If you're in the market for dividend stocks, put these three companies on your watchlist. Two well-known income stocks -- Philip Morris (PM +0.36%) and U.S. Bancorp (USB +3.28%) -- and one lesser-known small-cap -- Progress Software (PRGS 9.34%) -- just announced increases for their quarterly dividends.
Here's what investors should know about each of these companies' dividend increases.
Image source: Getty Images.
Philip Morris
|
Company |
Dividend Yield |
This Year's Dividend Increase |
Last Year's Dividend Increase |
|---|---|---|---|
|
Philip Morris |
3.7% |
2.9% |
2% |
Data sources: Yahoo! Finance and company press releases.
Leading international tobacco company Philip Morris, known for its consistently fat dividend yield, announced a 2.9% increase to its dividend last week. Notably, this increase represented an acceleration from the company's 2% dividend hike last year.
Philip Morris has increased its dividend each year for the last 10. During this period, the company's dividend has compounded at an average growth rate of 9.8%.
Though Philip Morris' dividend yield of 3.7% is nice, the company's high payout ratio of 88.2% explains why its dividend increases have been lower in recent years than the dividend's compound average growth of 9.8% in the past 10 years.
U.S. Bancorp
|
Company |
Dividend Yield |
This Year's Dividend Increase |
Last Year's Dividend Increase |
|---|---|---|---|
|
U.S. Bancorp |
2.3% |
7.1% |
9.8% |
Data sources: Yahoo! Finance and company press releases.
U.S. Bancorp announced 7.1% increase to its dividend last week. The dividend increase was lower than the bank's dividend increase of 9.8% last year, reflecting U.S. Bancorp's higher payout ratio recently. Though U.S. Bancorp's payout ratio of about 34% is reasonable for a bank, it has risen steadily recently -- up from about 32% at the end of 2016 and 31% at the end of 2014.
This is U.S. Bancorp's seventh year in a row of increasing its dividend.
U.S. Bancorp currently has a dividend yield of 2.3% -- well below Phillip Morris', but above the average dividend yield of stocks in the S&P 500 of 2%.
Progress Software
|
Company |
Dividend Yield |
This Year's Dividend Increase |
Last Year's Dividend Increase |
|---|---|---|---|
|
Progress Software |
1.5% |
12% |
N/A |
Data sources: Yahoo! Finance and company press releases.
Along with announcing better-than-expected preliminary financial results for its third quarter earlier this month, Progress also said its board had approved a double-digit increase to its dividend, boosting it by 12%. The increase sets an important precedent for how the company may approach dividend increases in the future, as it marks Progress' first-ever dividend increase.
As a small-cap application development company, the company started paying a dividend just last year. "Our confidence in the strength of our business and free cash flow generation enable us to expand our capital allocation strategy in meaningful and lasting ways," CEO Phil Pead said last year when the dividend was first initiated.
Along with its dividend increase, management also set a target to pay out 25% to 30% of Progress' annual cash flow from operations in dividends, giving investors some transparency into its dividend policy.
Progress has a dividend yield of 1.5%.
While Philip Morris and U.S. Bancorp offer investors a steady and predictable dividend, investors may want to spend some extra time analyzing Progress before they make up their minds on the younger company's dividend's sustainability.
