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Forbes
06-07-2025
- Business
- Forbes
5 Stocks To Watch For Great Dividend Growth
Coins arranged as a bar chart with a graph line above ADP showed us that the private sector is now shedding jobs. That's bad for workers—but it's great news for earnings season (and dividend growth stocks!). Slowing employment means easing wage pressures and lower inflation. It also brings better profit margins and, our favorite of all, dividend hikes. Let's talk about five firms that recently raised their payouts 25% to 400% Are these one-hit wonders or will AI-driven savings make these dividend hike sequels even better? Profit growth brings dividend growth. Which then translates to share-price gains. That's the idea behind my 'Dividend Magnet' strategy. When a company announces that it's going to pay more for the foreseeable future, it's a bold statement. More dividends opens the floodgates to more investors. Let's consider Visa (V). Everyone knows Visa for its nonstop gains—but let's not overlook its steadily rising divvie. Visa Magnet I frequently refer to these kinds of stocks as 'Hidden Yields' because they won't always wow us with their headline yields—Visa, for instance, yields less than 1% right now. But if we own these dividend stocks for years, our yields on cost can easily soar into the high-single and even double-digits. This payout potential is why I have my popcorn ready for earnings season. Let's visit five dynamic dividend growers that improved their payouts by 25% to 400% last year. Fresh dividend announcements are likely over the next few months. Dividend Growth Stock #1: T-Mobile US (TMUS) T-Mobile US (TMUS) merged with Sprint in 2020, putting it on more even footing with rivals AT&T (T) and Verizon (VZ). But we could argue it only really joined 'Big Telecom' a few years later, in 2023, when it unveiled a brand-new dividend program. TMUS keeps growing. The Sprint merger (and the spectrum assets that came along with it) allowed TMUS to build a more competitive 5G network, which has translated into big jumps in new wireless subscribers, as well as big gains for T-Mobile shares. T-Mobile has also been expanding its margins and free cash flow, which has so far translated into better things for dividend investors. A year after its dividend initiation, TMUS announced a 35% dividend raise to 88 cents per share. T-Mobile is still in growth mode. Last year, the company entered a pair of joint ventures in an apparent future play on fiber telecom. Not to mention, like the other telcos, T-Mobile will have to keep plowing cash into maintaining and innovating its communications infrastructure. But we'll likely get another important data point on how aggressive TMUS wants to be with its dividend come mid-September, which is right around when the company made its previous two dividend splashes. Dividend Growth Stock #2: Amphenol (APH) Amphenol (APH) isn't nearly the household name that T-Mobile is, but it's giving dividend investors plenty to talk about. Amphenol dates back to 1932, when founder Arthur J. Schmitt produced a tube socket for radio tubes. Today, the company designs, makes and sells electrical, electronic and fiber optic connectors across three segments: Harsh Environment Solutions, Communications Solutions, and Interconnect and Sensor Systems. It's a global leader in broadband communication products for video and data networks, it provides high-performance interconnect systems for defense firms, it supplies sensors and antennas to the automotive industry, and more—so while we might not see the name around the house, chances are Amphenol powers some part of our day. The company has been a font of growth for decades because of its products' vast array of applications, which in recent years has included artificial intelligence. In Q1 2025, for instance, total orders jumped by nearly 60% year-over-year, driven heavily by AI. Indeed, the company says it will continue an elevated pace of capital expenditures 'to support the significant growth we are experiencing related to artificial intelligence applications in our IT datacom market.' This growth has been reflected in APH shares for years, but it's also starting to pour out into Amphenol's dividend, which dates back to 2005. Last year, the company juiced its payout by 50%—one of the biggest raises it has ever authorized. We'll likely get an answer to whether Amphenol plans to keep its foot on the pedal for another year in late July. Dividend Growth Stock #3: California Resources (CRC) California Resources (CRC) is a mid-cap energy E&P firm that was spun off of Occidental Petroleum (OXY) in 2014. The traditional business, which focuses on crude