Five dividend stocks are poised to see their payouts soar as the Federal Reserve cuts interest rates, creating a “dividend magnet” effect that boosts stock prices. Companies like Starbucks have seen their stock prices and dividends move in tandem, with dividend hikes attracting more investors and helping to drive the stock price higher through company growth.
As the Fed reduces interest rates, the yields on bonds and bond funds will decrease, making dividend stocks more attractive. Companies like Marriott International, Penske Automotive Group, The First Bancshares, AGCO Corp, and Energy Transfer have all experienced significant dividend growth in the past year and are expected to announce new dividend actions in the coming months. These stocks are currently undervalued, presenting a buying opportunity before the broader investing public catches on.
Marriott International, an international hotelier, has seen its dividend increase by 73% in 2023 and is set to announce its Q2 dividend in mid-May. Despite a sub-1% yield, Marriott’s dividend has been growing steadily as the company’s hotels have been recovering post-COVID restrictions. Penske Automotive Group, an international automobile retailer, has also seen a 32% increase in its dividend in 2023 and is expected to announce its Q2 raise in mid-May.
The First Bancshares, a bank headquartered in Mississippi, has experienced a 22% increase in its dividend this year and is set to announce its next increase in late May. AGCO Corp, an agricultural equipment producer, has seen its dividend grow from 16 cents per share in 2021 to 29 cents currently and is expected to announce its Q2 dividend in late April. Energy Transfer, responsible for a significant portion of America’s energy infrastructure, has a dividend yield of 8% and is a serial dividend raiser, with a 53.8% increase in 2023.
While these dividend stocks have already experienced significant growth, the upcoming interest rate cuts by the Fed could further boost their performance. As bond yields decline, dividend stocks become a more attractive investment, particularly for those seeking income. Investors looking to capitalize on the potential dividend increases of these five stocks should consider investing before the broader market catches on to their value.
