In this article, we discuss the top 10 dividend increases of 2021. If you want to skip our detailed analysis of dividend investing and these stocks, go directly to Top 5 Dividend Increases of 2021.
As the economy rebounded from the COVID-19 pressures in 2021, companies experienced a strong cash flow position and decided to pay out increased dividends to shareholders. In the United States, common dividends in 2021 increased to $78.6 billion, up 89.7% from $41.4 billion in 2020. Higher earnings, sales, and improving margins have enabled companies to start returning shareholder wealth once again.
David Bahnsen, The Bahnsen Group founder and CIO, said in a CNBC interview on August 13 that the way to proceed with investments is to look for companies with strong cash flow, stable balance sheets, and good dividend payout ratios, since the returns on dividend stocks are higher than treasury and S&P 500 returns. According to Bahnsen, dividend growth stocks outperformed the market but investors tend to flock towards trending names, especially FAANG stocks, which is often a misguided notion on their part.
Jack Ablin, Cresset Capital founding partner and CIO, joined CNBC’s ‘TechCheck’ on November 5 and stated that investors looking for earnings yield and dividend yield will benefit over the next five years, and cyclicals, energy stocks, and financial services stocks with low price to earnings ratios are going to be of great interest to investors in the upcoming years. In the US, the energy infrastructure sector is not properly funded by the government or by large-cap banks, hence it offers traders some interesting incentives to invest.
The most notable stocks that offered dividend increases in 2021 include Target Corporation (NYSE:TGT), Lowe’s Companies, Inc. (NYSE:LOW), and Morgan Stanley (NYSE:MS).
Photo by Dan Dennis on Unsplash
Our Methodology
We picked stocks that increased their dividends in 2021, have strong company fundamentals and positive hedge fund sentiment.
Top Dividend Increases of 2021
10. Nucor Corporation (NYSE:NUE)
Dividend Yield as of January 20: 1.92%
Dividend Increase in 2021: 23.5%
Number of Hedge Fund Holders: 25
Nucor Corporation (NYSE:NUE) is the largest steelmaker in the United States and is also known for recycling scrap. Nucor Corporation (NYSE:NUE) produces steel and rebar products.
On December 3, Nucor Corporation (NYSE:NUE) increased its quarterly dividend by 23.5% to $0.50 per share, up from the prior dividend of $0.41. The dividend will be paid on February 11, to shareholders of record on December 31.
Nucor Corporation (NYSE:NUE) announced on January 12 that it plans to build a sheet mill in West Virginia, a project that will cost $2.7 billion. The new mill will have the capacity to produce 3 million tons of steel per year. Nucor Corporation (NYSE:NUE) will access customers in the Midwest and the Northeast and penetrate the two largest sheet consuming regions in the United States.
Wolfe Research analyst Timna Tanners downgraded Nucor Corporation (NYSE:NUE) to Underperform from Peer Perform with a $102 price target on January 11. The analyst is moving to a “market underweight” rating on the steel sector for 2022. She is “most excited” about downstream/specialty metals names but sees a “trifecta of bad news” for steel names.
Among the hedge funds tracked by Insider Monkey in Q3 2021, Cliff Asness’ AQR Capital Management is one of the largest Nucor Corporation (NYSE:NUE) stakeholders, with 283,503 shares worth $27.9 million. Overall, 25 hedge funds were bullish on the stock in the third quarter.
Here is what ClearBridge Multi Cap Growth Strategy has to say about Nucor Corporation (NYSE:NUE) in its Q3 2021 investor letter:
“Our active approach also applies to being disciplined in managing positions in companies in more cyclical industries and taking profits during stronger periods of each cycle. We closed a position in steelmaker Nucor during the quarter after the shares had more than doubled over the last year as a direct participant in the recovery of the U.S. economy and rebound in industrial activity. At this point in the cycle, we no longer view the risk/reward as compelling and feel more confident in deploying the proceeds in more attractive areas discussed in this and previous letters.”
9. CubeSmart (NYSE:CUBE)
Dividend Yield as of January 20: 3.42%
Dividend Increase in 2021: 26.5%
Number of Hedge Fund Holders: 22
CubeSmart (NYSE:CUBE) is a Pennsylvania-based real estate investment trust that invests in self storage facilities. CubeSmart (NYSE:CUBE) offers household, moving, business, vehicle, climate controlled, and wine storage options.
CubeSmart (NYSE:CUBE) on November 2 reported a 26.5% increase from its prior dividend of $0.34. The company paid a $0.43 per share quarterly dividend on January 18 to shareholders of record on January 3.
