S&P 500   4,282.37
DOW   33,762.76
QQQ   354.65
MarketBeat Week in Review – 5/29 - 6/2
[BREAKING] Small Firm Develops World's First Anti-Aircraft Laser (Ad)
Biden signs debt ceiling bill that pulls US back from brink of unprecedented default
Russia bans 'unfriendly' countries' journalists from showpiece economic gathering
[BREAKING] Small Firm Develops World's First Anti-Aircraft Laser (Ad)
Slow start to New York's legal pot market leaves farmers holding the bag
Apple is expected to unveil sleek headset aimed at thrusting the masses into alternate realities
BREAKING: Tiny biotech successfully treats blindness (Ad)
Oil tanker breaks down in Egypt's Suez Canal, briefly disrupting traffic in the global waterway
With oil prices slumping, OPEC+ producers weigh more production cuts
S&P 500   4,282.37
DOW   33,762.76
QQQ   354.65
MarketBeat Week in Review – 5/29 - 6/2
[BREAKING] Small Firm Develops World's First Anti-Aircraft Laser (Ad)
Biden signs debt ceiling bill that pulls US back from brink of unprecedented default
Russia bans 'unfriendly' countries' journalists from showpiece economic gathering
[BREAKING] Small Firm Develops World's First Anti-Aircraft Laser (Ad)
Slow start to New York's legal pot market leaves farmers holding the bag
Apple is expected to unveil sleek headset aimed at thrusting the masses into alternate realities
BREAKING: Tiny biotech successfully treats blindness (Ad)
Oil tanker breaks down in Egypt's Suez Canal, briefly disrupting traffic in the global waterway
With oil prices slumping, OPEC+ producers weigh more production cuts
S&P 500   4,282.37
DOW   33,762.76
QQQ   354.65
MarketBeat Week in Review – 5/29 - 6/2
[BREAKING] Small Firm Develops World's First Anti-Aircraft Laser (Ad)
Biden signs debt ceiling bill that pulls US back from brink of unprecedented default
Russia bans 'unfriendly' countries' journalists from showpiece economic gathering
[BREAKING] Small Firm Develops World's First Anti-Aircraft Laser (Ad)
Slow start to New York's legal pot market leaves farmers holding the bag
Apple is expected to unveil sleek headset aimed at thrusting the masses into alternate realities
BREAKING: Tiny biotech successfully treats blindness (Ad)
Oil tanker breaks down in Egypt's Suez Canal, briefly disrupting traffic in the global waterway
With oil prices slumping, OPEC+ producers weigh more production cuts
S&P 500   4,282.37
DOW   33,762.76
QQQ   354.65
MarketBeat Week in Review – 5/29 - 6/2
[BREAKING] Small Firm Develops World's First Anti-Aircraft Laser (Ad)
Biden signs debt ceiling bill that pulls US back from brink of unprecedented default
Russia bans 'unfriendly' countries' journalists from showpiece economic gathering
[BREAKING] Small Firm Develops World's First Anti-Aircraft Laser (Ad)
Slow start to New York's legal pot market leaves farmers holding the bag
Apple is expected to unveil sleek headset aimed at thrusting the masses into alternate realities
BREAKING: Tiny biotech successfully treats blindness (Ad)
Oil tanker breaks down in Egypt's Suez Canal, briefly disrupting traffic in the global waterway
With oil prices slumping, OPEC+ producers weigh more production cuts

Recent Dividend Increases

Below you will find a list of public companies, exchange traded funds (ETFs), and real-estate investment trusts (REITs) that have recently increased the amount of their dividend payments. Learn how to invest in stocks with increasing dividends.

