One of the best facets of dividend stocks is that some of them not only pay out cash to shareholders on a regular basis but also jack up those payouts annually. These three companies are doing exactly that. In fact, all three just raised their dividends this month.
Here's a close look at American Express (AXP +1.75%), Texas Instruments (TXN +3.01%), and Fifth Third Bancorp (FITB +1.66%) and their just-announced dividend increases.
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American Express
|
Company |
Dividend Yield |
This Year's Dividend Increase |
Last Year's Dividend Increase |
|---|---|---|---|
|
American Express |
1.4% |
9% |
10% |
Data sources: Yahoo! Finance and company press releases. Table by author.
American Express may offer the lowest dividend yield of these three stocks. However, investors shouldn't overlook the credit card and financial services company just because of its relatively low 1.4% dividend yield.
As a high-quality stock that lives up to famed investor Warren Buffett's standards as one of Berkshire Hathaway's largest holdings, income investors who buy American Express not only get a growing dividend but also a reasonably priced, highly profitable financial services juggernaut with serious staying power.
American Express announced a 9% hike to its quarterly dividend on Tuesday. That was about in line with last year's 10% dividend rise. With a payout ratio of just 26%, investors should expect more increases for years to come.
Texas Instruments
|
Company |
Dividend Yield |
This Year's Dividend Increase |
Last Year's Dividend Increase |
|---|---|---|---|
|
Texas Instruments |
2.3% |
24% |
32% |
Data sources: Yahoo! Finance and company press releases. Table by author.
Semiconductor company Texas Instruments is a dividend stock to its core. The company prides itself on its long, uninterrupted dividend history, paying out dividends since 1962. Furthermore, the company has also set a strong precedent for dividend growth. Except for a period between 1998 and 2004, the company's dividend has steadily risen.
Reflecting the company's strong earnings growth recently, Texas Instruments has provided shareholders with big increases both this year and last. This year, the company pumped up its dividend by 24%. Last year, the dividend climbed by 32%.
Looking ahead, investors should expect more meaningful dividend growth. The company's relatively moderate payout ratio of 47% combined with its recent upward trajectory for earnings makes today's dividend conservative. But investors won't have to wait for dividend growth to get a nice dividend. Texas Instruments has a dividend yield of 2.3% today.
Fifth Third Bancorp
|
Company |
Dividend Yield |
This Year's Dividend Increase |
Last Year's Dividend Increase |
|---|---|---|---|
|
Fifth Third Bancorp |
2.1% |
14% |
8% |
Data sources: Yahoo! Finance and company press releases. Table by author.
Fifth Third Bancorp offers income investors a well-rounded investment option, including a solid 2.1% dividend yield and a low payout ratio of 28%, leaving plenty of room for dividend growth in the years ahead.
Fifth Third has emerged from the recession as a highly profitable bank, growing earnings per share at an average annual rate of about 10% between 2011 and 2016. The bank's below-average efficiency ratio should enable the company's return on equity to exceed its cost of equity over the long haul, leading to consistent earnings growth and, ultimately, consistent dividend increases.
