It's the start of a new year and for many dividend-growth stocks, it's also time to raise dividend payments. As long as their performances are strong and their outlooks remain good, companies that have increased their payouts over the years will likely continue to do so. That's what these three stocks did in February. Plus, all three of these stocks currently pay dividends that are much higher than the average S&P 500 yield of 2% per year.
1. Gilead Sciences
Gilead Sciences (GILD -0.23%) released its fourth-quarter and year-end results on Feb. 4. The healthcare stock reported a solid $5.4 billion in net income on revenue of $22.4 billion. The biotech company develops a variety of drugs for serious diseases, including hepatitis B and hepatitis C, as well as HIV, which is where the company sees a lot of its growth. However, both revenue and net income showed little increase from the prior year. But 2019 was still a strong year, and it was good enough for the company to announce on the same day that it would grow its dividend payments by 8%.
The company will now pay shareholders $0.68 every quarter, up from the previous payment of $0.63. Gilead has only paid dividends since 2015, but it has been increasing them annually. Initially paying $0.43 every quarter, its payouts have risen by 58% in less than five years, averaging a compounded annual growth rate (CAGR) of about 9.6%. With the current rate increase, investors who buy shares of Gilead today will earn 4% in dividends per year.
In 2019, shares of Gilead rose by just 4% while the S&P 500 soared 30%.
Image source: Getty Images.
2. 3M
3M (MMM -0.42%) produces tens of thousands of items, including adhesives, sealants, surgical tape, stethoscopes, and many other products. Consumers from all over the world and in various industries use 3M's products, making it a very strong global brand. The company reported its fourth-quarter earnings on Jan. 28. The company fell short of expectations as both revenue and net income were down for the full year. 3M also announced restructuring that would involve eliminating approximately 1,500 positions as it looks to have a "streamlined organizational structure."
Despite the uninspiring results, the Dividend Aristocrat continued its streak of dividend increases in February, announcing that it would raise its dividend for the 62nd straight year. Although it's a nominal increase of 2%, the company will now pay shareholders $1.47 in quarterly dividends, up from the $1.44 it distributed every three months in 2019.
Five years ago, 3M was paying a quarterly dividend of $1.025, meaning that payments have increased by 43% since then, for a CAGR of 7.5%. With the increase, 3M is now paying a dividend yield of 3.7% per year. The company is coming off a challenging year in 2019 when its stock price fell by 7.4%.
3. Suncor Energy
Suncor (SU 0.48%) is a large energy provider in Canada that produces natural gas, oil, and wind-generated electricity. The company also has four refineries, including three in Canada and one in Colorado. The company released its year-end results on Feb. 5 and despite challenges in the Canadian oil and gas industry, the Alberta-based energy company announced it had a strong performance in 2019, generating record funds from operations totaling 10.8 billion Canadian dollars. The company also reported operating earnings of CA$782 million during the fourth quarter, which was an improvement from the CA$580 million it earned in the same period last year.
The same day, Suncor announced it would renew its share repurchase program, so it can buy back up to CA$2 billion in shares beginning March 1. The current program expires at the end of February and the company was authorized to repurchase CA$2.5 billion worth of shares.
The company also announced that for the 18th straight year, it would be increasing its dividend. Suncor will now be paying shareholders a quarterly dividend of CA$0.465, up from the previous amount of CA$0.42. The company's dividends are up 66% in five years, with quarterly payments in 2015 at a more modest CA$0.28. That equates to a CAGR of 10.7% during that time. Suncor's annual dividend yield is now up to 4.6%, the highest on this list. Its stock is doing well too, rising 17.3% in 2019.
Which dividend stock is best for your portfolio?
All three stocks listed here can provide investors with a steady stream of dividend income. If you have to pick just one stock, however, then I'd suggest going with 3M. The conglomerate has a diverse business that provides stability and it's hard to argue with a company that has a streak of increasing its payments for 62 straight years. Something would have to go drastically wrong for the company to interrupt that streak, and that doesn't look to be happening anytime soon, making it a great long-term investment for income investors.
