Investing for Income

A Comeback for Dividends

The biggest hikes in the Kiplinger Dividend 15 were 10% increases from Home Depot and Procter & Gamble.

The reopening of the economy means more revenue flowing into corporate coffers. And that cash infusion is boosting the fortunes of companies that pay dividends, including members of the Kiplinger Dividend 15.

Our list of favorite dividend-paying stocks continues its steady showing, with five members increasing their dividends since our update in the April issue.

The biggest hikes came from home-improvement retailer Home Depot (HD) and consumer-products giant Procter & Gamble (PG), known for brands such as Charmin and Tide. Both firms upped annual payouts by 10%. Johnson & Johnson (JNJ), which received authorization for its COVID-19 vaccine in February, also boosted its payout, as did retailer Walmart (WMT) and Realty Income (O), a real estate investment trust.

As a group, the Dividend 15 stocks yield 3.1% – more than double the yield of the S&P 500 Index. (Yields, returns and other data are as of June 4.)

The outlook for dividends continues to improve, thanks to the swift earnings recovery for many firms after a tough 2020.

"Pandemic-related reasons for dividend reductions are in the rearview mirror," says Jamie Cox, managing partner at Harris Financial Group. S&P Dow Jones Indices now projects at least a 5% increase in S&P 500 dividends this year compared with a year ago, up from a 4% estimate in April.

Top Performers

In terms of total returns (dividends plus price appreciation), our 15 picks have gained 28.4%, on average, over the past 12 months – less than the 38.1% for the S&P 500.

But so far in 2021, our picks' 15.4% gain is competitive with the S&P 500's 14.1% advance. The Dividend 15's best performers, which include private-equity firm Blackstone Group (BX), electrical component maker Emerson Electric (EMR), and analog semiconductor manufacturer Texas Instruments (TXN), handily topped the S&P 500 in both the past year and year-to-date periods.

The big winner was Blackstone, up 65.7% over the past 12 months. Investment bank Piper Sandler boosted earnings projections for Blackstone for this year and 2022, citing a rebound in the parts of its portfolio hurt by the pandemic, such as rental housing, hotels, offices and retail, as well as Blackstone's strong fee-related gains and robust fund-raising for future investment activities.

Emerson Electric is also building on momentum. A solid balance sheet, improving sales growth and strong leadership under a new CEO bode well for another dividend hike in 2022, according to Argus Research. In April, Texas Instruments said its strong free cash flow underscores the sustainability of its payout.

Defense contractor Lockheed Martin (LMT) was flat for the past year, but has gained nearly 13% in 2021 as supply-chain challenges moderate and fears of cutbacks in military spending ease. President Biden proposed a $715 billion defense budget for 2022, a 1.4% increase over this year. "The dividend payout is secure, and we expect it to grow," says Argus analyst John Eade.

Most Popular

Your Guide to Roth Conversions
Special Report
Tax Breaks

Your Guide to Roth Conversions

A Kiplinger Special Report
February 25, 2021
12 Best Monthly Dividend Stocks and Funds to Buy
Kiplinger's Investing Outlook

12 Best Monthly Dividend Stocks and Funds to Buy

Your bills come monthly. Why not your dividend checks? These are some of 2022's best monthly dividend stocks and funds for easier income planning.
November 22, 2021
The Berkshire Hathaway Portfolio: All 41 Warren Buffett Stocks Ranked
stocks

The Berkshire Hathaway Portfolio: All 41 Warren Buffett Stocks Ranked

The Berkshire Hathaway portfolio is a diverse set of blue chips, and increasingly, lesser-known growth bets. Here's a look at every stock picked by Wa…
November 16, 2021

Recommended

Stock Market Today (11/29/21): Tech Stocks Lead in Broad-Market Bounce
Stock Market Today

Stock Market Today (11/29/21): Tech Stocks Lead in Broad-Market Bounce

Tesla and Microsoft were two notable gainers, while semiconductor stocks also made a big move higher.
November 29, 2021
Where to Find Yield in 2022
Investing for Income

Where to Find Yield in 2022

I am sold on leveraged closed-end debt funds, junk bonds and floating-rate bank loan funds.
November 29, 2021
Stock Market Today (11/26/21): New COVID Strain Sinks Stocks in Short Session
Stock Market Today

Stock Market Today (11/26/21): New COVID Strain Sinks Stocks in Short Session

The WHO assigned the new strain the Greek letter "Omicron" and designated it a "variant of concern."
November 26, 2021
New "Omicron" COVID Variant Rattles Stock Markets
stocks

New "Omicron" COVID Variant Rattles Stock Markets

A new strain of COVID - B.1.1.529, which has been given the "omicron" label - hit stocks and other risk assets on the chin Friday.
November 26, 2021