These companies are growing their dividends, Morgan Stanley says

Morgan Stanley Highlights Companies Increasing Dividends, Signaling Potential for Steady Investor Returns

Think of investing like building a sturdy bridge—when the weather gets rough, you want strong supports to keep things steady. That’s where dividend stocks can help during rocky times in the stock market.

Why This Matters for Investors

September is usually a bumpy month for stocks, kind of like a road full of potholes. That can make investors nervous, especially when news about interest rates and oil prices keeps changing. But some companies pay out regular dividends, which are like little “thank you” checks just for owning their stock. These payments can help smooth out the ride for your portfolio.

According to Morgan Stanley, companies that raise their dividends often see their stock prices do better than others, with an average outperformance of 3.1% in the following six months. That means investors may not only get income from dividends, but also see their investments grow faster.

Bulls: Why Dividend Stocks Look Good Now

  • Steady Income: Dividends give you money even if stock prices jump around.
  • Market Confidence: Companies that raise dividends show they’re doing well and believe in their future.
  • Outperformance: Stocks that boost their dividends have a history of beating the market after those increases.
  • Analyst Support: Many experts rate these stocks as good buys, meaning they expect them to keep doing well.

For example, East West Bancorp raised its dividend by 33% this year, and the stock is up 16%. Packaging Corporation of America bumped its payout by 20%, and Devon Energy hiked its dividend by 33%—with its stock up 31% so far this year.

Bears: What Could Go Wrong?

  • Market Volatility: Even dividend stocks can drop if the whole market falls.
  • Interest Rates: If the Federal Reserve raises rates, it could hurt stock prices and make bonds look more attractive than stocks.
  • Dividend Cuts: A company facing trouble might have to lower or stop its dividend, which usually hurts its stock price.
  • Sector Risks: Some industries, like banks or oil, can be hit hard by economic changes even if they pay good dividends.
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Historically, during big downturns like the 2008 financial crisis, even some strong dividend payers had to cut back. According to a Nasdaq study, dividend-paying stocks have outperformed non-dividend payers over the long term, but nothing is guaranteed in the short run.

Spotlight on Recent Dividend Raisers

  • East West Bancorp: Dividend up to 80 cents a share, yield 2.4%, stock up 16% this year. Most analysts say “buy.”
  • Packaging Corporation of America: Payout up to $6 a year, yield 2.5%, stock up 15% this year. Analysts expect more growth.
  • Devon Energy: Dividend up 33% to 32 cents per share, yield 2.3%, stock up 31% this year. Nearly all analysts recommend it.
  • Other Names: Nvidia, Royal Caribbean, and Capital One Financial also made the list for consistent dividend growth.

Investor Takeaway

  • Consider adding dividend stocks to your portfolio for more stability and regular income, especially during uncertain times.
  • Look for companies that have a history of raising their dividends, as this can be a sign of strength.
  • Don’t rely only on dividends—keep your portfolio balanced across different sectors and types of investments.
  • Watch for changes in interest rates or big economic shifts, as these can still affect even the best dividend payers.
  • Research each company’s outlook and make sure you’re comfortable with the risks before investing.

For the full original report, see CNBC

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