3 Stocks to Watch on Dividend Hikes as Inflation Woes Prevail

Ritujay Ghosh

Wed, Jun 28, 2023, 6:18 AM 4 min read

The Fed decided to keep its interest rates unaltered for the first time in 15 months in its June FOMC meeting. The decision was cheered by investors that sent stocks on a rally. However, all three major indexes snapped their multiweek winning streaks last week as concerns of the economy slipping into a recession grew once again.

This saw the Dow ending 1.7% lower last week, while the S&P 500 and Nasdaq each finished 1.4% lower, snapping their five and eight straight weeks of gains.

Inflation has shown signs of easing, but the Fed has said that the crisis is far from over. Fed Chair Jerome Powell maintained his hawkish stance last week during his Congressional testimony. He said that two more rate hikes of 25 basis points each will be required by the end of this year.

The Fed has increased interest rates by 500 basis points since March 2022, with the terminal interest rate now at 5.6% instead of 5.125%. The Fed’s decision to continue with its interest rate hikes comes as inflation is still a lot elevated than its target level of 2%.

Understandably, market participants are concerned about the economy’s health and are trying to gauge the Fed’s next course of action. Given the Fed’s stance and the multi-year high inflation, it is unlikely that the first interest rate cut will be any time before 2025, although market participants believe it could also be some time in 2024.

Markets are thus likely to remain volatile for a longer period than expected, maybe throughout this year.

Stocks in Focus

Given this situation, investing in dividend-paying stocks would be a wise decision. Dividend stocks with a solid business plan and a proven track record are known for handling market volatility. An astute investor should thus consider stocks that have recently raised their dividend payments. Three such companies are Matson, Inc. MATX, Investar Holding Corporation ISTR and Hamilton Lane Incorporated HLNE.

Matson, Inc. operates as an ocean transportation and logistics company. MATX offers shipping services in Hawaii, Guam and Micronesia islands and expedited service from China to southern California. Matson sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

On Jun 22, Matson announced that its shareholders would receive a dividend of $0.32 a share on Jul 9, 2023. MATX has a dividend yield of 1.65%. Over the past five years, Matson has increased its dividend six times, and its payout ratio at present sits at 6% of earnings. Check Matson’s dividend history here.