Dividends are always a topic of keen discussion — whether it be the best high yield dividends to own or dividend stocks that have increased their payout for 50 years or more.
But neither approach will necessarily create a foolproof strategy for growing your portfolio. Many high-yielding stocks are high-yielders because the stock price has taken a beating. Then, those very companies end up having to cut the dividend.
Then there are those companies that have spent decades increasing dividend payments, but have done nothing to grow their core businesses. This leaves them with few opportunities for boosting the dividend materially in the future.
Dividend investing is becoming more of an art, and selecting great dividend stocks takes more than just a ramble through the numbers.
Consider the First Trust Rising Dividend Achievers ETF (NASDAQ: RDVY), which is a unique ETF that focuses on some of the very best dividend growth stories. While its particular angle is to look at a company’s dividend growth, it also pays attention to fundamentals like earnings growth, low debt and low payout ratios.
With its formula, the First Trust ETF is up 68% on a total return basis since its inception in 2014. Meanwhile, the S&P 500 is up just 50% over the same period.
Here are the top five companies with dividend increases in January to start the year with a bang:
Best Dividend Increases in January: AT&T (NYSE: T)
AT&T is one of the largest wireless telecom companies in the world and generates a lot of cash from its over 130 million subscribers. It uses that cash to pay shareholders a hefty dividend — yielding 5.1%. This month AT&T is upping its quarterly dividend from $0.49 a share to $0.50. It now has a 33-year streak of consecutive annual dividend increases.
The big news for current and potential AT&T shareholders is the pending merger with Time Warner (NYSE: TWX). With the merger, AT&T could become a powerhouse in both the wireless space and the cable television industry. Recall that AT&T also bought up DirecTV in 2015. The telecom company recognizes a big opportunity in the pay TV space, which includes being able to leverage its large user base for cross-selling. The merger creates a full-blown entertainment company, which is good news for the dividend and dividend investors.
AT&T shares trade ex-dividend this Friday, Jan. 5.
Best Dividend Increases in January: Mid-America Apartment Communities (NYSE: MAA)
This is a smaller market-cap name. The $11 billion market-cap real estate investment trust focuses on apartment buildings. Mid-America is increasing its quarterly dividend by 6% this month to $0.923. This marks a seven-year streak of consecutive dividend increases. The dividend yield for this apartment REIT comes in at 3.7%, which is well above all of its top peers.
Mid-America owns and operates over 100,000 apartment homes focused on the southeastern U.S. This is a great play on the rise of residential renting. The housing trend for the millennial generation is skewing more toward renting versus owning. Many millennials view short-term benefits and flexibility of renting as outweighing the long-term commitment of owning, and that will continue to be a tailwind for Mid-America’s dividend.
Mid-America shares trade ex-dividend on Jan. 11.
Best Dividend Increases in January: Abbott Laboratories (NYSE: ABT)
Abbott is boosting its quarterly dividend by 6% to $0.265. This medical supply company has long been a very solid dividend pick. It has a 45-year streak of consecutive dividend increases and pays a 2% dividend yield.
Abbott has a strong mixture of businesses. It offers products for pain management and for treatment of heart disease and diabetes; all are high-growth areas in the health-care sector. Abbott also has a strong and growing pharmaceutical business, which it can fund with cash flow from its medical device sales.
Abbott Labs shares trade ex-dividend on Jan. 11.
Best Dividend Increases in January: WD-40 Co. (NASDAQ: WDFC)
WD-40 Co., the small-cap market-cap maker of various workshop supplies, is upping the quarterly dividend by a hefty 10% to $0.54 a share. It pays a 1.8% dividend yield and now has a six-year streak of consecutive dividend increases. It’s paying out less than 60% of its earnings via dividends.
Shares are essentially flat over the last year. However, it’s been selling some of the best lubrication and cleaning products for nearly 80 years. These products generate plenty of cash and earnings. Over the last five years, WD-40 has managed to grow earnings at an annualized rate of over 10%. Wall Street expects the same for the next half decade. With that, not only will the company be continuously increasing its dividend, but also buying back shares.
WD-40 shares trade ex-dividend on Jan. 18
Best Dividend Increases in January: Pentair (NYSE: PNR)
Pentair is increasing the quarterly dividend from $0.345 a share to $0.35 a share. This is an industrial equipment company that pays a 2% dividend yield. The company has an impressive 41-year record of consecutive dividend increases. And Pentair is only paying out 40% of its earnings via dividends.
This industrial maker of electrical and water components has been around for over 150 years. It has a steady client base and strong balance sheet. Its program called Pentair Integrated Management System consistently looks at Pentair’s profitability from all angles, including the potential for consolidating factories, supply-chain sourcing changes and niche business opportunities. It’s an approach that has proven beneficial for Pentair shareholders.
Pentair shares trade ex-dividend Jan. 25.