oil, natural gas and natural gas liquids (NGLs), includes wells in five of the largest California oil fields. However, over the past few years, CRC has leaned into green-energy initiatives such as direct air capture, and carbon capture and storage—largely through its Carbon TerraVault joint venture. CRC filed for (and emerged from) bankruptcy in 2021, and it's been profitable ever since. It initiated a 17-cent-per-share quarterly distribution that has since jumped by 128%, including a 25% improvement last year. CRC shares have more than tripled since relisting—not quite as impressive a feat as it sounds, as they've largely just tracked the energy sector, which was rebounding from Covid lows. But I'm interested in CRC's dividend direction given the size of the current payout, which is also in line with the sector. The company could taper out after its big 2024 hike—or it could signal a more aggressive plan for its cash. Like with Amphenol, California Resources previously had announced dividend increases later in the year but delivered the news earlier in 2024—in CRC's case, early August. So that's when I'll be keeping an eye out for CRC dividend news. Dividend Growth Stock #4: RLJ Lodging Trust (RLJ) RLJ Lodging Trust's (RLJ) is a hotel real estate investment trust (REIT) whose properties host 'premium-branded, rooms-oriented, high-margin, focused-service and compact full-service hotels located within the heart of demand locations.' Hoteliers love their jargon—let's cut through it. RLJ's properties contain larger hotels that offer specific, limited amenities and essentials, as well as hotels that are smaller in size but offer a wide variety of services (restaurants, bars, spas, etc.) Those 'premium' brands run the gamut, including Embassy Suites, Courtyard by Marriott, Hyatt Place, Wyndham, Residence Inn by Marriott, Hilton, and more. RLJ's dividend growth story is a familiar Covid-time tale. It and other hotel REITs were forced to raze their dividends to the ground during the pandemic, with RLJ reducing its payout from 33 cents per share down to a mere penny per quarter. It's easy to show dividend growth off of that low a platform, of course—technically speaking, after 2024's 50% hike to 15 cents per share, the dividend is 1,400% bigger than it was three years ago. It's also still half of what RLJ paid before Covid. Analysts think RLJ will earn roughly $1.40 in adjusted funds from operations (AFFO) in 2025; at current levels, that's a 40% AFFO payout ratio, which is considerably lower than many of its peers. So there's room to grow—which we can't always say about a stock that already yields 8%. Dividend Growth Stock #5: Coca-Cola Consolidated (COKE) Some rookie investors accidentally buy Coca-Cola Consolidated (COKE) instead of Coca-Cola (KO)—and what a profitable mistake! Coca-Cola Consolidated is the largest bottler of Coca-Cola in the U.S., boasting 11 manufacturing facilities, as well as 60 distribution and sales centers across the Midwest and East Coast. Those operations ship out a lot of Coke, Sprite, Dasani, Powerade and hundreds more brands and flavors to some 60 million consumers every year. While not nearly as well-known as its consumer staples partner, it has demonstrated unflinching top-line growth for the past decade-plus, including through Covid. But more noteworthy has been the bottom line: I highlighted COKE's dividend prowess back in 2023, noting it had 'quietly put up one of the more impressive five-year strings of financials you'll see' before doubling its dividend and announcing a massive $3-per-share special dividend. That didn't translate into continued dividend growth—immediately, anyway. But at the end of 2023, the company announced a massive $16-per-share special dividend to be paid in early 2024. Then in August 2024, it announced it would quintuple its regular payout to $2.50 per share. (Which, thanks to a 10-for-1 stock split in May 2025 is now 25 cents per share.) At current levels, COKE is still paying out a meager 15% of its 2024 earnings as dividends. If the company expects its past few years of profits to be the new baseline, Coca-Cola Consolidated has a lot more room to expand on that payout. The next probable announcement for such a move would be in late August, a year following its last expansion. But if not, I would look toward early December, which is when COKE previously announced special dividends and its 2023 dividend hike. Brett Owens is Chief Investment Strategist for Contrarian Outlook. For more great income ideas, get your free copy his latest special report: How to Live off Huge Monthly Dividends (up to 8.7%) — Practically Forever. Disclosure: none
Forbes
21-05-2025
- Business
- Forbes
