Investing in dividend growth stocks is one way to create a life-changing passive income portfolio for retirement.
Dividend growth stocks are typically well-established companies that consistently grow their profits year after year. They predictably give shareholders a raise every year as their profits climb. And over time, they can produce market-beating returns.
Over the last 50 years, stocks that initiated and increased their dividend outperformed the market with less volatility, according to research from Hartford Funds. So adding a few solid dividend growth stocks to your portfolio could provide a nice boost to your long-term returns.
Here are three dividend growth stocks that could raise their dividends in January.
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1. Comcast
Comcast (CMCSA 1.85%) has raised its dividend for 15 straight years, typically announcing the new dividend payment with the release of its fourth-quarter earnings results. The company will release the results of its 2023 fourth quarter on Jan. 25.
While Comcast sits on a ton of debt, about $95 billion, that's balanced by its massive cable business, which produces stable recurring revenue.
Total dividend payments amounted to $3.6 billion over the first nine months of 2023, barely moving higher from the previous year thanks to Comcast's share repurchase program. Comcast bought back $7.8 billion worth of shares during the first three quarters. Combined, the two amount to practically all of its free cash flow.
The dividend is protected by the aggressive share repurchases and strong free cash flow at Comcast. Therefore, investors should expect yet another dividend increase when the company announces its fourth-quarter results.
2. Chevron
Chevron (CVX 0.37%) has increased its dividend for 36 straight years, managing through tough economic environments, including the recent Russian invasion of Ukraine and the COVID-19 pandemic before that. That's largely owed to management's focus on keeping its balance sheet in tip-top form.
The company keeps a relatively low debt level most of the time compared to its peers, and it keeps its capital expenditures in check. It's well positioned to generate strong free cash flow from its existing assets, and a plan to acquire Hess in an all-stock deal could provide a boost to earnings and free cash flow next year.
Total dividend payments amounted to $8.5 billion through the first nine months of 2023, up slightly from $8.3 billion in 2022. Share repurchases accelerated to $11.5 billion, using up excess cash on the balance sheet while it works to turn around free cash flow growth. With expectations for lower capital expenditures and higher margins in the future, investors should expect a strong recovery in free cash flow generation.
Investors should see yet another dividend increase when Chevron announces its fourth-quarter financial results.
3. BlackRock
BlackRock (BLK 0.69%) has increased its dividend every year but one since initiating it in 2003. The lone year it didn't raise the dividend? 2009, following the Great Recession.
BlackRock's balance sheet looks fantastic, with $7.1 billion in cash and $4.7 billion in unencumbered investments relative to about $7.9 billion in long-term debt. As an asset manager, BlackRock is more susceptible to market swings than other companies, so free cash flow isn't as consistent as in some other industries.
Nonetheless, BlackRock's dividend is well protected. Around half of its capital return program currently goes toward share repurchases. That leaves plenty of room for the company to keep raising its dividend year after year as its assets under management grow due to asset price appreciation and continued inflows of new money.
Investors should expect management to announce an increased annual dividend before the end of January if it doesn't announce with its fourth-quarter earnings release.
It pays to dig deeper on dividend growth stocks
Finding a great dividend growth stock requires more than just finding a company that's consistently raised its dividend. You need to be sure the company will be able to continue raising its dividend for years to come.
These companies look well positioned to do just that, but not every company that's raised its dividend can afford to keep doing so. So be sure to dig into the company's financials and research the outlook for the future before diving in, no matter how many years a stock has increased its dividend.
