Please ensure Javascript is enabled for purposes of website accessibility
Free Article Join Over 1 Million Premium Members And Get More In-Depth Stock Guidance and Research

2 Companies About to Increase Their Dividends

By Daniel Sparks - Sep 4, 2018 at 7:23PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

These two cash cows will almost certainly announce dividend increases this month.

One of the best reasons to own dividend stocks is that many of them not only make regular payouts to shareholders, they also often increase their payouts on an annual basis. Two companies with a long history of dividend increases that are likely to announce dividend increases in September are semiconductor company Texas Instruments ( TXN -0.10% ) and fast-food giant McDonald's ( MCD 0.21% ).

Ahead of their likely dividend increase announcements later this month, here's an overview of each company's dividend, as well as a preview of what to expect from their latest increases.

A roll of hundred dollar bills with a sign that reads "DIVIDENDS"

Image source: Getty Images.

Texas Instruments

Company

Dividend Yield

Most Recent Dividend Increase

Texas Instruments

2.2%

24%

Data source: Reuters and company press releases. Table by author. 

Texas Instruments is a key part of management's strategy for building shareholder value, hence the company's sharp increases in the past few years. In 2016 and 2017, Texas Instruments increased its dividend by 32% and 24%, respectively.

"Dividend increases and share repurchases are both part of TI's capital management strategy and reflect the company's strong free cash flow generation and commitment to return excess cash to shareholders," management said in a press release last September, when the company increased its dividend and announced a $6 billion share repurchase authorization on top of the $4.6 billion that remained from its previous buyback authorization.

Texas Instruments has increased its dividend for 14 years in a row -- and another increase this year is all but certain given the company's continued strong free cash flow and a payout ratio of 53% that leaves room for further increases. Further, given TI's 42% year-over-year increase in trailing-12-month free cash flow, investors have good reason to expect a dividend increase on par with last year's.

McDonald's

Company

Dividend Yield

Most Recent Dividend Increase

McDonald's

2.5%

7%

Data source: Reuters and company press releases. Table by author.

Last year, McDonald's annual dividend increase saw a slight acceleration, with the fast-food chain announcing a 7% dividend increase. This compared to a 6% dividend increase in the prior year. The dividend hike was McDonald's 41st annual dividend increase in a row, highlighting management's commitment to its dividend payout. In addition, the dividend's accelerated growth rate was a reflection of McDonald's strong business performance leading up to the increase.

For McDonald's likely dividend increase this year, investors can expect the increase to rival last year's. McDonald's momentum has continued, with EPS rising 12% year over year in the company's most recent quarter, driven by a notable 4% increase in global comparable sales. Further supporting the case for another dividend increase is McDonald's conservative payout ratio of 51%. 

With both companies' dividend increases announced on Sept. 21 last year, investors will likely get an update on Texas Instruments' and McDonald's dividends soon.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Texas Instruments Incorporated Stock Quote
Texas Instruments Incorporated
TXN
$193.38 (-0.10%) $0.20
McDonald's Corporation Stock Quote
McDonald's Corporation
MCD
$249.33 (0.21%) $0.53

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
640%
 
S&P 500 Returns
139%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 12/03/2021.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Our Most Popular Articles

Premium Investing Services

Invest better with the Motley Fool. Get stock recommendations, portfolio guidance, and more from the Motley Fool's premium services.