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3 Dividend Stocks That Hiked Their Payouts by More Than 10% This Year

By David Jagielski – Oct 15, 2021 at 6:45AM

Key Points

  • Thermo Fisher Scientific, Procter & Gamble, and Kroger have all been generously increasing their dividend payments in recent years.
  • Two of these companies have made double-digit rate hikes for consecutive years.
  • While not all of them pay more than the S&P 500 average yield, that could change over time.

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And more rate hikes are likely in their future.

Dividend stocks that hike their payouts by generous amounts should definitely be on your watch list. If a company were to raise its dividend payments by 10% for more than seven years in a row, your dividend payment would double. That type of increase is by no means a guarantee, and a 10% rate hike could prove to be rare. But a company that makes such large increases is at the very least demonstrating a willingness to give back to shareholders. And it could be a sign that in periods of strong growth, there could be more generous rate hikes.

Three companies that boosted their payouts by double-digits this year that are suitable for risk-averse investors are Thermo Fisher Scientific (TMO -0.65%)Procter & Gamble (PG -0.41%), and Kroger (KR 1.33%).

A person giving money to their children.

Image source: Getty Images.

1. Thermo Fisher Scientific

In February, healthcare giant Thermo Fisher announced that it would be raising its quarterly dividend from $0.22 to $0.26, an increase of 18%. Last year, it also made a significant rate hike of 16%. While that is impressive, it's also important to note that the company has only been raising dividend payments consistently since 2018.

Despite these recent increases, Thermo Fisher's yield is still a minuscule 0.18% -- well below the S&P 500 average of 1.3%. The good news for investors is that it still has plenty of room for more increases. The healthcare company anticipates that for this year, its adjusted earnings per share will grow by 13% to $22.07 -- more than 21 times the rate of its dividend. During the first half of 2021, Thermo Fisher experienced strong revenue growth of 15% or better across all its major segments: life sciences, analytical instruments, specialty diagnostics, and laboratory products and services.

But dividends aren't the only way that Thermo Fisher rewards its investors. In September, it announced that its board of directors approved up to $3 billion worth of share repurchases (with no expiration date). This can be a way for the company to help boost its shares if it deems them to be undervalued. Year to date, the stock has risen 23%, outperforming the S&P 500, which is up by 16%.

2. Procter & Gamble

Consumer goods company Procter & Gamble is a household name and a safe investment to hang on to for years. Its portfolio includes big names like Pampers, Tide, Bounty, Gillette, and many others. It makes for your typical, boring stock to own. But there's a great reason to hold P&G shares in your portfolio: the dividend.

Currently, it yields 2.5% and offers a much better payout than Thermo Fisher. And unlike the healthcare company, this business has an incredibly long track record of dividend increases. With its current streak at 65 years, this is an elite dividend stock, even among Dividend Kings. In 2021, it raised its payouts by 10%, from $0.7907 to $0.8698. Those types of rate hikes aren't typical for P&G -- its previous rate hikes were 6% in 2020 and 4% in 2019.

Although future rate hikes are probable (its payout ratio is less than 60%), when it released its most recent quarterly results, P&G warned that rising costs (due to commodities) will affect its profitability in the near term. That could impact the size of the increase next year, or however long those headwinds remain. During the period ending June 30, P&G reported 7% growth in net sales. Its top line of $18.9 billion beat expectations, as did its per-share profit of $1.13.

Even if that type of growth may not persist in a post-pandemic world where people aren't stockpiling on essentials, there's little doubt that P&G will continue raising its payouts and keep its dividend streak going.

3. Kroger

Grocery stores are normally great options for income investors. That's because just like consumer goods businesses, they are essential and have a constant, recurring flow of revenue. While there may not always be much in the way of top-line growth, there's usually plenty of long-term stability. And that's no exception with Kroger.

The company has been remarkably consistent this year, with revenue of $73 billion through the first two quarters of the year up a modest 1.3% from the same period in 2020. It forecasts that its adjusted diluted per-share profit will be within a range of $3.25 and $3.35 -- easily enough to cover its annual dividend payments that total $0.84 per share. 

Kroger pays a yield of 2.1%, which got a boost this year with the company raising its dividend payments by more than 16%, from quarterly payments of $0.18 to $0.21. What's surprising is that since 2018, Kroger has been increasing its payouts by more than 10%. During that time, the company's dividend jumped 68% from $0.125. Its recent rate hike was a bit more generous than usual, but it hasn't been completely out of the norm for management.

For these reasons, Kroger is an excellent option for risk-averse investors looking for a safe stock to buy and hold forever.

David Jagielski has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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