Are you looking for dividend stocks to buy? If so, make sure to consider stocks that also increase their payouts, or that are at least likely to do so. That way, you have an incentive to buy and hold the investments, and inflation won't take as big of a bite out of your dividend income over the years.
A couple of dividend stocks that raised their payouts last February and that could do so again this year are Coca-Cola (KO +6.27%) and Medical Properties Trust (MPW +0.68%). Here's why they make for good investments right now.
1. Coca-Cola
Soft drink giant Coca-Cola is among the safest dividend stocks you can own. Not only does this popular Warren Buffett stock pay a high yield of 2.9% (versus the S&P 500 average of 1.7%), but it also has an incredible streak of raising dividends that spans six decades, making it a Dividend King.
NYSE: KO
Key Data Points
Dividends are never a guarantee, but with that kind of track record, it would be more surprising if the company stopped raising its payouts than if it were to continue with them. Plus, the company's payout ratio sits at a manageable 76% of earnings, suggesting that there is room for more rate hikes.
It was on Feb. 17, 2022, that the company announced its most recent dividend increase. At the time, management said the dividend would be going up by $0.02, from $0.42 to $0.44, representing an increase of 5%. This year, investors could see a similar rate hike in the weeks ahead.
The company has been able to raise prices to offset inflation, and that hasn't hurt its business, as sales for the period ended Sept. 30, 2022, totaled $11.1 billion and rose 10% year over year -- and would have been even higher, if not for the negative impact from foreign currency.
With a business that's proving to be resilient despite inflation, it's hard not to like Coca-Cola's stock right now. At 24 times its future earnings (based on analyst estimates), the stock is trading a bit higher than the S&P average of 18, but the premium may be justifiable, given the stability and great dividend income investors have come to expect from the business.
2. Medical Properties Trust
Another stock that could announce a dividend increase in February is Medical Properties Trust. The real estate investment trust (REIT) does not have the same impressive track record as Coca-Cola does, but it did announce a rate hike the same time last year as the soft drink company. Medical Properties' rate hike last year was just a $0.01 increase to $0.29, representing a 4% increase to the payout.
NYSE: MPW
Key Data Points
Medical Properties has been raising its dividend payments since 2013. But with a dividend yield of around 9%, investors are likely concerned about whether it will continue to do so, given how high the payout is right now.
But when looking at the REIT's funds from operations (FFO) over the trailing 12 months, there looks to be plenty of room for the company to raise its dividend payments again and to keep its streak going:
MPW FFO Per Share (TTM) data by YCharts
Plus, profitability at hospitals should improve as COVID becomes less burdensome on the healthcare industry, which should lead to stronger margins. And that would make Medical Properties' portfolio safer as hospitals make up the vast majority of its tenants.
It's not as much of a slam dunk as Coca-Cola is, but Medical Properties is another stock that I expect will increase its payouts in February. At a forward price-to-earnings multiple of less than 11, the healthcare stock could be a bargain buy right now.