On November 17, CubeSmart (NYSE:CUBE) proposed a public offering of 13.5 million common shares, priced at $51 per share. The company gathered $688.5 million under this program, and used $40.9 million to pay off the debt accumulated during the acquisition of Storage West from LAACO, which is an REIT offering 59 self storage facilities.
Raymond James analyst Jonathan Hughes upgraded CubeSmart (NYSE:CUBE) to Outperform from Market Perform with a $60 price target on December 2, citing increased conviction in the outlook for the self storage sector heading into 2022. His revised 2022 earnings estimates are now about 4% above consensus due to better than expected outlooks for occupancy, rates, expenses, and external growth activity in the sector.
A total of 22 hedge funds were long CubeSmart (NYSE:CUBE) in the third quarter of 2021, with stakes totaling $225.4 million. Ric Dillon’s Diamond Hill Capital is the leading CubeSmart (NYSE:CUBE) stakeholder, with 3.1 million shares worth $153.1 million.
In addition to Target Corporation (NYSE:TGT), Lowe’s Companies, Inc. (NYSE:LOW), and Morgan Stanley (NYSE:MS), CubeSmart (NYSE:CUBE) also elevated its dividends in 2021.
8. Nordson Corporation (NASDAQ:NDSN)
Dividend Yield as of January 20: 0.86%
Dividend Increase in 2021: 30.76%
Number of Hedge Fund Holders: 29
Nordson Corporation (NASDAQ:NDSN) is an American multinational corporation, based in Ohio, that manufactures precision dispensing equipment, testing and inspection equipment, and surface preparation and curing equipment. Nordson Corporation (NASDAQ:NDSN)’s products are distributed globally.
On August 11, Nordson Corporation (NASDAQ:NDSN) lifted its quarterly dividend by 30.8% from its prior dividend of $0.39. On December 8, Nordson Corporation (NASDAQ:NDSN) declared a $0.51 per share quarterly dividend, which was paid on January 4.
Baird analyst Michael Halloran on December 17 lowered the price target on Nordson Corporation (NASDAQ:NDSN) to $293 from $310 and kept an Outperform rating on the shares. The analyst stated that he would be a buyer on the recent pullback and said underlying demand is robust, backlog is at record levels, and cyclical and secular set up remains attractive. His estimates should move higher through F2022.
Among the hedge funds tracked by Insider Monkey in the third quarter of 2021, Ken Griffin’s Citadel Investment Group is the largest Nordson Corporation (NASDAQ:NDSN) stakeholder, with 325,535 shares worth $77.5 million. Overall, 29 hedge funds were long Nordson Corporation (NASDAQ:NDSN), down from 34 funds in the preceding quarter.
Just like Target Corporation (NYSE:TGT), Lowe’s Companies, Inc. (NYSE:LOW) and Morgan Stanley (NYSE:MS), Nordson Corporation (NASDAQ:NDSN) also offered shareholders higher dividends in 2021.
7. Target Corporation (NYSE:TGT)
Dividend Yield as of January 20: 1.61%
Dividend Increase in 2021: 32.35%
Number of Hedge Fund Holders: 49
Target Corporation (NYSE:TGT) is a big box department store, headquartered in Minneapolis, Minnesota. Target Corporation (NYSE:TGT) has more than 1900 retail outlets in the United States, with retail formats including discount stores and hypermarkets.
On June 9, Target Corporation (NYSE:TGT) declared a 32.4% increase from its prior dividend of $0.68. On January 10, a quarterly dividend of $0.90 per share was announced by the company, to be paid on March 10, to shareholders of record on February 16.
JPMorgan analyst Christopher Horvers on January 14 removed Target Corporation (NYSE:TGT) from the firm’s Analyst Focus List but kept an Overweight rating on the shares with a $292 price target. The analyst has short-term concerns on same store sales forecasts but remains positive on a “still solid” customer base, sustained share gains, and Target Corporation (NYSE:TGT)’s share repurchase initiatives.
In the third quarter of 2021, 49 hedge funds reported owning stakes in Target Corporation (NYSE:TGT), worth $4.34 billion, as compared to 66 funds holding stakes valued at $5.8 billion in Target Corporation (NYSE:TGT) in the preceding quarter.
Here is what Nelson Capital Management has to say about Target Corporation (NYSE:TGT) in its Q2 2021 investor letter:
“We added Target (tkr: TGT) to our consumer staples sector. Target Corporation (NYSE:TGT) offers a broad array of products in owned and known brand items at affordable prices. Its omni-channel fulfillment centers allow customers to receive their items via in-store pickup, curbside pickup, same-day shipping and regular shipping while simultaneously reducing operating costs. With a significantly lower valuation than peers and a unique operating strategy, Target is an attractive holding.”
