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Dividends simply cannot be overlooked.
The S&P 500 index is up a cool 95% over the last five years. But when you throw in dividends, the large-cap benchmark has surged 117% over the same time period.
The threat of an interest rate hike by the Federal Reserve has led many investors to be a bit more cautious with dividend stocks. However, the key is to focus on companies still offering healthy dividend yields, while also having a commitment to boosting dividend payments.
The average S&P 500 dividend yield is still just 1.9%. But there are a number of stocks that are offering dividend yields comparable to or better than the S&P average, while also offering stock appreciation that might be above what the index can muster.
With that thought in mind, here are the top five stocks in the dividend universe that are upping their payouts in July:
No. 1 July Dividend Increase: Ethan Allen Interiors (NYSE: ETH)
Ethan Allen is a near $800 million market cap interior design company. It’s paying a 2.1% dividend yield and will be upping its quarterly dividend by 17% next month to 14 cents a share. Ethan Allen has now upped its dividend for four straight years and is only paying out 40% of its earnings via dividends.
The company both makes and sells furniture, which gives it a unique advantage. It also has exposure to the higher-end segment, which helps insulate it from economic roller coasters. As far as future growth, Ethan Allen has the opportunity to expand overseas, namely China.
Shares trade ex-dividend on July 7.
No. 2 July Dividend Increase: Cracker Barrel Old Country Store (NASDAQ: CBRL)
Cracker Barrel, the restaurant and country store, offers a 3% dividend yield. It’s upping its quarterly dividend by 10% in July to $1.10 a share. But more importantly, it will also be paying a special dividend of $3 per share in July. Over the next year it will offer a robust dividend of $4.10 a share. That puts its pro forma dividend yield at over 5%.
The company operates over 600 locations, with the majority in close proximity to major interstate highways. This geographic strategy increases its appeal to travelers and has paid off well: Cracker Barrel has seen its same-store sales grow for 14 straight quarters.
Cracker Barrel has performed a sale-leaseback of select restaurants, with the proceeds being used to pay down debt. However, it still owns 66% of its real estate, which can be used to generate additional cash.
The stock trades ex-dividend on July 15.
No. 3 July Dividend Increase: Caterpillar (NYSE: CAT)
Caterpillar offers a 3.6% dividend yield. It’s upping its quarterly dividend by 10% in July to 77 cents a share. It has upped its dividend for five straight years now.
Caterpillar is also a buyback leader. It repurchased over $4.2 billion of its own stock last year, and still has close to $5 billion remaining on its current buyback authorization.
Over the last year, shares are down over 20% due to its significant commodity exposure. But the key is that the company is a leader in the global heavy equipment industry. It’s the largest construction equipment maker in the world, with close to 20% of the market share for new construction equipment.
Shares trade ex-dividend July 16.
No. 4 July Dividend Increase: The Clorox Co. (NYSE: CLX)
Clorox pays a 2.9% dividend yield and is considered an S&P 500 Dividend Aristocrat, having upped its dividend for 37 straight years. Clorox is upping its quarterly dividend by just over 4% in July to 77 cents a share.
Clorox competes in the household and personal-care markets, with a focus on niche categories. And it has a strong number of top tier brands, with about 80% of its brands being the No. 1 or No. 2 in their respective categories.
Clorox also enjoys a very healthy return on invested capital. Its ROIC is currently at 23%, which is more than double top peers like Procter & Gamble (NYSE: PG).
The stock trades ex-dividend July 20.
No. 5 July Dividend Increase: Lowe’s Companies (NYSE: LOW)
Lowe’s is paying a 1.6% dividend yield. In July, it’s upping its quarterly dividend by over 21% to 28 cents a share. This will mark the 52nd straight year of a dividend increase. The other beauty of Lowe’s dividend is that it’s only paying out 34% of its earnings via dividends.
There are still plenty of growth opportunities in the home improvement market overseas, as well as here in the U.S., where the housing recovery and improving employment will further drive home improvement spending.
Lowe’s is the second-largest home improvement retailer in the U.S., but it has a couple advantages over other players. One is that it’s tailoring its merchandise to local markets. Lowe’s also uses large-scale purchase orders to get a discount, which it then passes on to shoppers with what it has branded as “everyday low prices.”
Shares trade ex-dividend July 20.
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