Don’t settle for dividend stocks that don’t grow your payments. If a dividend-paying company is doing well, it should generally have room to increase its dividend, even by a modest amount. Not only is it a good indicator that business is doing well, but it also means more dividend income for you. Three companies that increased their dividend payments this month are Real estate income (NYSE: O), Aim (NYSE: TGT)and Fedex (NYSE: FDX).
1. Real estate income
Realty Income makes monthly dividend payments and the real estate investment trust (REIT) makes a good, diversified income investment. The REIT’s portfolio includes a broad mix of tenants from all areas of the economy. It doesn’t just focus on apartments or hospitals. Instead, it has more than 1,500 clients spread across 89 industries.
The REIT typically makes multiple dividend increases over the course of a year, but since its payments are made every month, they are usually not huge. On June 11, the REIT announced that its monthly dividend would increase again, from $0.2625 to $0.2630. The payment, which is scheduled for July, is 16% higher than what it paid its investors five years ago: $0.2265. The stock’s 5.9% yield means it could raise more than four times what it would with the average. S&P 500 share, where the average yield is around 1.3%.
This year, the REIT expects its normalized funds from operations per share to be between $4.17 and $4.29. which would be well above the current rate of its annual dividend: $3.16. Realty Income’s high dividend yield may not stay as high once interest rates drop; By then, the stock could be rising. For income investors, now is a good time to buy shares of this high-dividend stock.
2. Objective
One of the main reasons investors love owning Target stock is the Minneapolis-based retailer’s continually growing dividend. At 3.2%, investors can already get a higher payout than the average retail stock. What sweetens the deal is that Target is also the dividend king, having increased its payouts not only for years but also decades.
That’s why Target’s latest dividend increase announced this month was business as usual, without much fanfare. The company said it was increasing its dividend at a fairly modest rate of 1.8%, as it extends its dividend growth streak to an impressive 53 consecutive years. But Target has achieved bigger increases in recent years, after benefiting from a pandemic-driven surge in traffic to its stores. The new quarterly dividend of $1.12, to be paid in September, is 70% higher than the $0.66 it paid to shareholders five years ago.
It hasn’t been a great year for Target stock, having risen just 1% since January. But with a modest valuation of 16 times trailing earnings and being a leader in the retail industry, this may be another solid income-producing stock to buy and hold for the long term.
3.FedEx
The biggest dividend increase on this list comes from logistics company FedEx. Last week, the company announced it would increase its annual dividend by 10% to $5.52.In five years, the company has more than doubled its dividend payments. However, even with the increase, the stock’s yield is now 2.2%, which is still the lowest rate on this list.
FedEx stock is down this year. Economic conditions have not been great and that has been evident in the company’s results, as sales have decreased due to weaker demand. For the nine-month period ending February 29, the company’s revenue totaled $65.6 billion and fell 4% from the same period a year earlier.
The good news is that as economic conditions improve, the company should be in much better shape going forward. It currently trades at just 11 times its estimated forward earnings, and could represent a bargain right now for both dividend- and growth-oriented investors.
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David Jagielski has no position in any of the stocks mentioned. The Motley Fool ranks and recommends FedEx, Realty Income, and Target. The Motley Fool has a disclosure policy.
3 Dividend Stocks That Recently Raised Their Payouts was originally published by The Motley Fool