According to Science magazine, 93% of human behavior is completely predictable.
The route we take to work… Where we shop for groceries… What time we go to bed… Heck, even if we prefer boxers or briefs.
Considering the number of possibilities, 93% is pretty solid.
When it comes to dividend investing, though, we’re dealing with even better odds – particularly when it comes to predicting the behavior of Dividend Aristocrats and Champions.
[ad#Google Adsense 336×280-IA]Since these companies have both paid and increased their annual dividends for 25 consecutive years, their behavior is virtually assured.
Management understands the possible backlash of failing to continue raising dividends when they’ve done so for a long time.
As a result, every last one of them can be counted on to raise their dividends each and every year.
For us income-oriented investors, that’s a fact of life we can take to the bank, literally.
With that in mind, we’re kicking off the New Year with three dividend increasers that will likely boost their dividends within the next 30 days or so.
Dividend Booster #1: Consolidated Edison (ED)
Consolidated Edison is an electric, gas and steam utility company that serves parts of New York, New Jersey and Pennsylvania.
I know what you’re thinking. A utility isn’t what you’re looking for in a dividend grower.
And while I’ll concede that utilities aren’t traditionally the best investments to own in an uncertain interest rate environment, Con Ed may be an exception to the rule.
The company currently pays an attractive 4.5% yield. And it’s increased its dividend every year for 39 years. That’s an excellent record, especially for a utility stock that’s had to withstand almost four decades of interest rate fluctuations.
With a trailing 12-month dividend payout ratio (DPR) of 69.7%, Con Ed can afford to continue growing its dividend, too.
In fact, we should expect management to announce the next dividend increase in mid-January.
And when one considers the future infrastructure needs of New York and New Jersey, Con Ed should experience better-than-average growth, too. That promises to provide more earnings and higher cash flows – and, in turn, help fund even more dividend growth in the years ahead.
The opportunity is all the more compelling when we take valuation into account.
At current prices, the stock trades at a price-to-earnings (P/E) ratio of 15.6. That represents a 34.4% discount to the industry average P/E of 23.8 and a 22.9% discount to the S&P 500 Index P/E ratio of 17.9.
Dividend Booster #2: Wal-Mart (WMT)
Like Con Ed, Wal-Mart sports a dividend growth history extending back 39 years. And although shares don’t yield as much as Con Ed at 2.4%, the dividend growth potential more than makes up for it.
Last February, the company announced an 18.2% dividend hike – “one of the largest increases in our history,” in the words of Wal-Mart President and CEO, Mike Duke.
With $8.7 billion in cash on hand and an ultra-low DPR of 36.4%, management can easily afford to match last year’s increase.
Expect the announcement of a dividend hike to hit in late January or early February.
Once again, the stock’s valuation makes this an even more compelling “Buy.”
Wal-Mart currently trades at a P/E ratio of just 15.1 times earnings, which represents a discount to both the S&P 500 and the industry average P/E of 16.7.
Dividend Booster #3: Coca-Cola (KO)
Coca-Cola has increased its dividend for 51 years and counting. (Talk about predictable!) And the next hike will likely be announced in mid-February.
Given the company’s $11-billion cash balance and modest DPR of 56.7%, I expect the coming increase will top both the five-year average dividend growth rate of 8.5%, as well as last year’s increase of 9.8%.
If I’m right, the stock will yield close to 3%, based on the current share price of about $41.
In addition to the looming dividend announcement, Janney Capital Markets recently slapped a “Buy” rating on the stock, with a price target of $52 (due to a successful expansion in Myanmar and improving crop yields due to better weather).
So we’re talking about assured income with the potential for double-digit appreciation here. It doesn’t get much better than that. Don’t miss out!
Safe investing,
Louis Basenese
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Source: Dividends and Income Daily