The S&P 500 is offering a paltry 1.9% dividend yield. But don’t underestimate the power of dividends – especially those stocks that consistently up their dividend payments.
Every investor should have a focus on stocks that can and do pay investors more year after year. And for good reason.
The S&P 500 has returned 93.6% over the last five years. But when you add in dividends, the total return for the S&P 500 is upwards of 115%. It’s a seemingly small difference, but one that equates to $214,000 on a million dollar portfolio.
But it goes beyond that, because not all dividends are created equal. It pays to do your due diligence. For example, the S&P 500 Dividend Aristocrats are an elite group of companies that have upped their dividend payments for 25 years or more. Yet, how do they perform as a whole?
The ProShares S&P 500 Dividend Aristocrats ETF (NYSEArca: NOBL) tracks the Dividend Aristocrats. Since its creation in 2013, it has underperformed the S&P 500 by 2.5 percentage points on a total return basis.
With that in mind, don’t blindly invest in stocks upping their dividends. Here are the top five stocks increasing their dividends this month:
No. 1 June Dividend Increase: Public Storage (NYSE: PSA)
Public Storage operates as a real estate investment trust (REIT), paying out 90% of its taxable income to shareholders. It’s also the largest owner of self-storage facilities in the U.S. This REIT is offering a 3.5% dividend yield and it’s upping its quarterly dividend by over 20% this month to $1.70 a share.
The beauty of Public Storage is its size, which gives it scale advantages, such as the ability to secure financing to buy up more facilities and competing companies. And Public Storage is hitting on all cylinders thanks to a rebounding economy, which has pushed both rental and occupancy rates to historical highs. It also still has growth opportunities in Europe, where the market has been noticeably weak.
Shares trade ex-dividend on June 11.
No. 2 June Dividend Increase: Macy’s (NYSE: M)
Macy’s will be upping its quarterly dividend by 15% in June. It plans to pay out 36 cents a share going forward. Its dividend yield is up to 2.15%, and this is its fourth straight year of dividend increases. What’s more is that its payout ratio (dividends as a percent of earnings) is a low 30%.
The department retail giant needs no introduction and it has been one of the few bright spots in the retail sector. This comes thanks to its “My Macy’s” initiatives, which tailor merchandise (including color and assortments) to local and regional markets. It’s still rolling this promotion out across the nation, and in the meantime, Macy’s has shown an ability to connect with family shoppers as well as the millennial generation.
The stock trades ex-dividend June 11.
No. 3 June Dividend Increase: Gilead Sciences (NASDAQ: GILD)
Gilead has been gaining a lot of traction of late, thanks to its success in infectious diseases. When it starts paying a 43 cents a share dividend later this month it will be its first ever dividend payment. Its pro forma dividend yield will be 1.5%.
Gilead’s core focus has been on treating HIV and hepatitis C, with the drug company being the market leader for oral treatment of hepatitis C. The margins for these drugs and Gilead’s business in general is very solid, given that it has a small sales team and very focused research and manufacturing spending.
Shares trade ex-dividend on June 12.
No. 4 June Dividend Increase: Agrium (NYSE: AGU)
Agrium runs over 750 farm stores across the U.S., making it the largest agricultural-focused retailer in the country. Agrium is also a producer of the three major crop nutrients – nitrogen, phosphate and potash.
Agrium is paying a 3.4% dividend yield and has upped its dividend for three straight years. It’s upping its quarterly dividend by 12% this month to 87.5 cents a share.
Its production and then selling of its own products gives it impressive advantages. But the beauty of Agrium and its products is that with the declining amount of land, farmers are constantly being forced to increase their efficiency. And the company has a presence in Canada and Australia, and should see increased sales from meat and grain demand from emerging markets like China and India.
Agrium trades ex-dividend on June 26.
No. 5 June Dividend Increase: American Express (NYSE: AXP)
This credit card giant is paying a 1.5% dividend yield, and when it comes to dividend increases, it has now upped its dividend for three consecutive years. Later this month it will be upping its quarterly dividend by 11.5% to 29 cents a share. But its payout ratio remains an ultra-low 20%.
The key for American Express has been its rather affluent cardholder base, which somewhat insulates it from economic cycles. It’s unique in that it not only issues cards but also acquires transactions from merchants, making its system closed-loop. It thus has a lot of customer and merchant data, and in turn spending habit data, which it can then sell to analytics and marketing firms.
And let us not forget, American Express is also Berkshire Hathaway’s (NYSE: BRK-B) fourth largest holding.
Shares trade ex-dividend June 30.
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