Dividend growth stocks can be incredibly attractive investments if you crave recurring income. As these types of stocks raise their dividend payments, that can help offset the effects of inflation and allow you to grow your dividend income without any additional effort on your part.
Three stocks that recently raised their payouts by more than 10% are Walt Disney (DIS +0.96%), Yum! Brands (YUM +1.27%), and American Express (AXP +0.33%). Here's a closer look at just how good these stocks are as dividend investments -- and whether you should expect more dividend increases from them in the future.
1. Walt Disney
Entertainment and media giant Walt Disney reinstated its dividend this year. It suspended it during the height of the COVID-19 pandemic amid some incredibly challenging conditions for its business. But now the company behind Mickey Mouse and other iconic brands has gotten back to paying a dividend. And with some encouraging results of late, the company has also decided to give its dividend a big boost.
NYSE: DIS
Key Data Points
In February, Disney announced that it would increase its quarterly dividend by 50%. The $0.45 quarterly dividend will be just the second one it has paid since resuming payouts earlier this year. The first payment, in January, was $0.30. With the increase in the dividend, the stock's yield is 1.6%. Back in 2019, the company's quarterly dividend was $0.88.
Disney's revenue for the last three months of 2023 was flat at $23.5 billion although pre-tax income of $2.9 billion rose by 62% as the company has been slashing its expenses. Income investors may want to proceed cautiously with Disney right now, however, as the company is still struggling to make its streaming service profitable, is contemplating the sale of assets, and recently announced a $1.5 billion investment into video game maker Epic Games.
With a lot of balls in the air and the dividend only recently reinstated, this isn't the type of stock I would be comfortable assuming will sustain a payout for the long haul, or that it will continue increasing it. With the stock trading near its 52-week high, investors may be better off taking a wait-and-see approach with Disney's stock right now.
2. Yum! Brands
Yum! Brands, the company that operates Pizza Hut, Taco Bell, and KFC, can provide investors with a great way to profit from the economy's long-term growth, even amid challenging conditions.
Although consumers may be feeling the pinch of higher prices, fast-food restaurants can be relatively cheap options for eating out. And that is evident in Yum! Brands' financial resiliency. In 2023, the company reported 3% revenue growth with sales coming in at just under $7.1 billion. Operating income of $2.3 billion also rose by 6%.
NYSE: YUM
Key Data Points
In January, the company announced an 11% increase to its quarterly dividend. The $0.67 payment means investors are earning a 2% dividend yield from the stock. Yum! Brands has increased its dividend by 60% in just five years. And with a payout ratio of around 43%, there's still room for more rate hikes in the future.
At 24 times earnings, this can make for a good, reasonably priced dividend stock to buy and hold for the long term.
3. American Express
Credit card company American Express caters to an affluent customer base, which can make this a safer investment than many other stocks. Last year, the company's revenue net of interest expense totaled $60.5 billion and rose 14% year over year. Net income of $8.4 billion was also up by 11%.
NYSE: AXP
Key Data Points
This year, American Express announced that its board has authorized a 17% increase to the dividend. The new $0.70 quarterly dividend payment will push the stock's yield up to 1.3%, which is around the S&P 500 average of 1.4%. Five years ago, American Express' dividend was $0.39 -- it has increased by 79% since then.
At less than 20 times trailing earnings, the stock makes for a reasonably priced investment to hang on to. With a payout ratio of only 21% and some solid earnings growth, it wouldn't be surprising to see more dividend hikes from American Express in the years ahead.
