4 Companies that Could Raise Q4 Dividends by 20% or More

By Amey Stone

Research firm IHS Markit is out with its fourth quarter dividend preview and it highlights four companies expected to hike their dividends by at least 20%. These include Starbucks (SBUX), Zoetis (ZTS), CVS Health (CVS) and Assurant (AIZ).

Below is Markit’s expectations for each company, plus a few lines from its Monday report:

Starbucks: On October 20, the quarterly dividend is expected to increase 20% from 20 cents to 24 cents for a 1.8% forecast yield. Analysts write:

The company is under-levered compared to its peers (net debt to EBITDA at 0.17x vs peers’ 1.43x) and could raise extra debt easily. Management has repurchased twice as much stock in the last twelve months as the same time earlier, with $1.94bn vs $914m. Given the Board’s commitment to increase shareholder return, we anticipate double-digit dividend growth momentum to roll on.

Zoetis: On December 14, the quarterly dividend is expected to increase 26% from 9.5% to 12 cents for a 0.9% yield. Analysts write:

Adjusted net income for full year 2017 is suggested to be $1120m to $1190m, speculating a more than 20% increase from 2016. Furthermore, the company has increased its dividend rate year by year since 2014 with no exceptions and Markit expects the company to continue this trend. Our projected increase for 2017 would maintain the 20% payout ratio based on the consensus EPS estimates.

CVS Health: On December 16, the quarterly dividend is expected to increase 20% from 42.5 cents to 51 cents for a 2.3% forecast yield. Analysts write:

 The company maintains a 13-year consecutive stretch of increasing its dividends annually. Management currently aims to reach its targeted payout ratio of 35% by 2018, with the goal to return at least $5bn cash to shareholders via dividends and buybacks. They also revised the company’s full year free cash flow from between $5.3bn – $5.6bn to between $6.3bn – $6.6bn, with double-digit revenue growth driven by solid contract renewal rate, gross business wins and better purchasing economics.

Assurant: On November 16, the quarterly dividend is expected to increase 20% from 50 cents to 60 cents for a 2.7% forecast yield. Analysts write:

AIZ has a fluid capital deployment strategy that combines dividend growth, buybacks and acquisitions. The company intends to return $1.5bn to shareholders by the end of FY’17 via dividends and buybacks and has returned $548m so far. 80% of the $548m has been returned through buybacks, and based on this we’re expecting 20% of the remaining $952m to comfortably cover our expected increase.