5 Dividend Stocks to Fight Off the Fiscal Cliff
Just on Wednesday, for instance, wholesale club Costco (COST) announced a special $7 per share dividend payout for investors that prompted 6.3% rally in shares that day. Clearly, investors are rewarding companies that opt to give them cash ahead of the looming possibility of a tax hike on dividend income. Costco isn't alone, even if its $3 billion special dividend is the biggest of the bunch -- a handful of firms have announced special dividend payouts to reward investors before the cliff.
But even if you bought shares of Costco now to take advantage of your $7 payout, you've already missed out on the capital gains benefits from the announcement. That's why we're trying to step in front of the next set of dividend hikes this week.
In other words, these five firms are getting ready to boost dividends; they just don't know it yet.
In the past few months we've had some stellar success in finding future dividend hikes just by zeroing in on a few key factors. Now we'll look at our crystal ball and try to do it again.
For our purposes, that "crystal ball" is composed of a few factors: namely a solid balance sheet, a low payout ratio, and a history of dividend hikes. While those items don't guarantee dividend announcements in the next month or three, they do dramatically increase the odds that management will hike their cash payouts, especially as investors start to get antsy about this late-2012 correction.
Without further ado, here's a look at five stocks that could be about to increase their dividend payments in the next quarter.
First up is beverage giant Coca-Cola (KO) . While Coke is ubiquitous, it's hard to get a grasp on just how massive the company's reach really is; but think about this: Coke's products make up an astounding 3% of the 55 billion beverages served worldwide each day. Much of Coke's success is due to an amazing distribution network that spans more than 200 countries. The beverage business is cheap -- the fountain soda you drink at lunch has infinitesimally small ingredient costs. Transportation is less cheap, however. Coke's efficient network is key to the firm's massive net margins.
Brand doesn't hurt either. The firm's namesake soda enjoys the number-one spot in the soft drink market, with the Coke brand one of the best recognized and most valuable in the world. Emerging markets like China hold the keys to growth for Coca-Cola -- as consumers' wealth increases, the amount of cash that they're willing to spend on luxury food products like soft drinks increases as well. In more mature markets, innovations like the Freestyle fountain machine should help wring some growth out of markets that have remained stagnant.