MarketRank evaluates a company based on community opinion, dividend strength, institutional and insider ownership, earnings and valuation, and analysts forecasts.
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Media sentiment refers to the percentage of positive news stories versus negative news stories a company has received in the past week.
Available with a MarketBeat All Access Subscription
Media SentimentUpgrade to All Access to use the All Sentiments Filter
Analyst consensus is the average investment recommendation among Wall Street research analysts.
Available with a MarketBeat All Access Subscription
Analyst ConsensusUpgrade to All Access to use the All Ratings Filter
CompanyAnnouncement DateAmountPrevious AmountIncrease AmountYieldEx-DatePayable DateIndicator(s)
Cricut, Inc. stock logo
CRCT
Cricut
6/3/2023$1.00$0.35185.71%6/30/20237/17/2023Insider Selling
Seacoast Banking Co. of Florida stock logo
SBCF
Seacoast Banking Co. of Florida
6/3/2023$0.18$0.175.88%3.17%6/14/20236/30/2023News Coverage
Gap Up
Nasdaq, Inc. stock logo
NDAQ
Nasdaq
6/3/2023$0.22$0.2010.00%1.58%6/15/20236/30/2023Positive News
Euronav NV stock logo
EURN
Euronav
6/2/2023$0.70$0.032,233.33%5.64%6/1/20236/13/2023Dividend Announcement
Analyst Upgrade
News Coverage
Gap Up
John Hancock Investors Trust stock logo
JHI
John Hancock Investors Trust
6/1/2023$0.2152$0.192012.08%8.1%6/9/20236/30/2023News Coverage
Positive News
John Hancock Income Securities Trust stock logo
JHS
John Hancock Income Securities Trust
6/1/2023$0.0990$0.09108.79%4.8%6/9/20236/30/2023News Coverage
Positive News
BRP Inc. stock logo
DOOO
BRP
6/1/2023$0.1330$0.13200.76%0.75%6/29/20237/14/2023Earnings Report
Analyst Report
Analyst Revision
News Coverage
TotalEnergies SE stock logo
TTE
TotalEnergies
5/31/2023$0.5850$0.54307.73%4.06%6/16/20237/17/2023Gap Up
Frontline plc stock logo
FRO
Frontline
5/31/2023$0.70$0.30133.33%19.83%6/15/20236/30/2023Analyst Upgrade
News Coverage
Gap Up
Infosys Limited stock logo
INFY
Infosys
5/31/2023$0.2134$0.171024.77%1.5%6/1/20237/3/2023News Coverage
Vanguard Total World Bond ETF stock logo
BNDW
Vanguard Total World Bond ETF
5/30/2023$0.1396$0.12809.06%6/1/20236/6/2023News Coverage
Positive News
Vanguard Total International Bond ETF stock logo
BNDX
Vanguard Total International Bond ETF
5/30/2023$0.0726$0.063015.24%6/1/20236/6/2023News Coverage
Positive News
Vanguard Total Corporate Bond Fund stock logo
VTC
Vanguard Total Corporate Bond Fund
5/30/2023$0.2442$0.23105.71%6/1/20236/6/2023Positive News
High Trading Volume
Vanguard Total Bond Market ETF stock logo
BND
Vanguard Total Bond Market ETF
5/30/2023$0.1870$0.17606.23%6/1/20236/6/2023
Vanguard Short-Term Treasury Index ETF stock logo
VGSH
Vanguard Short-Term Treasury Index ETF
5/30/2023$0.1523$0.125021.84%6/1/20236/6/2023News Coverage
Positive News
Vanguard Short-Term Corporate Bond ETF stock logo
VCSH
