Please ensure Javascript is enabled for purposes of website accessibility

2 Top Dividend Stocks That Just Hiked Their Payouts by 10% or More

By David Jagielski – Dec 13, 2021 at 6:53AM

Key Points

  • Amgen and Bank of Montreal are quality dividend stocks that provide investors with attractive yields of more than 3% per year.
  • The companies recently announced double-digit rate increases to their already high payouts.
  • Even with the generous rate hikes, both stocks are in excellent positions to continue increasing their dividends.

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

And there could be even more increases in the future.

Whether you're a retiree or just someone who doesn't want to watch stocks all day, a good dividend stock can be a great investment. Money keeps flowing into your portfolio, and you can use that extra cash however you want. But you don't want to settle for any dividend stock. Instead, you should target companies that plan to increase their dividend payments over time.

Amgen (AMGN 0.10%) and Bank of Montreal (BMO 0.89%) are two solid dividend growth stocks to consider. And when they announced rate increases recently, they proved generous, bumping their payouts up by double digits. What's great is that there could be even more dividend increases from these two companies in the future.

A person counting money in their living room.

Image source: Getty Images

1. Amgen

On Dec. 3, drugmaker Amgen announced that it would be raising its dividend by a lofty 10%. The healthcare company doesn't have a long track record of paying dividends -- only going back to 2011 -- but it has been regularly increasing them since then. From quarterly payments of just $0.28 a decade ago, the company will now be paying its shareholders $1.94 for every share that they own. With the increase, investors will now be earning a dividend yield of 3.3% -- well above the S&P 500 average of 1.3%.

Although the pandemic has negatively impacted the company, Amgen said in its latest earnings release that it is seeing a "gradual recovery," suggesting that there is a return to normality taking place. And even despite the challenges, the company is forecasting that for 2021 its earnings per share will come in between $9.55 and $10.21. That's well above the company's new annual dividend of $7.76 per share, and would put it at a payout ratio of less than 80% if it were to maintain that same level of profitability next year.

In all likelihood, the company's profits will grow. In May, the Food and Drug Administration approved Lumakras, a non-small cell lung cancer drug that analysts project could become a blockbuster and generate annual revenue of $1.4 billion by 2023. The growth in that drug's sales plus a hopeful return to normally scheduled doctor's visits next year could make 2022 a great year for Amgen. And for investors, that could mean another potentially generous increase, making this an ideal stock to hold on to for the long haul.

2. Bank of Montreal

A top bank stock always makes for an attractive dividend option for investors, and Bank of Montreal is no exception.

In November, Canada's banking regulator, the Office of the Superintendent of Financial Institutions, lifted restrictions on the country's banks (and insurers), allowing them to raise dividends again (restrictions were in place since March 2020 due to the pandemic). Bank of Montreal wasted no time in doing so, announcing a whopping 25% increase in its quarterly payouts just a month later (rivals Canadian Imperial Bank of Commerce and Toronto-Dominion Bank also announced rate hikes in December, but they were much more modest at around 10% and 13%, respectively). At $1.33 Canadian dollars per share, the increase allows Bank of Montreal investors who buy the stock today to earn a yield of around 3.9%. The last time the company raised its payouts, in early 2020, the hike was a lot more modest, rising from CA$1.03 to CA$1.06, for an increase of 2.9%.

The big increase, which is likely to make up for the gap between previous rate hikes, was made possible by the strong year that Bank of Montreal has enjoyed. On Dec. 3, the top Canadian bank released its fourth-quarter results, and net income for the period ending Oct. 31 totaled CA$2.2 billion, rising by 36% year over year. For the full year, the company's bottom line soared by an even more impressive rate of 52% to CA$7.8 billion. Not only did revenue of CA$27.2 billion increase by a solid 7.9% this past fiscal year, but the company recorded minimal provisions for credit losses. At just CA$20 million, they paled in comparison to the CA$3 billion in provisions the company recorded in the previous fiscal year due to concerns about the coronavirus pandemic. Now, with a brighter outlook for the economy, Bank of Montreal hasn't had to record such large provisions, and that has bolstered its profit significantly.

Bank of Montreal recorded a diluted per-share profit of CA$11.58 in fiscal 2021, which is more than double its annual dividend of CA$5.32, and that's with factoring in the recent increase. Although investors shouldn't expect another big increase in the bottom line this year (since a large part was due to the change in credit provision charges), I wouldn't be surprised if the dividend increases continue in 2022 and beyond.

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

Premium Investing Services

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