As my High-Yield Investing premium subscribers know, I make it a point to keep readers abreast of potential dividend increases on the horizon in the coming weeks.
Considering many stocks pop on a dividend hike, I prefer to give my readers actionable ideas before the announcement, not after. (Although if there is a noteworthy increase that has already just been confirmed, I sometimes share those as well.)
February brings a fresh batch of prospects. When narrowing down the field, I look for several traits such as superior dividend growth and proven longevity. By those measures, we've got a good group this month.
1. Coca Cola (NYSE: KO) -- Some investors think of Coca-Cola as a one-trick pony, but that couldn't be further from the truth. Yes, the flagship product is still one of the world's most popular and widely-distributed beverages, sold in 200 countries around the globe.
But it's just one of a growing portfolio of 21 billion-dollar brands, including Dasani water, Powerade sports drinks, Gold Peak sweet tea, and Simply Orange fruit juice. The company has also just made a leap into the hot beverage market with the $5 billion acquisition of Costa, the top coffee brand in the United Kingdom. Costa is available in more than 30 countries and has a retail footprint of 4,000 locations.
Keep in mind, this Dividend Aristocrat has already hiked payments for 56 straight years and now dishes out more than $6 billion annually. I expect to see that streak extended next month. A similar increase to the last one would lift the quarterly payout to $0.41 per share.
2. Genuine Parts Company (NYSE: GPC) -- This auto parts supplier (owner of the NAPA brand) has a history of raising distributions in the first quarter, having done so in each of the past five years. The latest was a 7% increase that lifted the annual dividend to $2.88 per share.
The company enters 2019 with some momentum, having produced a healthy 14% sales growth last year. But that's nothing new. Genuine Parts has increased annual sales 85 times in its 90-year history (raising dividends for 62 straight years).
With thousands of parts superstores and service centers across North America and Europe, the company is in prime position to benefit from the trend of people driving their cars longer (vehicles over six years require 50% more maintenance spending annually than newer vehicles).
I expect to see another dividend hike approved next month, lifting annual payments to the $3.00-per-share level.
3. T Rowe Price (Nasdaq: TROW) -- It has been a tough stretch for many money managers, as investors siphon assets away from traditional mutual funds and deposit them in passive exchange-traded funds (ETFs). But T. Rowe Price bucked the trend and attracted $2.7 billion in net inflows last quarter, raising its assets under management (AUM) to $1.08 trillion.
Of course, that figure will deviate from month to month with market performance. Still, it helps when 81% of your funds have outperformed their respective category median over the past five years. The company generated $1.2 billion in investment advisory fees last quarter, a healthy increase of 15%.
It's worth noting that T. Rowe Price is also debt-free and has $5.2 billion in cash and equivalents. And the company has raised dividends for 32 straight years -- the last hike being a meaningful 23% increase in February 2018 to $0.70 per share or $2.80 annually. Odds are good we'll see another dividend hike within the next month.
4. Amgen (Nasdaq: AMGN) -- Amgen is a leading global biotech developer with a diverse product portfolio and promising development pipeline. The company has special expertise in cancer research and renal failure (kidney disease) treatments. Its biggest blockbuster is the anti-inflammatory drug Enbrel, used primarily for rheumatoid arthritis, which is in the top-five worldwide with annual sales of nearly $8 billion.
Amgen hauled in more than $23 billion in sales last year. And with a highly efficient manufacturing platform, it converts every dollar of revenue into 50 cents of free cash flow. That profit margin is off-the-charts, allowing for generous returns to stockholders.
Amgen has one of the strongest dividend growth trajectories around. Between February 2014 and February 2018, annual distributions surged from $2.44 per share to $5.28 per share, an increase of 116%. Meanwhile, the share price marched from $124 to $183 over the same time frame.
With a flurry of new product launches to help combat patent erosion and bio-generic competition, earnings are expected to approach $15 per share in 2019. That could pave the way for another hefty dividend increase next month.