2 Stocks Ready for Dividend Hikes in 2024

The markets have started 2024 with a bang, with the S&P 500 up 23% over the last 12 months and hitting several new highs this year. Some may be wondering which stocks they can be confident will grow in value in the new bull market.

Investors can almost never go wrong putting money to work in companies with long records of increasing their dividend. These are usually strong businesses that are very profitable and have a loyal legion of customers that make repeat purchases.

If you’re looking for more income, here are two incredibly strong companies that have a long record of growing their dividend every year and will most likely continue that streak in 2024.

1. Costco Wholesale

Shares of Costco Wholesale (COST -0.14%) rocketed to new highs to start the year. The discount retailer has grown sales and profits at healthy rates in a difficult macro environment, and this bodes well for continued growth in the dividend.

Costco has increased its quarterly dividend for 20 years. It also has a history of paying special dividends — an extra payment on top of its regular payout. It just paid a special payout of $15 per share to shareholders last month — the company’s fifth one in the last 11 years. But even if investors missed out, an increase to Costco’s regular dividend is likely coming next quarter.

Costco has increased the dividend for 20 consecutive years and usually announces an increase in April for a May payable date. Last year, it raised the quarterly dividend from $0.90 to $1.02, or about a quarter of its earnings. The company’s recent performance certainly supports another dividend hike.

Lower inflation drove strong growth in unit sales in recent quarters, and this is also boosting Costco’s profits. In the November-ending fiscal quarter, sales grew 6% year over year. Meanwhile, stronger e-commerce sales are helping the company leverage expenses, with earnings up 16% year over year.

Investors can count on Costco to increase the dividend for many years. It is still in the early innings of expanding internationally and developing its e-commerce business. But management is also still finding opportunity in the U.S. On the last earnings call, executives noted that the average sales per location domestically is higher than it was seven years ago.

2. Starbucks

Starbucks (SBUX -1.88%) is another solid dividend stock. In many ways, Starbucks is basically operating a toll booth on people’s daily commute. The business generates a growing revenue stream of $37 billion annually because people need their morning caffeine, and that will never change.

Although the consumer hasn’t been in the best spending position the last few years, Starbucks has held up well. The company has continued to grow comparable-store sales, profits, and its dividend.

Starbucks has increased its dividend every year for 14 years. The company usually increases it toward the end of the year in November. Last year, the company increased the quarterly dividend by 7.5% to $0.57, or more than half its earnings.

Starbucks has great brand power that keeps customers coming back. The company’s membership rewards program increased 13% year over year last quarter to more than 34 million, and management is targeting 75 million members in the next five years.

Starbucks also still has ample room to expand the store footprint. Despite operating more than 20,600 stores worldwide, the company grew the store base by 10% year over year last quarter and believes it can more than double the footprint to 55,000 by 2030.

Investors can’t go wrong investing in a coffee brand like Starbucks. A profitable business built around people’s daily routines spells a rewarding dividend investment for the long haul.

John Ballard has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Costco Wholesale and Starbucks. The Motley Fool has a disclosure policy.

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