If the virtues and importance of dividend growth weren’t
etched into your brain already, let’s consider February’s example. (Then we’ll
outline eleven imminent hikes coming in April.)
About a month ago, shortly before the market reached full
correction mode, I outlined the problem low-growth dividend stocks would have
against rapidly rising Treasury rates – and why it’s vital that we monitor the
dividend growth of current and prospective holdings.
Within a week, yields quickly leapt to nearly 3%, and
currently sit close by at about 2.9%. On cue stocks crashed.
The lesson here is twofold.
For one, if interest rates continue to climb, life becomes
more difficult for corporations across the board. Per Bloomberg: “Policy
accommodation has helped the cost of servicing debt for companies in the
S&P 500 fall to an all-time low of 3.5 percent of sales over the past 12
months.” Conversely, rising rates would lead to higher debt-servicing costs,
which would naturally weight on profits.
The other fear is more targeted at many popular blue chips
that yield around 2% to 3% and deliver dividend expansion at a snail’s pace.
Yes, Coca-Cola and Merck as companies have stood the test of time, but with their
stocks flat-lining and their payout growth marginal, the safety of Treasury
debt looks increasingly attractive by comparison.
That’s why I regularly flag popular yield plays for expected
dividend hikes. I want investors to keep an eye on these stocks that they
either hold or may be looking at so they can keep track of one of the most
important elements of dividend investing. April is particularly thick with
longtime payers, so here’s a look at ten stocks that should up the ante next
month.
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