It has been proven that dividend stocks outperform their non-dividend-paying peers, which explains why dividend-paying stocks have become staples of investment portfolios. Although some dividend companies are likely to reduce the amount they pay out to investors this coming year, our Motley Fool experts believe these three companies might be in line for a dividend hike.
Eric Volkman
My bet for a 2015 dividend booster is specialty real estate investment trust HCP (HCP 0.79%). This REIT concentrates on the management of medical facilities and related assets such as doctors' offices, hospitals, and senior living amenities.
That's a great niche, considering that the huge baby boomer generation is now entering its twilight years and needs the sort of care these facilities provide.
But even before the boomers went gray, HCP was delivering for its shareholders. The REIT has been consistently profitable since its IPO in 1985. Better yet, it has not only paid a dividend in every single quarter for nearly 30 years, but also raised that distribution each year it has been in business.
As a result, HCP's annual disbursement (paid in quarterly installments) has shown a pronounced upward lift over the years. It now stands at $2.18 per share, for a beefy yield of 4.8%.
At the moment, investors are rightly concerned about the impact of an expected 2015 Federal Reserve rate hike on REITs' results. But HCP has weathered interest rate bombs before and thrived, so this doesn't present too scary a threat.
Source: Coca-Cola
Dan Caplinger
There are no guarantees in investing, but I'm confident Coca-Cola (KO 0.55%) will continue its 52-year run of annual dividend increases by boosting its payout in 2015. Earlier this year, Coca-Cola gave investors a 9% dividend hike, and its current yield of 2.8% is well above what many blue-chip stocks pay.
Many investors worry about the pressure on Coca-Cola's core carbonated soft-drink business, with adverse sales trends and regulatory scrutiny hurting the segment. Yet Coca-Cola has moved aggressively in other directions, with noncarbonated beverages and water offering new avenues for growth. Moreover, Coca-Cola has realized the value of making strategic partnerships with other major players in the industry, with stakes in Monster Beverage (MNST 2.49%) and Keurig Green Mountain (GMCR +0.00%) both opening up opportunities for the soda giant to participate in their respective innovations and make greater use of its distribution network to enhance profits. Coca-Cola pays out just two-thirds of its earnings in the form of dividends, so the company has a sufficient margin of safety to boost its payout without jeopardizing further opportunities to make smart strategic moves and continue a legacy of success that has endured for more than a century.
Matt Frankel
One stock that is long overdue for a dividend increase is Citigroup (C 0.98%), which has been stuck paying out $0.01 per share per quarter since the end of the financial crisis.
Citigroup is much improved since then, and the bank is growing in the right ways. For instance, it reported a 9% year-over-year revenue increase during the most recent quarter, fueled by solid gains in trading revenue and institutional banking.
Even the Citi Holdings division, which holds the bank's legacy assets, produced $1.6 billion in revenue, 26% more than last year. The bank has made great progress in getting rid of Citi Holdings' assets in order to focus on its core businesses, reducing the size of the division from $290 billion in assets in 2011 to just over $100 billion now.
To sum it up, Citigroup is a much healthier bank than it was a few years ago, and the numbers reflect this. In fact, the company's Basel III supplementary leverage ratio increased from 5.1% to 6% over the past year. All that progress has me convinced 2015 will be the year that Citigroup is finally allowed to raise its dividend.