Vanguard Short-Term Corporate Bond ETF
5/30/2023$0.1952$0.172013.49%6/1/20236/6/2023News Coverage
Positive News
Vanguard Mortgage-Backed Securities ETF stock logo
VMBS
Vanguard Mortgage-Backed Securities ETF
5/30/2023$0.1254$0.114010.00%6/1/20236/6/2023Positive News
Vanguard Long-Term Treasury Index ETF stock logo
VGLT
Vanguard Long-Term Treasury Index ETF
5/30/2023$0.1694$0.16105.22%6/1/20236/6/2023News Coverage
Positive News
Vanguard Long-Term Corporate Bond ETF stock logo
VCLT
Vanguard Long-Term Corporate Bond ETF
5/30/2023$0.3145$0.30702.44%6/1/20236/6/2023News Coverage
Positive News
Vanguard Intermediate-Term Treasury Index ETF stock logo
VGIT
Vanguard Intermediate-Term Treasury Index ETF
5/30/2023$0.1290$0.12205.74%6/1/20236/6/2023News Coverage
Positive News
Vanguard Intermediate-Term Corporate Bond ETF stock logo
VCIT
Vanguard Intermediate-Term Corporate Bond ETF
5/30/2023$0.2510$0.23506.81%6/1/20236/6/2023News Coverage
Vanguard Emerging Markets Government Bond ETF stock logo
VWOB
Vanguard Emerging Markets Government Bond ETF
5/30/2023$0.2931$0.27705.81%6/1/20236/6/2023Positive News
First Trust Enhanced Short Maturity ETF stock logo
FTSM
First Trust Enhanced Short Maturity ETF
5/30/2023$0.2290$0.21407.01%4.62%5/31/20236/5/2023Positive News
JOYY Inc. stock logo
YY
JOYY
5/30/2023$0.51$0.50700.59%8.2%6/20/20237/5/2023
Golar LNG Limited stock logo
GLNG
Golar LNG
5/30/2023$0.25$0.1566.67%4.67%6/9/20236/16/2023Analyst Downgrade
Analyst Revision
News Coverage
Gap Up
Tsakos Energy Navigation Limited stock logo
TNP
Tsakos Energy Navigation
5/30/2023$0.30$0.15100.00%1.8%6/8/20236/15/2023Earnings Report
Analyst Upgrade
News Coverage
Lowe's Companies, Inc. stock logo
LOW
Lowe's Companies
5/26/2023$1.10$1.054.76%2.15%7/25/20238/9/2023Analyst Report
Insider Selling
Analyst Revision
NetEase, Inc. stock logo
NTES
NetEase
5/25/2023$0.4650$0.2772.22%2.08%6/8/20236/26/2023Gap Up
National Storage Affiliates Trust stock logo
NSA
National Storage Affiliates Trust
5/25/2023$0.56$0.551.82%5.9%6/14/20236/30/2023Insider Buying
Positive News
Canadian Imperial Bank of Commerce stock logo
CM
Canadian Imperial Bank of Commerce
5/25/2023$0.6420$0.63900.47%6.16%6/27/20237/28/2023
Flowers Foods, Inc. stock logo
FLO
Flowers Foods
5/25/2023$0.23$0.224.55%3.52%6/7/20236/22/2023Analyst Revision
Hamilton Lane Incorporated stock logo
HLNE
Hamilton Lane
5/25/2023$0.4450$0.4011.25%2.7%6/14/20237/7/2023Analyst Report
Royal Bank of Canada stock logo
RY
Royal Bank of Canada
5/25/2023$0.9960$0.99200.40%4.47%7/25/20238/24/2023
IDEX Co. stock logo
IEX
IDEX
5/25/2023$0.64$0.606.67%1.27%6/8/20236/23/2023
The Bank of Nova Scotia stock logo
BNS
Bank of Nova Scotia
5/25/2023$0.7851$0.77401.43%6.2%7/3/20237/27/2023
American Tower Co. stock logo
AMT
American Tower
5/25/2023$1.57$1.560.64%3.42%6/15/20237/10/2023
Texas Community Bancshares, Inc. stock logo
TCBS