6. Lowe’s Companies, Inc. (NYSE:LOW)
Dividend Yield as of January 20: 1.36%
Dividend Increase in 2021: 33.3%
Number of Hedge Fund Holders: 60
Lowe’s Companies, Inc. (NYSE:LOW) is an American company that offers home improvement products to customers across the United States and Canada via a chain of retail stores.
Lowe’s Companies, Inc. (NYSE:LOW) has a rich dividend history, and the company lifted its dividend by 33.3% from its prior dividend of $0.60 in May 2021. On November 12, Lowe’s Companies, Inc. (NYSE:LOW) declared a $0.80 per share quarterly dividend, payable on February 2, to shareholders of record on January 19.
In its FY22 guidance, published on December 15, Lowe’s Companies, Inc. (NYSE:LOW) reported sales of approximately $95 billion, versus a consensus of $95.66 billion. The company also announced a share buy back plan of $13 billion.
On January 18, Citi analyst Steven Zaccone raised the price target on Lowe’s Companies, Inc. (NYSE:LOW) to $292 from $270 and kept a Buy rating on the shares. The analyst says sentiment has shifted toward “defensive, stable margin businesses” like home improvement and auto parts retail, however, he believes the recent pullback in growth stocks from the market backdrop and 2022 uncertainty “presents some compelling risk/reward opportunities” for long term investors.
60 hedge funds in the Q3 2021 database of elite hedge funds maintained by Insider Monkey were long Lowe’s Companies, Inc. (NYSE:LOW), with stakes totaling $5 billion. Pershing Square is the largest stakeholder of Lowe’s Companies, Inc. (NYSE:LOW), with a $2 billion position.
Here is what Pershing Square Holdings has to say about Lowe’s Companies, Inc. (NYSE:LOW) in its Q2 2021 investor letter:
“Since the onset of the COVID-19 pandemic, Lowe’s has experienced a significant acceleration in demand driven by consumers nesting at home, higher home asset utilization and the reallocation of discretionary spend. In the three years since Marvin Ellison became CEO, the company has executed a multi-year transformation plan to bolster Lowe’s retail fundamentals, reduce structural costs, expand distribution capabilities, and modernize systems and the company’s online capabilities. This transformation has allowed Lowe’s to meet consumers’ needs during this highly elevated period of demand, and positioned the company for continued success and accelerated earnings growth.
In the second quarter, Lowe’s reported U.S. same-store-sales growth of 2.2%. Growth was bolstered by strength from the critical Pro consumer, where Lowe’s reported growth of 21%, off setting moderating do-it-yourself (“DIY”) demand. While DIY demand has receded from peak-COVID-19 periods, Pro customer demand has accelerated as consumers engage Pro’s for larger renovation projects.
Notwithstanding the headline growth fi gure, which is impacted by comparisons to COVID-19-aff ected months from spring of 2020, demand remains extremely elevated relative to baseline 2019 levels. July same-store-sales, the most recent full month for which the company has provided disclosure, were up 31.5% on a two-year basis and management indicated August month-to-date results are substantially similar. More significantly, Lowe’s reported Pro growth of +49% on a two-year basis in Q2, evidence that Lowe’s focus on the Pro is bearing fruit. Share gains with the critical Pro customer will provide a tailwind to growth that should allow Lowe’s to outperform market-level growth going forward.
Even as the robust demand experienced during the height of COVID-19 stabilizes at a new base, the medium and longer-term macro environment remain very attractive for the home improvement sector and Lowe’s in particular. This favorable context for the sector is evidenced by consumers’ enhanced focus and appreciation of the importance of the home, higher home asset utilization, rising home prices, historically low mortgage rates, an aging housing stock, strong consumer balance sheets, and the general lack of new housing inventory.
Against this backdrop, Lowe’s is focused on taking market share and expanding margins. Pro penetration today is still only 25% of revenue as compared to Lowe’s medium-term target of 30% to 35%, providing a runway for continued above market growth. Management continues to execute against various operational initiatives (Lowe’s “Perpetual Productivity Improvement” program) designed to improve the customer experience while enhancing the company’s margins and long-term earnings power. The company’s long-term outlook implies significant opportunity for continued margin expansion and earnings appreciation as it executes its business transformation.
Lowe’s Companies, Inc. (NYSE:LOW) currently trades at approximately 17 times forward earnings. Home Depot, its closest competitor, trades at approximately 22 times forward earnings despite Lowe’s superior prospective earnings growth. We find this valuation disparity to be anomalous in light of Lowe’s strong execution and potential for further operational optimization.”
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Disclosure: None. Top 10 Dividend Increases of 2021 is originally published on Insider Monkey.
