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3 Stocks to Buy with Recent Dividend Increases

Friday, October 16, 2020 | Sean Sechler
3 Stocks to Buy with Recent Dividend Increases

Whenever a company increases its dividend, it sends a strong message to investors that the company expects to continue growing and staying profitable. It’s especially worth noting when a company is financially stable enough to increase its dividend payouts amidst all of the economic uncertainty at this time. While you should never chase a high-dividend yield on a stock, buying quality companies that are rewarding investors with increased payouts is a nice option for investors looking to generate some extra income in their portfolios.

With so many companies reducing their dividend payouts or cutting them altogether, assessing the potential in companies that have recently raised their dividends makes a lot of sense. That way, you can end up with strong businesses that likely won’t be cutting their payouts to shareholders anytime soon.

Here are 3 stocks to buy with recent dividend increases:

McDonald’s (NYSE:MCD)

While McDonald’s profits are going to take a hit this year as a result of the pandemic, there’s still a lot to like about the largest fast-food restaurant company in the world. The company provided a Q3 earnings preview that let investors know U.S. same-store sales rebounded and rose 4.6% year-over-year in the quarter. While the report also mentioned that global same-store sales decreased by 2.2% year-over-year, there’s plenty of analyst optimism that a strong recovery is on the cards for McDonald’s in 2021.

Another advantage of McDonald’s for investors to consider is the fact that is a company that should hold up well during a recession. There’s also the fact that management is focused on refranchising stores since they require no capital expenditures and help to improve free cash flow. The company just announced that it is increasing its dividend to $5.16 per share annually, which is 9% higher than the 2019 annual payout. With a dividend yield of 2.25% and the fact that the company has increased its payout every year since 1976, dividend investors should strongly consider McDonald’s. The stock is currently trading at around all-time highs, which means waiting for a dip before adding shares is sensible.

Lennar Corporation (NYSE:LEN)

Another intriguing investment prospect for dividend investors is Lennar Corporation. The housing sector has been one of the best performing sectors from the pandemic due to record-low interest rates and an increase in home improvement projects. The strong performance should continue throughout 2021 as well. Since Lennar is one of the nation’s leading homebuilders, the stock has a lot of upside. It’s a company that offers affordable, move-up, and retirement homes which is a big plus since there is a shortage of affordable housing at this time.

Lennar Corporation reported an EPS increase of 33% year-over-year in Q3 and saw new orders for homes increase by 16% year-over-year. These are encouraging numbers for investors to consider, but there’s also a dividend increase to keep in mind. Earlier in October, Lennar increased its annual cash dividend by 50% to $1 per share from $0.50 per share. With housing market trends working in its favor, a strong financial position, and a big dividend bump, this company just might be the top pick in the residential construction industry.

Walgreens Boot Alliance (NASDAQ:WBA)

This is a stock that has been beaten up over the last few years and is down over 36% year-to-date, but that doesn’t mean you should write it off. Walgreens Boot Alliance is a pharmacy-led health and wellbeing company that has a portfolio of retail brands including Walgreens, Duane Reade, Boots and Alliance Healthcare, and more. The company just reported its Q4 and FY 2020 earnings today and the stock is up around 5% in the trading session following the release. Walgreens Boot Alliance reported a Q4 profit largely driven by higher sales at U.S. pharmacies and the stock could finally be breaking out of its downtrend.

Sales were up 2% year-over-year to $139.5 billion in FY 2020 and the company expects strong adjusted profit growth in the second half of 2021. The real selling point here is the 4.96% dividend yield and the recently announced 2.2% dividend increase. Although it is a riskier dividend stock to consider, 45 consecutive years of dividend increases and the upbeat earnings report make it worth a look.


Companies Mentioned in This Article

CompanyBeat the Market™ RankCurrent PricePrice ChangeDividend YieldP/E RatioConsensus RatingConsensus Price Target
McDonald's (MCD)2.3$227.45+0.6%2.20%36.05Buy$221.85
Lennar (LEN)2.1$83.29+0.9%1.20%11.62Buy$79.94
Walgreens Boots Alliance (WBA)2.3$37.49+1.4%4.99%45.72Hold$43.27
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7 Stocks to Own For the Next Decade

According to Blackrock (NYSE:BLK) analysts, investors who are looking for growth as the economy begins to recover need to be in stocks. In fact, many investors are breathing a sigh of relief for not panicking when the market sold off in February and March.

But while a Black Swan event like the Covid-19 pandemic can teach investors short-term lessons, the trick to buy-and-hold investing is identifying companies that give you the confidence to invest for not just 10 weeks, but 10 years.

For many investors this means identifying key trends. Prior to the pandemic, trends were emerging. Those trends, such as e-commerce, financial technology, digital healthcare, are quickly becoming part of our “new normal.” Think about it. Cash is now literally “dirty money”. E-commerce is not just convenient, it’s essential. And we’ve figured out that the patient-doctor relationship can take place via videochat.

And all of this feeds into other trends, which includes the idea that our smartphones are only going to become more powerful, and more important. But the next 10 years are not destined to be the decade of stealth small-caps. Many of the companies that are well positioned for the next decade will be familiar to most investors.

Here are 7 companies that are going to become increasingly relevant over the next decade. When you buy them now, you’ll be thanking yourself when the calendar turns to 2030.

View the "7 Stocks to Own For the Next Decade".

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