The 30 stocks in the Dow Jones Industrials (DJINDICES:^DJI) have one thing in common: they all pay dividends. Most of them are good about increasing those payouts regularly, with a majority rewarding their shareholders with annual jumps in their dividend payments. As a result, it's possible to predict when Dow components are most likely to raise their dividends, and barring an unforeseen change in their usual practice, the companies most likely to be next to boost their payouts are Cisco Systems (NASDAQ:CSCO), Home Depot (NYSE:HD), Coca-Cola (NYSE:KO), and Wal-Mart (NYSE:WMT).
Cisco last raised its dividend in late March 2013, boosting its payout by more than 20% to $0.17 per share every quarter. That gives Cisco an impressive yield of 3.1%, ranking it among the top 10 Dow stocks by dividend yield. Cisco has been aggressive in boosting its dividend, having made its initial payout less than three years ago but raising it on three separate occasions since then. With a payout ratio below 40%, Cisco has plenty of room to make further increases to encourage shareholders to hold on as it struggles to grow in the increasingly competitive tech industry.
Home Depot made a massive dividend increase last February, boosting its quarterly payout by a dime to $0.39 per share. Yet given the high-flying home-improvement retailer's big share-price gains lately, even that large hike leaves Home Depot with a yield of less than 2%. The company started its recent string of annual increases back in 2010 after holding its payout steady throughout the financial crisis, and a payout ratio of 39% combined with anticipated further earnings growth gives Home Depot leeway to consider future increases.
Coca-Cola is a Dividend Aristocrat with a more than 50-year history of giving annual distribution increases to its shareholders. Last year's increase of slightly less than 10% came in late February, raising the soft-drink giant's quarterly payout to $0.28 per share. Slowing growth might seem like a concern for Coca-Cola's dividend prospects, especially as its payout ratio has nosed up to about 57%. But given the value of retaining Dividend Aristocrat status, investors can expect Coca-Cola to make at least a token dividend increase in the next month or two.
Wal-Mart gave investors a hefty raise of 18% last February, bringing the retail giant's quarterly payout to $0.47 per share and raising its yield to 2.4%. Like Coca-Cola, Wal-Mart qualifies as a Dividend Aristocrat, with this year slated to mark its 40th straight dividend increase if it follows through on past tradition. Wal-Mart's own growth woes have been well documented, but having made it through more than two years of falling same-store sales without letting its dividend streak end, it's unlikely that Wal-Mart will do anything to endanger that run in 2014.
Don't take dividends for granted
It's dangerous to assume that all of these stocks will definitely move forward with dividend increases. Until recently, Intel had done a reasonably good job of regularly raising its payouts, but the semiconductor giant has now gone since August 2012 without a dividend boost.
Nevertheless, given their track records, the odds are strong that these four Dow stocks will deliver the goods in the next couple of months. For investors who like dividends, every extra bit can make a difference in the total wealth your portfolio generates in the long run.
Why you should care about dividends
One of the dirty secrets that few finance professionals will openly admit is the fact that dividend stocks as a group handily outperform their non-dividend paying brethren. The reasons for this are too numerous to list here, but you can rest assured that it's true. However, knowing this is only half the battle. The other half is identifying which dividend stocks in particular are the best. With this in mind, our top analysts put together a free list of nine high-yielding stocks that should be in every income investor's portfolio. To learn the identity of these stocks instantly and for free, all you have to do is click here now.
Fool contributor Dan Caplinger has no position in any stocks mentioned. You can follow him on Twitter @DanCaplinger. The Motley Fool recommends Cisco Systems, Coca-Cola, Home Depot, and Intel. The Motley Fool owns shares of Coca-Cola and Intel. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.