3 Dividend Stocks That Could Raise Their Payouts in November

For long-term investors, dividend growth stocks can play a pivotal role in generating substantial returns. Did you know that if a stock consistently raises its dividend by 5% each year, your dividend income from that stock would double in just 14 years?

Amongst the stocks that have recently increased their dividend payouts by more than 5% are Nike (NKE -1.84%), Merck (MRK 0.15%), and Automatic Data Processing (ADP -3.60%). These companies are anticipated to announce further increases in their dividend payouts this month.

1. Nike

Nike, the well-known sports apparel and footwear company, currently offers a modest dividend with a yield of 1.3%, slightly lower than the S&P 500 average of 1.7%. Nevertheless, Nike has consistently enhanced its dividend payouts over the years.

In November of the previous year, Nike announced an impressive 11% increase in its dividend, resulting in a quarterly payment of $0.34 per share. This marked the 21st consecutive year of dividend growth for Nike.

Despite challenges faced this year, Nike’s brand loyalty has ensured its business remains resilient. In its fiscal 2024 first quarter, which concluded on August 31, Nike reported a 2% year-over-year revenue increase to $12.9 billion. Net income only experienced a marginal decline of 1% to $1.5 billion.

With these positive results and Nike’s modest payout ratio of 42%, it is highly likely that the company will once again raise its dividend payouts this month. However, caution must be exercised as the stock trades at a high multiple of over 30 times earnings, its growth rate is slowing, and there may be potential headwinds from a decrease in consumers’ discretionary income due to the resumption of student loan repayments.

2. Merck

Merck, a prominent pharmaceutical giant, offers investors a higher dividend yield of 2.8% at its current share price. However, Merck’s streak of increasing dividends is not as extensive as Nike’s and only dates back to 2011.

In November of the previous year, Merck raised its dividend by just under 6% to $0.73 per share. Although the company’s payout ratio appears unsustainable at over 100%, its earnings were negatively affected by a non-recurring charge related to an acquisition a few quarters ago.

During the third quarter, Merck reported earnings per share of $1.86, which comfortably supports its dividend payments and allows room for further increases. Total sales also increased by 7% year over year to nearly $16 billion, primarily driven by strong growth from its leading cancer drug, Keytruda, which generated $6.3 billion in sales and grew by 17%.

Considering its overall financial performance, Merck is expected to raise its dividend this month. With a relatively low multiple of 12 times its estimated future earnings, the stock presents a promising investment opportunity.

3. Automatic Data Processing

Automatic Data Processing (ADP), a renowned player in human resources and payroll management, maintains a stable business due to its essential payroll services and a significant portion of recurring revenue. Income investors also value ADP for its dividend, which yields 2.3% at the current share price.

Last November, ADP announced an impressive 20% increase in its quarterly dividend, marking an astounding 48 years of consecutive dividend growth. With such a remarkable track record, it would require significant challenges for ADP to refrain from increasing its dividend in any given year.

Currently, there is no indication of any major issues affecting ADP’s business. In its most recent quarter, which concluded on September 30, the company reported $4.5 billion in revenue, representing a 7% year-over-year increase. Net earnings also surpassed 10% growth, reaching $859.4 million.

ADP’s solid business performance makes it an appealing option for investors. Although the stock trades at a relatively high multiple of 26 times earnings, dividend investors seeking long-term reliability may find ADP to be an excellent stock to hold for decades.