Investing in dividends can feel like a tricky tightrope walk. Yields may be the bread and butter for income investors hunting for long-term wealth, but the path is fraught with inconsistencies. Enter the realm of Dividend Kings and Aristocrats, with their impressive track record of unwavering increases over time, the safe bet for passive income generation.
While some choose the tried and tested, others have a taste for adventure and chase high-yielding stocks, aiming to ride the wave and exit with hefty profits. And then there are those who scout the horizon for budding dividend payers, seizing the opportunity to get in early before the payouts climb the ladder. The thrill of snagging a future dividend giant before the crowd catches on is undeniable.
Now, let’s delve into three prospective additions to your investment arsenal.
A Glimpse Into the Process
In curating this list, I scoured the stock market for companies that either initiated dividends or implemented a dividend policy within the past year. Each underwent meticulous scrutiny to evaluate its potential.
But here’s the kicker – paying dividends is one thing; consistently and sustainably paying them is a whole different ball game. Hence, I set additional criteria to spotlight the companies with the brightest outlook:
- Positive year-over-year net income growth
- A dividend payout ratio capped at 30%
So without further ado, let’s meet the new dividend entrants, ranked by their increasing yields.
Rising Star: T-Mobile US (TMUS)
T-Mobile, a titanic name in the US wireless network arena, delivers a spectrum of telecom services, from data communications to voice over IP calls. Toss in a range of smartphones, and you have the complete package.
What’s got my interest piqued is T-Mobile’s recent dividend policy rollout – cue the quarterly dividend of 65 cents per share, totaling $2.60 annually with a current yield of 1.61%.
What’s more, the company is aiming for a jaw-dropping 10% annual dividend growth – a potential future Dividend Aristocrat in the making. T-Mobile’s hefty market cap positions it as a telecom colossus in the US, second globally.
And the cherry on top? Despite a 1.3% dip in total revenues, T-Mobile saw an outstanding 221.1% year-over-year net income surge in FY’23, with diluted EPS soaring by 236.4% to $6.93. With a snug 9.04% payout ratio based on three quarters of payouts, the company has room to up the dividend ante.
Income investors holding TMUS might just be eyeing substantial growth down the line.
Emerging Player: Opportunity Financial
Meet OppFi, the American fintech crusader on a mission to democratize credit access. Utilizing AI-powered algorithms, OppFi aids customers with stable incomes in securing the best credit solutions tailored to their financial needs.
Having strutted onto the public stage in 2021, OppFi wrapped up 2023 as its ninth consecutive profitable year, with a staggering 1,082% year-over-year net income surge.
The company’s move to offer a special 12-cents per share dividend in May 2024, coupled with a 23.5% payout ratio based on FY’23 adjusted EPS, yields a respectable 4.17%. With a $20 million share repurchase program in play, the question now is not if OppFi can maintain a dividend, but if it will.
Groundbreaker: Jiayin Group (JFIN)
Jiayin Group, the Chinese fintech luminary, acts as a bridge between banks, underserved communities, and individuals, complemented by its business-to-business wing offering risk management services.
JFIN’s sporadic dividend distributions in August 2023 and January 2024 totaled 80 cents USD, boasting a 12.76% yield. As per its recent dividend policy, the company pledges to continue semi-annual payouts, with potential increases contingent on market conditions.
With a meager 25% dividend payout ratio based on 2022 net income, coupled with a 9.9% bottom-line upswing in 2023, Jiayin shows promise. If it delivers on its commitment to upping dividends in line with performance, income investors stand to reap the rewards.
