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 -1.23%) and fast-food giant McDonald's (MCD 0.38%).
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.
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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.
