As 2022 wraps up, many investors are likely looking for ways to position their portfolio for more macroeconomic uncertainty next year. After all, such uncertainty looms following a spike in inflation and rapid increases in interest rates from the Federal Reserve.
This is one reason why some investors may be considering strong dividend-paying stocks as potential investment options today. While quality dividend stocks may fluctuate in price, their payouts to shareholders often persist. Even more, dividend stocks regularly increase their payouts. This income stream helps offset some of the pain of stock price volatility during uncertain times.
Two compelling dividend stocks likely to announce meaningful increases to their quarterly payments in 2023 are Texas Instruments (TXN 5.64%) and Vail Resorts (MTN -1.65%). Here's a closer look at what to expect from these companies, as well as why their stocks may be worth a spot on your watch list.
Texas Instruments
With nearly two decades of consecutive annual dividend increases behind it, an underlying business that produces substantial cash flow, and a management team with a great track record of prudently returning cash to shareholders, another dividend hike from Texas Instruments in 2023 is pretty much in the bag.
The company's most recent dividend increase was announced in September. The semiconductor company raised its quarterly dividend by 8%, marking the company's 19th year in a row of dividend hikes.
Paying out less than 48% of its trailing-12-month earnings in dividends, Texas Instruments has plenty of room to increase its dividend again next year. So when September comes around, investors should keep an eye out for another increase.
In the meantime, Texas Instruments already pays out a substantial dividend. Its current quarterly payments translate to a dividend yield of about 3% -- well ahead of the average dividend yield of 1.8% for the stocks in the S&P 500 index.
Vail Resorts
Ski resort operator Vail Resorts has an interesting dividend history. Due to travel restrictions during the peak global lockdown period of the COVID-19 pandemic, the typically reliable dividend payer suspended its payment to shareholders. Ticket sales plummeted as travel restrictions negatively impacted demand. But it didn't take long for the company to reinstate its dividend, albeit at a lower level than before. Toward the end of 2021, Vail rolled out a quarterly dividend of $0.88. By early 2022, the company had increased its quarterly payment to an all-time high of $1.91 -- up from the $1.76 quarterly payment it boasted before the COVID-19 pandemic.
Vail's current dividend gives the company a substantial dividend yield of 3.2%. Better yet, Vail will lap its last annual dividend increase in March, making another dividend increase in the upcoming months likely. With the company guiding for earnings before interest, taxes, depreciation, and amortization (EBITDA) for fiscal 2023 to be between $893 million and $947 million, up from about $837 million in fiscal 2022, the company's financials can likely support another increase. Further, Vail made a habit of increasing its dividend annually in the years leading up to the pandemic. It's likely that management will resume this trend.
While investors shouldn't expect Vail's quarterly dividend to more than double again, it's reasonable to expect a dividend increase of around 10% or more in 2023. This would beef up an already nice dividend yield.
