Dividends can make or break your portfolio. Returns for some of the most widely held companies can appear lackluster at first. But with a closer look, you’ll find out just how much difference dividends can make, explains Marshall Hargrave, editor of Wyatt Research’s Daily Profit.
Here are the top three dividend increases for November that investors should consider:
Microsoft (MSFT)
Microsoft is raising its quarterly dividend by 8% and will pay $0.42 per share. The tech giant pays a 2% dividend yield and has a 13-year streak of dividend increases. It’s paying out just half of its earnings via dividends.
The “old” technology company has effectively turned itself into a major competitor again. Shares are up 40% in the last year, so why invest now? Well, the dividend is only part of the story.
As for its growth prospects, Microsoft still has a long runway for building its commercial cloud business. Azure, Microsoft’s cloud computing platform, continues to grow and makes Microsoft a recurring revenue story.
Now that Microsoft is less tied to personal computer and physical product sales, nearly half of its revenues come from recurring revenue sources. Microsoft shares trade ex-dividend Nov. 15.
Honeywell (HON)
Honeywell is raising its quarterly dividend by 12% this month. It’ll be paying out $0.745 a share, which is a 2% dividend yield. This industrial giant has a six-year streak of consecutive dividend increases.
Honeywell pays out just around 40% of its earnings via dividends. The company recently decided to streamline its business — hoping to position itself in higher growth markets.
Honeywell will spin off non-core businesses to focus on core businesses like aerospace. It plans to use the cash from these spinoffs to make growth acquisitions. Honeywell will spin off its home and ADI global distribution business and its transportation system business into new public companies.
And even if Honeywell can’t find any worthwhile acquisitions, it’s shown that it will still find a way to reward shareholders — and not just with a richer dividend. The company spent $1.3 billion on buybacks during the first three quarters of the year. Honeywell is still a cheap bet. Shares trade ex-dividend Nov. 16.
McDonald’s (MCD)
McDonald’s is the biggest yielder on our list, paying out a 2.4% dividend yield. The behemoth fast-food chain is boosting its quarterly dividend to $1.01 a share. It has a long history of rewarding shareholders, with its 40-year streak of consecutive dividend increases. Just around 60% of its earnings are paid out via dividends.
The stock has soared 50% in the last year as the company works on burning itself around — that is, selling more items that customers actually want. Menu innovation is working; the company saw global sale-store sales (stores open for at least a year) growing at 6% globally last quarter. Wall Street had expected 4.5%.
Going forward, McDonald’s has growth opportunities with digital innovation; mobile ordering and in-store payment/ordering kiosks are showing promise. Guests are reporting more positive experiences with McDonald’s restaurants, which is a welcome change from the past several years. McDonald’s shares trade ex-dividend Nov. 30.
Marshall Hargrave is editor of Wyatt Research’s Daily Profit.
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