by Fred Fuld III
Investors like stocks that have increased their dividend.
There are several reasons why investors tend to favor stocks that have had a dividend increase:
Increased income: A dividend increase means a larger payout to shareholders, providing a more immediate and reliable source of income. This is particularly attractive to investors seeking regular cash flow, such as retirees or those living off their portfolios.
Signal of confidence: A dividend increase is often seen as a signal of a company’s strong financial health and healthy long-term prospects. This suggests the company is confident in its ability to generate sustained profitability and share its success with shareholders. This confidence can boost investor sentiment and attract new investors seeking stable and growing income streams.
Growth potential: While not always the case, a dividend increase can also point to future growth potential. It can indicate that the company has excess cash and sees limited opportunities for reinvestment within the business. This suggests the company may be exploring new lines of business or initiatives that could unlock future growth, further increasing shareholder value.
Risk reduction: Dividend-paying stocks tend to be less volatile than their non-dividend counterparts. This is because they attract investors seeking income and stability, leading to a more consistent investor base. A dividend increase can further solidify this perception of stability, making the stock a less risky investment in the eyes of some investors.
Market psychology: A dividend increase can be seen as a positive momentum indicator, often sparking increased demand for the stock as investors try to capitalize on the perceived trend of future growth and income. This increased demand can drive up the stock price, adding to the potential returns for investors.
It’s important to note that not all dividend increases are created equal. Investors should also consider:
- The size of the increase: A large increase is generally more favorable than a small one.
- The company’s dividend history: A consistent track record of dividend increases is more reassuring than a one-time bump.
- The reason for the increase: Understanding the company’s rationale behind the increase (e.g., strong earnings,increased cash flow) can provide context.
- Overall financial health: While a dividend increase is positive, it shouldn’t come at the expense of the company’s financial stability.
The following is a list of stocks that have increased their dividends during the last week.
| Stock | % Increase | Yield |
| Fastenal (FAST) | 11% | 2.23% |
| Royalty Pharma plc (RPRX) | 5% | 2.87% |
| ONEOK, Inc. (OKE) | 3.7% | 5.71% |
| Penske Automotive Group, Inc. (PAG) | 10% | 1.97% |
| Independent Bank Corporation (IBCP) | 4% | 3.46% |
| NRG Energy, Inc. (NRG) | 8% | 3.09% |
| Franklin Electric Co., Inc. (FELE) | 11% | 1.04% |
One of the stocks on the list, ONEOK (OKE), not only increased their dividend by 3.7% but also authorized a $2 billion Share Repurchase Program. The company is a major American energy infrastructure company, connecting key gas supply and demand centers through its vast pipeline network, primarily focused on natural gas liquids. The stock trades at 12.7 times trailing earnings and yields 5.71%.
Fastenal, which distributes fasteners and tools, and operates hardware stores, had one of the biggest increases in its dividend payout, increasing by 11%. The stock has a price to earnings ratio of 34 and yields 2.23%.
Let’s hope that higher dividends turn into higher stock prices.
Disclosure: Author didn’t own any of the above at the time the article was written.
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