This Snubbed Fertilizer Giant Gave Investors $2 Billion
Tractor cultivating field at spring,aerial view We need to talk about one dividend grower that's set to win big from this sudden breakout of tariff peace. It's an all-American stock that's 'dirt' cheap now. I'm talking about CF Industries (CF), a holding of my Hidden Yields service. CF makes fertilizers and is the world's largest maker of ammonia, a key ingredient of fertilizer. How do we know CF is primed to win as China and Uncle Sam take a breather? We're quite literally following the money here: CF's management team is piling in with huge stock buybacks—to the tune of 20% of the company's 'float' over the last three years. And its board just upped the ante with another $2 billion of repurchases. That's because management sees exactly what we see here. Let's dive into three gusting tailwinds for this 'back-to-the-land' play, starting (where else?) with tariffs. China is one of the biggest buyers of US crops, importing tens of billions of dollars' worth every year. Higher US-China tariffs hurt farmers' profits and slowed business at farm suppliers like CF and equipment maker Deere & Co. (DE). So it follows that the drop in tariffs between the two nations is bullish for farm profits—and fertilizer firms like CF. Tariffs have fallen from a stratospheric 125% to 10% on exports to China and from 145% to 30% on exports from China. As we discussed last week, this sets up a 'Goldilocks' tariff zone that'll protect US suppliers but doesn't restrict trade altogether. That, in turn, will help profits at American farms and at CF, thanks to the company's big US footprint. CF makes ammonia and ammonia-derived products, like granular urea fertilizer, at six plants in America, one in Canada and one in the UK. That American base isn't only a benefit in terms of tariffs—it also lets CF tap cheaper North American natural gas—a big edge, since gas is 70% of the cost of ammonia production. Moreover, CF says it can boost output in the US if needed. In fact, as we'll see below, it's already taking that step—in a smart, low-risk way. The second? Treasury Secretary Scott Bessent, who, as we've discussed recently, plans to tackle inflation with a three-step strategy: You can bet, too, that Trump and Bessent want lower corn and soybean prices, as cheap grocery costs are another administration priority (and are key to slaying inflation). That puts fertilizer makers—especially domestic fertilizer makers like CF—in a great spot, as their products boost crop yields. That, of course, is key to keeping a lid on food prices. Which brings us to our third (and most underrated) tailwind. Few investors realize this, but ammonia is in short supply and, according to CF, about seven more factories are needed to address the shortfall. CF is stepping into the breach with a new $4-billion plant, called the Blue Point Complex, in Louisiana. This facility also includes state-of-the-art carbon capture tech—a smart move to 'future-proof' it. To cut risk and cost, CF is building the plant through a joint venture with Japanese firms Mitsui & Co. and JERA Co. Inc. That leaves CF to foot about $2.2 billion of the overall construction bill. Meantime, CF is already enjoying a rebound in demand for its nitrogen fertilizers and is spending its profits wisely—by buying back its cheap shares, as we touched on earlier. When I say 'cheap,' I'm not kidding. You'd expect a firm with this kind of upside to at least trade for more than the S&P 500. But that's far from the case here. As I write this, CF trades for around 11.4 times trailing earnings, well below the S&P 500 average of around 23. CF has returned $5 billion to shareholders in dividends and buybacks since 2022. Add the fresh $2-billion authorization the board recently approved through 2029, and we're set to see that share count keep dropping. Buybacks like these also drive bigger dividend hikes, because they leave fewer shares on which the company has to pay out. CF's dividend, which yields 2.3%, hasn't been hiked since early 2024—though it did see a healthy 25% boost back then. I expect payout growth to resume soon, thanks to the lower share count and the huge amount of room management already has for increases: In the last 12 months, dividends accounted for just 19% of free cash flow. Finally, CF's balance sheet supports its buybacks and potential dividend hikes, with just $1.6 billion of long-term debt (net of cash), a fraction of its $13.3 billion of assets. Brett Owens is Chief Investment Strategist for Contrarian Outlook. For more great income ideas, get your free copy his latest special report: How to Live off Huge Monthly Dividends (up to 8.7%) — Practically Forever. Disclosure: none