Texas Community Bancshares
5/24/2023$0.03$0.0250.00%1.01%6/8/20236/26/2023Positive News
Equitable Holdings, Inc. stock logo
EQH
Equitable
5/24/2023$0.22$0.2010.00%3.48%6/2/20236/12/2023
TowneBank stock logo
TOWN
TowneBank
5/24/2023$0.25$0.238.70%4.28%6/29/20237/14/2023
Universal Co. stock logo
UVV
Universal
5/24/2023$0.80$0.791.27%5.96%7/7/20238/7/2023Positive News
DENTSPLY SIRONA Inc. stock logo
XRAY
DENTSPLY SIRONA
5/24/2023$0.14$0.125012.00%1.52%6/29/20237/14/2023Analyst Upgrade
Donaldson Company, Inc. stock logo
DCI
Donaldson
5/24/2023$0.25$0.238.70%1.5%6/6/20236/23/2023Earnings Report
Analyst Downgrade
Short Interest ↓
Analyst Revision
High Trading Volume
Insperity, Inc. stock logo
NSP
Insperity
5/24/2023$0.57$0.529.62%2.04%6/7/20236/22/2023Analyst Report
Insider Selling
Bank of Montreal stock logo
BMO
Bank of Montreal
5/24/2023$1.0850$1.07500.93%5.23%7/27/20238/28/2023
Medtronic plc stock logo
MDT
Medtronic
5/24/2023$0.69$0.681.47%3.15%6/22/20237/14/2023Analyst Upgrade
Guess', Inc. stock logo
GES
Guess'
5/24/2023$0.30$0.225033.33%6.91%6/6/20236/23/2023Gap Up
National Grid plc stock logo
NGG
National Grid
5/23/2023$2.3458$2.092912.08%4.5%6/1/20238/9/2023News Coverage
Oxford Lane Capital Corp. stock logo
OXLC
Oxford Lane Capital
5/23/2023$0.08$0.07506.67%18.8%9/14/20239/29/2023Positive News
First Trust California Municipal High Income ETF stock logo
FCAL
First Trust California Municipal High Income ETF
5/22/2023$0.1125$0.11200.45%2.79%5/23/20235/31/2023
Saratoga Investment Corp. stock logo
SAR
Saratoga Investment
5/22/2023$0.70$0.691.45%10.4%6/12/20236/29/2023
Oxford Lane Capital Corp. stock logo
OXLC
Oxford Lane Capital
5/22/2023$0.08$0.07506.67%18.8%8/16/20238/31/2023Positive News
Haverty Furniture Companies, Inc. stock logo
HVT
Haverty Furniture Companies
5/19/2023$0.30$0.287.14%4.53%6/5/20236/21/2023Positive News
Haverty Furniture Companies, Inc. stock logo
HVT.A
Haverty Furniture Companies
5/19/2023$0.28$0.267.69%4.28%6/5/20236/21/2023News Coverage
High Trading Volume
Invesco Variable Rate Investment Grade ETF stock logo
VRIG
Invesco Variable Rate Investment Grade ETF
5/19/2023$0.1223$0.121.92%5.91%5/22/20235/26/2023News Coverage
Positive News
Invesco KBW Premium Yield Equity REIT ETF stock logo
KBWY
Invesco KBW Premium Yield Equity REIT ETF
5/19/2023$0.1489$0.14701.29%10.74%5/22/20235/26/2023News Coverage
Positive News
Invesco KBW High Dividend Yield Financial ETF stock logo
KBWD
Invesco KBW High Dividend Yield Financial ETF
5/19/2023$0.1619$0.15405.14%13.54%5/22/20235/26/2023
Invesco High Yield Equity Dividend Achievers ETF stock logo
PEY
Invesco High Yield Equity Dividend Achievers ETF
5/19/2023$0.0706$0.070.79%4.48%5/22/20235/26/2023News Coverage
Invesco High Yield Bond Factor ETF stock logo
IHYF
Invesco High Yield Bond Factor ETF
5/19/2023$0.1294$0.12206.05%7.33%5/22/20235/26/2023
Invesco BulletShares 2030 Corporate Bond ETF stock logo
