dividend-paying stocks that had stellar earnings in 2017 and have a positive outlook for 2018’s earnings. The companies highlighted below also have a healthy payout ratio, which leaves enough room for the companies to grow their dividends at a pace that keeps up with their earnings growth.
Dividend.com has a dedicated tool to track daily dividend-payout change announcements.
Apple’s (AAPL ) annualized dividend growth over the last 3 years has been 9.8%. This year, the company raised its dividend by 10.5%. Apple only initiated a dividend 5 years ago, thus, it has a payout ratio similar to companies that have just initiated a dividend. 2017’s EPS estimate is at $9.01, while 2018’s estimate is at $10.98, which is a massive 21.8% growth expectation. It’s very likely that Apple will hit $1 trillion in market cap next year given its low P/E ratio and that it will keep growing its dividend in 2018 and beyond.
If you are looking for more frequent dividend payers, check out Dividend.com’s monthly dividend-payers’ list.
Johnson & Johnson
Johnson & Johnson’s (JNJ ) annualized dividend growth for the last 5 years has been 7%. This year the company raised its dividend by 5%. JNJ has a very healthy payout ratio of 46%, leaving ample room for the company to grow its dividend. The company has increased its dividend every year for the past 54 years. 2018’s EPS estimate comes in at $7.71, while 2017’s is at $7.18, which is an estimated growth expectation of 7.3%.
As more baby boomers retire, the demand for healthcare is expected to surge in 2018 and beyond, which serves as a strong catalyst for the company to keep growing its dividend.
JNJ has consecutively increased its dividend for 25+ years. Find other Dividend Aristocrats here.
Lockheed’s (LMT ) annualized dividend-growth rate over the past 5 years has been 15.8%. This year the company raised its dividend by 9%. A 61% payout ratio leaves plenty of room for the company to grow its dividend. 2017’s earnings estimate came in at $12.63, while next year’s earnings are estimated to be $14.12, which is an 11.8% jump. 2018 will almost certainly see a dividend hike in the low double-digits.
The Senate has passed a $700 billion defense policy bill that calls for an increase in military spending, which will serve as a major tailwind in 2018. Lockheed is one of the largest defense contractors with much of its revenue coming from military sales.
Find out Lockheed’s next ex-dividend date in our Ex-Dividend Calendar.
Home improvement giant Lowe’s (LOW ) annualized dividend growth over the past 5 years has been 20.3%. This year the company raised its dividend by 17%. With a 36% payout ratio, there is ample room for the company to increase its dividend next year. 2018’s EPS estimate has come in at $14.12, which is 11.8% higher than 2017’s EPS estimate of $12.63.
During rising interest rates and rising home prices, home improvement is seen as an investment that can raise the price of your house. Hurricane season has become a yearly occurrence in the U.S., which has boosted revenue for the likes of Home Depot and Lowe’s.
Boeing’s (BA ) annualized dividend growth for the last 5 years has been 21%. This year the company increased its dividend by 30%. Boeing also has a sustainable payout ratio of 67%, which leaves enough room for the company to grow its dividend in 2018 if it delivers on the outlook that they gave this year. 2018’s EPS estimate stands at $10.82 vs. 2017’s EPS estimate of $10.02, which is an approximate growth expectation of 7.98%.
One can expect a dividend growth between the 15-20% range again in 2018, as air travel is expected to be resilient in 2018. Beyond 2018, the air travel market is expected to be 2.5 times larger over the next 20 years.
Get Boeing’s complete dividend history here.
Texas Instruments’ (TXN ) annualized dividend growth over the past 5 years has been 24%. This year the company raised its dividend by 24%. Texas has a 56% payout ratio, which leaves plenty of room for the company to grow its dividend. 2018 doesn’t show a lot of room for earnings to grow as estimates have come in at $4.30, which is only 4.12% higher than 2017’s EPS estimate of $4.13.
Semiconductors are never going to be front-page news, which serves dividend investors well as ‘boring is good’ when it comes to dividend investing.
The automotive industry is expected to drive growth in semiconductors in 2018 and beyond, as they become more high-tech.
Royal Caribbean Cruises
Royal Caribbean’s (RCL ) annualized dividend growth over the last 5 years has been a mind-boggling 74.2%, which is probably the highest growth any company has experienced since it re-initiated its dividend.
RCL had suspended its dividend in 2008. After a gap of 3 years, it re-initiated its dividend. Current payout ratio stands at 32.5%
This year the company raised its dividend by 25%. Next year’s earnings growth estimate has come in at 13.63%. (2018 EPS estimate is at $8.42 vs 2017 EPS which is at $7.41). RCL has been using technology to turn its cruises into a work of art. Investments in technologies such as robot bartenders are likely to cut costs and further improve its bottom line.
The Bottom Line
Find out what dividend investors are currently investing in by following our Most Watched Stocks List. Stocks mentioned on the list are likely to increase their dividends in 2018 and are currently being watched by the dividend investing community. Sign up for a Free Trial to get access to the top 15 most watched stocks and their DARS ratings, along with a dividend-specific newsletter delivered to your inbox daily.