3 Dividend Growth Stocks That Could Raise Their Payouts in September
Dividend growth stocks can make for ideal long-term investments. These are stocks which have shown a commitment to not just paying dividends but increasing their payouts over time. That can be difficult to do amid varying economic conditions,l and long streaks are often due to the underlying business having strong and versatile operations.
Here are three dividend growth stocks that may announce another round of dividend hikes in September: Microsoft (NASDAQ: MSFT), Verizon Communications (NYSE: VZ), and Texas Instruments (NASDAQ: TXN).
Microsoft
Tech giant Microsoft might not strike you as a top dividend stock, but it's an underrated income investment to hang on to. While its dividend yield of 0.7% is modest compared to the S&P 500 average of 1.3%, it has been growing its dividend for nearly two decades. In September 2023, the company announced a 10% increase to its dividend payment.
It's highly probable that Microsoft will announce another dividend hike next month as its payout ratio is incredibly low at 25% of earnings. And with some attractive growth prospects in artificial intelligence and video games, now that its acquisition of Activision Blizzard is wrapped up, the company is likely feeling strongly about its future. Assuming it follows the same pattern as in previous years, Microsoft will probably announce a hike to its dividend in September. The big question is just how large of an increase it will be.
Whether you're a growth investor or looking for a great dividend, Microsoft can make for an ideal investment to buy and hold.
Verizon Communications
Verizon doesn't have great growth prospects, and that has been a big reason the stock has struggled in recent years. It hasn't performed well in relation to the markets and this year its shares are up a relatively modest 11% while the S&P 500 has risen by more than 18%.
What makes Verizon an appealing buy is primarily its dividend. Today, its dividend yields 6.5%, which is unusually high for the telecom stock. But as interest rates come down, I suspect more investors will gravitate to Verizon for its high payout, and the stock price may climb higher as a result of that.
Verizon prides itself on having the longest dividend growth streak in the U.S. telecom industry, which stands at 17 straight years of increases. It last announced a dividend increase in September 2023, when it boosted its quarterly payout from $0.6525 to $0.665.
The company has generated free cash flow of just under $14 billion in the past four quarters, which is comfortably higher than the $11.1 billion it has paid out in dividends during that time frame, suggesting that there is still room for another increase to the dividend this year.
If you're primarily looking for a good dividend stock to own, Verizon can make for a reliable investment to buy and hold.
Texas Instruments
Another company that raised its dividend payments last September and might again next month is Texas Instruments. The semiconductor company announced a 5% increase to its payout last year and it was the 20th straight year where it increased its dividend. Today, the stock yields 2.5%.
The company has been facing headwinds as revenue in its most recent quarter (which ended on June 30) declined by 16% to $3.8 billion due to softening demand in the automotive and industrial markets. But with its payout ratio still at around 90% of earnings, Texas Instruments may be able to justify announcing another rate hike this year, although it may be a more modest one compared to the previous year.
Although Texas Instruments is facing some challenges due to economic conditions, this can make for a good investment to hang on to for the long term as the company's products can play an important role in helping to revolutionize many industries. Investors will want to keep an eye on the payout ratio, though, for any signals a dividend cut might be on the horizon.
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David Jagielski has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Microsoft and Texas Instruments. The Motley Fool recommends Verizon Communications and recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.
3 Dividend Growth Stocks That Could Raise Their Payouts in September was originally published by The Motley Fool