BSCU
Invesco BulletShares 2030 Corporate Bond ETF
5/19/2023$0.0570$0.05700.05%4.23%5/22/20235/26/2023News Coverage
Positive News
Invesco BulletShares 2029 Municipal Bond ETF stock logo
BSMT
Invesco BulletShares 2029 Municipal Bond ETF
5/19/2023$0.0525$0.05102.92%2.76%5/22/20235/26/2023
BSCT
Invesco BulletShares 2029 Corporate Bond ETF
5/19/2023$0.0628$0.046036.57%4.19%5/22/20235/26/2023Positive News
Invesco BulletShares 2028 Municipal Bond ETF stock logo
BSMS
Invesco BulletShares 2028 Municipal Bond ETF
5/19/2023$0.0519$0.053.74%2.68%5/22/20235/26/2023
Invesco BulletShares 2028 High Yield Corporate Bond ETF stock logo
BSJS
Invesco BulletShares 2028 High Yield Corporate Bond ETF
5/19/2023$0.1260$0.12104.12%7.23%5/22/20235/26/2023
Invesco BulletShares 2028 Corporate Bond ETF stock logo
BSCS
Invesco BulletShares 2028 Corporate Bond ETF
5/19/2023$0.0675$0.056020.54%4.08%5/22/20235/26/2023Positive News
BSJR
Invesco BulletShares 2027 High Yield Corporate Bond ETF
5/19/2023$0.1264$0.1026.38%7.04%5/22/20235/26/2023
Invesco BulletShares 2027 Corporate Bond ETF stock logo
BSCR
Invesco BulletShares 2027 Corporate Bond ETF
5/19/2023$0.0617$0.055012.22%3.87%5/22/20235/26/2023Short Interest ↓
News Coverage
Invesco BulletShares 2026 Municipal Bond ETF stock logo
BSMQ
Invesco BulletShares 2026 Municipal Bond ETF
5/19/2023$0.0497$0.04803.54%2.56%5/22/20235/26/2023News Coverage
Positive News
Invesco BulletShares 2026 Corporate Bond ETF stock logo
BSCQ
Invesco BulletShares 2026 Corporate Bond ETF
5/19/2023$0.0579$0.052011.33%3.65%5/22/20235/26/2023
Invesco BulletShares 2025 Municipal Bond ETF stock logo
BSMP
Invesco BulletShares 2025 Municipal Bond ETF
5/19/2023$0.0452$0.04402.70%2.24%5/22/20235/26/2023News Coverage
Positive News
Invesco BulletShares 2025 Corporate Bond ETF stock logo
BSCP
Invesco BulletShares 2025 Corporate Bond ETF
5/19/2023$0.0599$0.0449.63%5/22/20235/26/2023News Coverage
Positive News
Invesco BulletShares 2024 High Yield Corporate Bond ETF stock logo
BSJO
Invesco BulletShares 2024 High Yield Corporate Bond ETF
5/19/2023$0.1224$0.1022.35%6.56%5/22/20235/26/2023
Invesco BulletShares 2024 Corporate Bond ETF stock logo
BSCO
Invesco BulletShares 2024 Corporate Bond ETF
5/19/2023$0.0519$0.0429.83%5/22/20235/26/2023News Coverage
Invesco BulletShares 2023 Corporate Bond ETF stock logo
BSCN
Invesco BulletShares 2023 Corporate Bond ETF
5/19/2023$0.0577$0.0515.30%3.28%5/22/20235/26/2023
Permian Basin Royalty Trust stock logo
PBT
Permian Basin Royalty Trust
5/19/2023$0.0440$0.027062.96%2.18%5/30/20236/14/2023Ex-Dividend
High Trading Volume
LyondellBasell Industries stock logo
LYB
LyondellBasell Industries
5/19/2023$1.25$1.195.04%5.55%5/26/20236/6/2023Analyst Report
News Coverage
AAON, Inc. stock logo
AAON
AAON
5/18/2023$0.12$0.1020.00%0.53%6/8/20236/30/2023Positive News
Grupo Televisa, S.A.B. stock logo
TV
Grupo Televisa, S.A.B.
