Dividend growth stocks often follow predictable patterns of when their next increases will take place. As long as their financials remain strong and there's room for a dividend hike, odds are that a business will increase its payout at around the same time as it did the year before.
Based on when they last raised their dividend payments, three stocks that are likely to announce dividend hikes next month include Costco Wholesale (COST +0.21%), Johnson & Johnson (JNJ +0.00%), and Procter & Gamble (PG +1.24%). Let's take a closer look at their track records and whether these are good dividend stocks to buy today.
1. Costco Wholesale
Big-box retailer Costco doesn't offer investors the biggest yield at 0.6%, but it makes for an underrated dividend investment. That's because it occasionally surprises investors with a special dividend. Last year, it announced a $15 per share special dividend. That's massive when you consider that on an annual basis its regular dividend pays just $4.08 per share.
NASDAQ: COST
Key Data Points
But the other reason it makes for a good dividend play is that Costco routinely increases its payouts. In April 2023, the company announced a 13% increase to its quarterly dividend, which now pays $1.02 per share. The dividend has more than doubled since the start of 2018 when the stock was paying $0.50 per quarter.
Costco's modest 27% payout ratio makes it almost a lock to announce another rate hike in April. Although its yield may seem modest, long-term investors can still generate a lot of income from its dividends as the company has shown that it is not hesitant to reward its shareholders through rate hikes and special dividend payments. Costco isn't a cheap stock, trading at 48 times earnings, but if you're buying and holding for decades, this can still be a great investment to add to your portfolio today.
2. Johnson & Johnson
Johnson & Johnson has been increasing its payouts for decades. It's a Dividend King, and it would be big news if the company didn't raise its dividend in April. Continuous dividend hikes are a key reason investors buy and hold the stock as it offers a fairly high yield of 3.1%, and the rate increases mean that investors can collect more dividend income in the future.
NYSE: JNJ
Key Data Points
On April 18, 2023, Johnson & Johnson announced a 5.3% increase to its quarterly dividend. It was the 61st consecutive year that the company raised its payout. Although the stock's payout ratio is near 90% (due to high litigation-related expenses in 2023), another rate hike is likely still coming in April. The healthcare giant projects adjusted operational sales growth of at least 5% in 2024 and adjusted earnings to rise by more than 6%.
While a rate hike is probable, this may turn out to be one of the riskier dividend stocks to own, given the ongoing talc litigation and the risks Johnson & Johnson faces on that front. And that's the main reason why although this may seem like an otherwise great stock to own, it may not be worth investing in right now.
3. Procter & Gamble
Top consumer company Procter & Gamble, which is known for popular brands such as Pampers, Bounty, and Tide, has also earned a reputation over the years as being a top dividend growth stock. Its impressive streak of dividend increases surpasses even Johnson & Johnson. Last April, the company announced a dividend hike, extending its streak to a 67th consecutive year. The 3% bump to the payout was a modest one, but in a span of five years the dividend has grown by 31%.
NYSE: PG
Key Data Points
Procter & Gamble's payout ratio is around 63%, which is where you might expect the ratio to fall for a company that prioritizes dividends but that also has a strong, growing business. At 2.3%, its yield is still higher than the S&P 500 average of 1.4% while giving investors an incentive to also stick around for the expected rate hikes.
In the trailing 12 months, the company has generated $14.5 billion in earnings on sales of $83.9 billion for a solid profit margin of 17%. The stock trades at an estimated forward earnings multiple of 23, making Procter & Gamble a reasonably priced option for investors looking for a safe dividend stock to add to their portfolios today.
