Week in and week out, there are close to a hundred companies paying a dividend. And each week, we do the hard work of sifting through those companies to find the ones that are actually paying investors more.
This week we have two stocks from very different parts of the market which are upping their quarterly dividends. And both could be worthwhile for long-term investors.
One of the easiest ways to approach dividend growth stocks is to look at the S&P 500 Dividend Aristocrats, which are those stocks that have boosted their annual dividend payments for 25 years or more.
This includes stocks like 3M (NYSE: MMM) and Coca-Cola (NYSE: KO), both of which have outperformed the S&P 500 by well over 150 percentage points over the last 25 years.
Looking at the ProShares S&P 500 Dividend Aristocrats ETF (NYSEArca: NOBL) over the last year, this ETF has outperformed the S&P 500 by close to 70 basis points.
With that, here are the two key dividend growth stocks that will be paying investors more this week:
Tyco International (NYSE: TYC)
Tyco is upping its quarterly dividend 14% this week to 20.5 cents a share. Its current dividend yield is right at 1.9%, and the global security company has been paying a dividend for 27 years. It’s paying out just 35% of its earnings via dividends.
Recall that Tyco is the industry leader in the security services market, with brands that include Scott, ADT, Wormald and more. A tailwind for the company is the expected rebound in the commercial construction market.
Just over a third of Tyco’s revenues are generated from the U.S. commercial construction market. Commercial construction spending in the U.S. is still more than 50% below its peak levels from less than a half decade ago. In the meantime, the company still has a stellar balance sheet, with enough cash to cover over a third of its debt.
Longer-term, the trend toward urbanization in developing nations will be a big positive for Tyco. It will benefit from the increased number of installs for fire detection and suppression systems in emerging markets.
Shares trade ex-dividend April 22.
Williams-Sonoma (NYSE: WSM)
Williams-Sonoma is upping its quarterly dividend 6% this week to 35 cents a share. This home goods player is paying a 1.8% dividend yield, and only about 40% of its earnings go to dividends. The company also has a five-year streak of consecutive dividend increases.
The home furnishings market is relatively large, but it’s also fragmented. Williams-Sonoma has carved out an impressive niche by targeting the online market. As well, there’s still international expansion opportunities for the company.
Internet sales can’t be overlooked in the current retail market, plus they tend to be higher margin, which is the case for Williams-Sonoma. It generates over half its sales from the direct-to-consumer segment (the majority of which is e-commerce). And with that, its return on invested capital is one of the tops in the retail industry at 25%.
Shares also trade ex-dividend April 22.
The yields on these two stocks might not seem like much, but they both are leaders in their respective markets. With top-notch balance sheets and an impressive ability to generate cash flow, look for more dividend increases in the future.
Dividends for Every Month of the Year
If you’re looking for just one dividend stock to round out your income stream, consider a little-known company that pays out dividends 12 months of the year.
Click here to see the full details of this company in my Dividend Calendar…