5/18/2023$0.0985$0.087612.53%1.6%5/26/20236/12/2023Analyst Report
NACCO Industries, Inc. stock logo
NC
NACCO Industries
5/18/2023$0.2175$0.20754.82%2.5%5/30/20236/15/2023Ex-Dividend
Gap Up
SL Green Realty Corp. stock logo
SLG
SL Green Realty
5/18/2023$0.2710$0.27080.07%14.31%5/30/20236/15/2023Ex-Dividend
Gap Up
Advanced Drainage Systems, Inc. stock logo
WMS
Advanced Drainage Systems
5/18/2023$0.14$0.1216.67%0.57%5/31/20236/15/2023Positive News
Mesa Royalty Trust stock logo
MTR
Mesa Royalty Trust
5/18/2023$0.2380$0.158150.54%14.56%5/30/20237/31/2023Ex-Dividend
Gap Down
Materion Co. stock logo
MTRN
Materion
5/17/2023$0.13$0.12504.00%0.49%5/30/20236/15/2023Ex-Dividend
Gap Up
Chubb Limited stock logo
CB
Chubb
5/17/2023$0.86$0.833.61%1.73%6/15/20237/7/2023Analyst Downgrade
Enel Chile S.A. stock logo
ENIC
Enel Chile
5/17/2023$0.3076$0.01102,696.36%10.5%5/18/20235/18/2023
Northrop Grumman Co. stock logo
NOC
Northrop Grumman
5/16/2023$1.87$1.738.09%1.67%5/26/20236/14/2023
Vodafone Group Public Limited stock logo
VOD
Vodafone Group Public
5/16/2023$0.4882$0.45407.53%6/8/20236/3/2023
MGE Energy, Inc. stock logo
MGEE
MGE Energy
5/16/2023$0.4075$0.40700.12%2.13%5/31/20236/15/2023Positive News
Western Asset Managed Municipals Fund Inc. stock logo
MMU
Western Asset Managed Municipals Fund
5/16/2023$0.0365$0.03601.39%4.4%7/21/20238/1/2023
Banco Bradesco S.A. stock logo
BBDO
Banco Bradesco
5/15/2023$0.0035$0.00343.24%5.1%6/2/20237/13/2023Gap Up
High Trading Volume
Lennox International Inc. stock logo
LII
Lennox International
5/15/2023$1.10$1.063.77%1.5%6/29/20237/14/2023
Columbia Banking System, Inc. stock logo
COLB
Columbia Banking System
5/15/2023$0.36$0.3020.00%7.11%5/30/20236/15/2023Ex-Dividend
Gap Up
América Móvil, S.A.B. de C.V. stock logo
AMX
América Móvil
5/15/2023$0.3605$0.196483.60%1.5%11/9/202311/13/2023Analyst Report
AGCO Co. stock logo
AGCO
AGCO
5/13/2023$5.00$4.5011.11%4.87%5/18/20236/20/2023
Highland/iBoxx Senior Loan ETF stock logo
SNLN
Highland/iBoxx Senior Loan ETF
5/12/2023$0.0960$0.09402.13%7.98%5/15/20235/31/2023High Trading Volume
PennantPark Floating Rate Capital Ltd. stock logo
PFLT
PennantPark Floating Rate Capital
5/12/2023$0.1025$0.102.50%10.9%6/14/20237/3/2023High Trading Volume
PennantPark Investment Co. stock logo
PNNT
PennantPark Investment
5/12/2023$0.20$0.18508.11%14.1%6/14/20237/3/2023
Marriott International, Inc. stock logo
MAR
Marriott International
5/12/2023$0.52$0.4030.00%1.19%5/25/20236/30/2023
Betterware de México, S.A.P.I. de C.V. stock logo
BWMX
Betterware de México, S.A.P.I. de C.V.
5/11/2023$0.2002$0.131152.71%7.2%5/19/20235/26/2023
Orange S.A. stock logo
ORAN
Orange
5/11/2023$0.3430$0.31429.18%6/1/20236/22/2023Analyst Report
Sun Life Financial Inc. stock logo
SLF
Sun Life Financial
5/11/2023$0.5540$0.54102.40%4.62%5/30/20236/30/2023Ex-Dividend
How to Invest in Stocks with Increasing Dividends

