As many of you know, each month I dedicate an article to informing you about stocks that are poised to put more cash in stockholders' pockets.
I scan the market for noteworthy special distributions on the horizon, as well as potential dividend hikes on the way over the next four to six weeks. I give special attention to outsized double-digit increases and reliable dividend-payers that have been steadily growing payouts for a decade or more.
I flag these stocks before the official announcements are made, not after, giving you a head-start. (And my High-Yield Investing readers get an even bigger lead on this information, as you hopefully understand.)
If you've read previous articles where I've projected dividend raisers for the next month, then you know my track record on predicting these dividend increases is pretty good -- and so are the subsequent gains posted by the stocks we've covered. So you'll want to pay particular attention to this month's candidates.
Here they are...
1. Microsoft (Nasdaq: MSFT) – What can you say about Microsoft that hasn’t already been said? Sure, the company still rakes in more cash from its ubiquitous Windows architecture and Office products in a month than most software companies could dream of in a year. But it’s the Azure cloud computing division that is propelling the company to new heights.
Microsoft just closed out fiscal 2019 with a powerful 39% surge in fourth-quarter commercial cloud revenues, which topped $38 billion for the year. Overall gross margins climbed to sky-high levels near 70%, allowing the company to return approximately $30 billion to stockholders. And fiscal 2020 is expected to bring healthy double-digit growth in operating income.
Microsoft likes to boost dividends in the fall. A similar increase to last year would lift the quarterly payout to $0.50 per share, or $2.00 annually.
2. Eaton Vance (NYSE: EV) – Traditional money managers have been watching money slip through their fingers as assets shift from active funds to passive indexes. But Eaton Vance has bucked the trend. The company’s assets under management (AUM) have expanded to $470 billion, reflecting $11.9 billion in net inflows and $17.9 billion in market appreciation over the past 12 months.
While management fees have compressed, this is still a tidy pile of assets earning recurring daily income. And industry headwinds haven’t stopped Eaton Vance from raising dividends by 40% over the past five years. Those hikes typically come in October, and the next one could elevate the yield to the 4% mark.
3. VFC Corp (NYSE: VFC) – VFC is the parent company of several popular outdoor and active lifestyle brands, including Northface, Timberland, Lee, Wrangler and Vans. With prominent placement at retailers across the country, the company has generated over $1 billion in cumulative free cash flow over the past three years.
About 60% of that is targeted for dividends, with the remainder used to eliminate debt and strengthen the balance sheet – two activities commonly associated with market-beating returns. This Dividend Aristocrat has reliably raised its dividend for 46 consecutive years, including hefty double-digit hikes in both 2017 and 2018.
Despite a challenging retail environment, VFC just reported a strong 24% increase in online sales last quarter. Fresh off the spinoff of Lee and Wrangler, management has also upped its full-year outlook and is expecting earnings to rise between 16% and 18% ($3.32 to $3.37 per share).
I think we’ll see a 47th-straight dividend hike next month.
Action To Take
Remember, just because these stocks are likely to increase dividends doesn't necessarily make them "buys." We won't be adding them to the High-Yield Investing portfolio right away without doing our own due diligence, and neither should you. That said, we'll be watching these names closely. If any of these stocks interest you, then I'd suggest doing the same. In the meantime, if want to know about my absolute favorite high-yield picks, then I invite you to check out my latest report right here.