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It’s dividend time again. December is upon us and there’s another robust list of companies paying dividends.
We’ve dug through the list to find those that will be paying you more. The key is that investors should focus more on stocks that are consistently upping their dividends, rather than just focusing on the dividend yield.
A stock offering an 8% dividend yield will do you no good if the stock price falls. Note that consistent dividend growers have a history of outperforming the market.
Let’s have a look at the Vanguard Dividend Appreciation ETF (NYSEArca: VIG), which offers a 2.3% dividend yield, but only focuses on companies that have a history of increasing their dividends. This ETF has seen its share price rise 59% over the last 10 years.
Then there’s the iShares Select Dividend ETF (NYSEArca: DVY), which just tracks high-yielding stocks. Its dividend yield is 3.3%. However, shares of the iShares fund are up just 22% over the last decade.
With that in mind, here are the top five dividend increases for December:
No. 1 December Dividend Increase: VF Corp. (NYSE: VFC)
VF Corp., the apparel maker of the Lee and Wrangler jeans brands, is offering a 2.2% dividend yield and is paying out less than 50% of its earnings via dividends. It has upped its dividend for 42 straight years. The dividend payment of 37 cents a share in December will be a 15% increase.
The beauty of VF Corp. is that more than half its sales are via the high-margin outdoor and action sports business. This gives VF Corp. superior margins and returns on invested capital relative to its peers. Going forward, look for the company to turn to direct-to-consumer and international expansion to really drive growth.
Shares trade ex-dividend on Dec. 4.
No. 2 December Dividend Increase: Lancaster Colony Corp. (NASDAQ: LANC)
Lancaster is paying out a $5 per share special dividend and will be upping its quarterly dividend by 8% to 50 cents a share. It offers a 1.6% dividend yield.
Lancaster has upped its dividend for 52 straight years and is paying out less than 50% of its earnings via dividends. The $5.50 in combined dividend payments equates to a 6% pro forma dividend yield.
Lancaster has a history of superior growth relative to the food industry thanks to its product lines, which are still resonating with shoppers – namely its frozen foods. It’s also seeing demand growth from its national restaurant chain customers.
Shares trade ex-dividend Dec. 7.
No. 3 December Dividend Increase: DineEquity Inc. (NYSE: DIN)
DineEquity is upping its dividend by 5% to 92 cents a share this month. Its dividend yield is up to 4.3%. Even with that robust dividend, it’s still paying out less than 60% of earnings via dividends.
DineEquity is the result of the 2007 purchase of Applebee’s by International House of Pancakes. The two have really dominated the low-cost and fast dine-in market for breakfast, lunch and dinner over the years. The next growth angle will be international expansion.
Shares trade ex-dividend Dec. 9.
No. 4 December Dividend Increase: Huntington Bancshares Inc. (NASDAQ: HBAN)
Huntington is paying a 2.4% dividend yield. It’s upping its dividend 17% to 7 cents a share. The bank came out of the financial crisis positioned nicely with relatively low charge-offs and credit losses.
Since 2010, it’s been focusing more on the retail and middle-market business banking areas. Since then, it’s managed to grow commercial banking customers at an annual rate of 2.6%. On the consumer banking side, that growth is upward of 10.6%.
Huntington has deep relationships with its customers as well: More than 80% of customers use four or more of its services. This type of relationship banking is a positive when it comes to keeping its return on equity in the double digits.
Shares trade ex-dividend Dec. 17.
No. 5 December Dividend Increase: Dow Chemical Co. (NYSE: DOW)
Dow Chemical is upping its dividend by 10% to 46 cents a share. The stock is offering a 3.5% dividend yield and has upped its annual dividend for four straight years now.
To ensure it can keep growing its dividend, the chemical and agriculture company is transitioning its portfolio toward higher-margin downstream products. It’s also looking to make low-cost input products, like feedstock, a bigger part of the business. Both of these efforts should help Dow raise the barriers of entry to its business and increase customer retention.
Shares trade ex-dividend Dec. 29.
That’s a wrap for 2015 for our monthly dividend increases issue of Income & Prosperity. But to learn more about a simple way to organize your dividend payments in 2016 and beyond, just click here.