One key to successful dividend investing is identifying companies that have a history of increasing their dividend yield over time. As dividend yields go up, it typically causes share prices to increase. This is a win-win for investors as they generate regular dividend income while seeing the value of their shares increase. In this article, we’ll take a look at how investors can find stocks that are increasing their dividends and how to maximize their gain from those investments

A dividend is a payment made to shareholders that comes out of a company’s profit. There are two metrics that investors monitor closely. The first is the dividend yield which reflects the value of the dividend relative to the company’s share price. The second is the payout ratio which is the percentage of profit that the company pays out as a dividend.

A dividend is declared and usually pays out quarterly. However, there are some companies that pay a monthly dividend. Still others pay a single, annual dividend. Investors that are looking for income as well as reasonable growth are attracted to dividend stocks.

Companies increase their dividend yield for several reasons.

  • The most common reason is because their net profits are increasing. As net profits increase, there is more money to return to shareholders.
  • A second reason is that a company may have a change in strategy. If a company is forecasting an economic slowdown, they may choose to put less money into capital projects. Conversely, a rapidly growing company may want to consolidate its capital gains and reassess their market position before continuing their growth strategy.
  • A third reason is in an effort to attract more equity investors.

In all cases, the choice to increase a dividend is means that a company is leaving a larger portion of their profits available to be returned to investors as dividends.

The dividend yield is the ratio of a company’s annual dividend compared to its share price represented as a percentage. To calculate dividend yield, let’s look at this example:

  • Company A announces a $2 per share annual dividend. The stock costs $40 per share.
  • Company B announces a $1 per share annual dividend. Their stock also costs $40 per share.

To calculate the yield, you would simply divide the announced per share annual dividend by the share price.

  • For company A, that would be 2/40 = 5%
  • For company B, that would be 1/40 = 2.5%

Simply put, investing $10,000 in Company A would produce $500 of annual dividend income. That same $10,000 in Company B would produce $250 in annual dividend income. Assuming all other fundamentals were the same, income-oriented investors would prefer to invest in Company A because of the higher yield.

The dividend payout ratio (also known as simply the payout ratio) gives investors an idea of how much profit a company is returning to shareholders as opposed to how much money they are keeping on hand for reinvestment, to pay off debt, or to hold as cash (i.e. retained earnings). The formula for the dividend payout ratio is as follows:

  • Dividend Payout Ratio = Dividends Paid/Net Income

Some companies will pay out 100% of their income to shareholders. An investor should expect a company’s payout ratio to be higher if they are a mature, established company. When a company has a high percentage of retained earnings, it can try the patience of investors.

Companies that pay dividends are typically mature companies in what are considered defensive stocks (utilities, consumer staples, etc.). These stocks do not generate the same capital growth as high growth stocks so they offer a dividend to help reward shareholders.

There are many companies that have a solid track record of raising their dividends. The best of the best have royal titles: princes, aristocrats, and kings.

  • Dividend princes have raised their dividend for at least 10 years.
  • Dividend aristocrats have raised their dividend for at least 25 years.
  • Dividend kings have raised their dividend for at least 50 years.

Once you’ve looked at a company’s dividend yield and dividend payout ratio, it’s still important to choose wisely. Although a dividend is generally considered to be a sign that a company is healthy, that is not always the case. Keep in mind that a dividend is an alternative measure to capital growth. Growth investors would rather invest in companies that are generating impressive revenue and plowing that money back into their business to stimulate even more growth.

