These 2 Top Stocks Just Declared Dividend Raises

In the past few days, we've seen a clutch of dividend raises. This isn't surprising, as we're now in the thick of earnings season. And one nice fringe benefit of many an earnings release is an accompanying dividend announcement.

We've recently seen raises from a pair of stock market heavyweights, healthcare and consumer goods mainstay Johnson & Johnson (JNJ -0.83%) and credit card giant American Express (AXP 0.45%). Read on for my take on these two companies and their recent dividend bumps.

1. Johnson & Johnson

There is one big question mark next to the dividend of healthcare and consumer goods giant Johnson & Johnson: What does its future look like?

This is a major concern, as the company is not only a stalwart in its various business lines, it's also one of the market's most reliable dividend raisers. It has a lift streak of 61 years and counting, one of the top runs of any publicly traded U.S. company.

However, what was Johnson & Johnson only days ago is now two companies. One is essentially the legacy pharmaceutical and medical devices business, which retains the same name, while the other is Kenvue (KVUE 1.43%), its brand-new consumer health products spinoff.

Johnson & Johnson has said that, like itself, Kenvue will pay a healthy quarterly dividend. This should yield 3.7%. However, there isn't much clarity about the future of Johnson & Johnson's existing payout (which, by the way, was set at a new quarterly rate of $1.19 in April, 5% higher than its predecessor).

For two key reasons, I feel Johnson & Johnson will keep its dividend raise streak alive.

Firstly, its dividend is the main draw for many investors, and even though the company has had its struggles lately, it's still very profitable and has more than enough free cash flow (FCF) to fund it. Secondly, Kenvue was previously the smallest of the three Johnson & Johnson business segments, responsible for only around 15% of overall company revenue. So the spinoff shouldn't affect FCF enough to put the payout at serious risk.

Meanwhile, Johnson & Johnson's share price is down considerably from its level at the beginning of the year. Plus, existing shareholders have been promised stock in Kenvue -- and its dividend -- later in 2023. So now feels like a good time to buy into Johnson & Johnson.

The company's new $1.19 per-share quarterly distribution will be paid on June 6 to investors of record as of May 23. It would yield 2.9% at the latest closing share price.

2. American Express

Investors also shouldn't worry about the future of rock-solid American Express, one of the sturdiest and best-known brands in the payment card world. It's also a sturdy and well-known dividend payer, handing out a quarterly distribution on a regular basis. In early May it declared a fresh dividend raise, pushing said distribution a robust 15% higher to $0.60 per share.

Investors are somewhat jittery about financial stocks these days, thanks to recent bank collapses and rescues. Amex is a victim of this sentiment too, since it's a closed-loop payment card operator. In card industry-speak, this means a company that functions as the issuer, processor, and brand behind the credit on its plastic. By contrast, open-loop companies -- exemplified by Visa and Mastercard -- are processors and branders only; third parties like banks are the issuers extending the credit.

Those fretful investors shouldn't lose sleep over Amex. The company continues to grow, which is very admirable given its age and size. In fact, in its recently reported first quarter, it notched an all-time high revenue figure for that period. This was just under $14.3 billion, 22% higher year over year. Net income fell by 13%, true, but it still landed well in profitable territory at over $1.8 billion.

Amex is benefiting from strong increases in spending by its card "members" (a fancy term for "holders"), in addition to bigger takeup of premium products. What helps greatly is that the company has a tight grip on its niche of relatively affluent, freer-spending consumers who like the many perks offered by its hallowed rewards program. 

Analysts like the cut of Amex's jib, too. On average, they're forecasting more double-digit growth for the entirety of 2023 -- specifically, a 16% improvement in annual revenue over the 2022 figure. Net income should start heading north again, rising by 13% on a per-share basis.

Amex's upcoming dividend yields a theoretical 1.6%. It's to be handed out on Aug. 10 to stockholders of record as of July 7.