A company like Coca-Cola (NYSE:KO) continues to grow year after year (it’s a favorite of Warren Buffett). However, much of Coke’s appeal is in its dividend that is both consistent and growing every year. That brings up the importance of an increasing dividend. Just because a company has a reputation for offering a dividend, investors should still expect a level of dividend growth to increase their total return.  

Also, remember that just because a company announces a dividend does not mean they have to pay it. If a company runs into financial difficulty, dividends are usually the first thing to get cut. An example of this occurred at the onset of the Covid-19 pandemic when many dividend paying companies suspended or cut their dividends in anticipation of weak revenue and/or earnings.

Any company that has both the desire and the ability to generate increased dividend payments for their shareholders is a stock worth considering for an investor’s portfolio.

Many, but not all, dividend-paying companies allow individuals to reinvest dividends through a dividend reinvestment plan (DRIP). Automatic reinvestment is a strategy for investors who do not need the regular income that is generated by dividends.

Here’s a simplified example of how a DRIP works. Company XYZ has a share price of $25 per share and a dividend yield of 5%. If an investor buys 100 shares, they will earn a yearly dividend of $125 ($2,500 x 5%). If they choose to reinvest that dividend, at the end of the year they will have purchased an additional five shares of Company XYZ stock and the value of their holdings assuming the share price remained at $25 would be $2,625. It’s a wash, right? But what if the share price climbs to $30 by the end of the year? Assuming the dividend yield does not increase, the payout would be $125, but the 105 shares would now be worth $3,150.

Some companies allow investors to put in additional money (with some minimum and maximum restrictions). An investor will typically pay market price for those shares, although some companies will sell these shares at a slight discount.

There are two caveats for investors looking to buy additional shares separate from dividends being reinvested. First, is that it can take some time to sell the shares that you buy directly from the company. Second, it is important to remember that every dividend reinvestment represents shares that are being purchased at a different price. This means that the capital gains are going to be different for every transaction. Therefore, when you go to sell these shares all of those capital gains have to be accounted for.

Investing in a dividend mutual fund or ETF is a good option for beginning investors and investors who don’t want to take the time to choose their own stocks or track individual stocks once they buy them. These funds are typically comprised of multiple dividend-paying stocks. If you believe in the idea of not putting all your eggs in one basket, this may be a great option.

However, choosing a fund can be like walking into a Baskin-Robbins. There are a lot of varieties and it’s still up to you to decide on which funds are right for you. You’ll want to look at the stocks that are included and check their dividend yield, their consistency with paying the dividend over time, their expense ratio (low is good) and the size of the company, or market capitalization. From lowest to highest risk, there are large caps, mid-caps and small caps.

If dividends are attractive to some investors why do companies cut their dividend? As we mentioned above, a company that is not rapidly growing may take on debt to spur growth. If the company takes on a lot of debt in a short period of time, the dividend may have to get cut in order for the company to service the payment of the debt.

One trap that can befall dividend investors is chasing a high yield. In some cases, a company’s dividend yield exists for good reason. But in some cases, a high dividend yield is a warning that the company is not financially stable. That’s why it’s always good to follow the strategy of looking at a company’s fundamentals to understand if their dividend yield and/or payout ratio is sustainable and also looking for companies with a history of increasing yields.

Investing in dividend stocks is a time-honored way of growing wealth slowly. Following the simple three-part strategy of choosing a company wisely, looking to reinvest your dividends, and if necessary investing in dividend mutual funds and ETFs are good ways to identify and take advantage of dividend stocks that are increasing their dividends on a regular basis.

Dividend investing is not about chasing the highest yield you can find. There are often reasons why a company is offering a high yield. Like many things in life, if it looks too good to be true, it usually is.

 

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