A stock that grows its dividend can be a valuable asset in your portfolio. That's because its rising dividend payment will help offset the effects of inflation, and it means more cash for your portfolio.
Dividend increases aren't a guarantee, but you can often narrow down when a company is likely to announce an increase. Three dividend stocks to watch in March for a possible rise in their payouts include Innovative Industrial Properties (NYSE: IIPR), CareTrust REIT (NYSE: CTRE), and Colgate-Palmolive (NYSE: CL).
Let's dive in and see what that could mean for investors.
1. Innovative Industrial Properties
Cannabis-focused real estate investment trust (REIT) Innovative Industrial Properties has been aggressive with its rate hikes over the years. Rather than annual rate hikes, the REIT has often increased its dividend payments multiple times a year. The stock currently pays an incredibly high yield of 8.8%, which is more than 5 times the S&P 500 average of 1.7%.
The last time Innovative Industrial has paid the same dividend for three straight periods was in 2018. For the past two quarters, the company's dividend payment has been $1.80, so I think the pot stock is due for another rate hike. And based on its history, a declaration should be coming sometime around mid-March.
However, it's also possible that Innovative Industrial doesn't increase its rate. That's because the company has been dealing with multiple tenant defaults of late and its most recent dividend hike was a relatively modest 2.9% increase. Previous to that, it was a more generous 17% boost to the payout.
Innovative Industrial has become more stringent with its rate hikes, but I do believe at least a modest one is coming. The company reported its fourth-quarter earnings on Feb. 27, and its diluted funds from operations (FFO) per share was $1.92 for the period ending Dec. 31, 2022 -- that's higher than its current payout, suggesting there may still be room for another increase later this month.
If you're bullish on the cannabis industry and are willing to take on some risk, Innovative Industrial could be a good way to get exposure to it while collecting a high dividend.
2. CareTrust REIT
The second REIT on this list is CareTrust, and it could also be hiking its payments sometime in March. However, rather than pot producers, it focuses on safer and more stable tenants in the healthcare industry. The bulk of the properties in its portfolio include skilled nursing and assisted living facilities.
In its most recent earnings report, which also covered the last three months of 2022, CareTrust's FFO per share was $0.34, which is comfortably higher than the $0.275 that it pays in dividends each quarter. Revenue during the period totaled $51.8 million and rose a modest 4.2% year over year.
Last March, the company announced that it was raising its quarterly dividend from $0.265 to $0.275, for an increase of 3.8%. Today, its yield is up to 5.5%. And with the REIT still generating strong financials, it's probable that CareTrust makes another modest increase to the dividend this year as well.
This healthcare stock could be a good buy for investors as it offers a mix of safety and a high yield.
3. Colgate-Palmolive
The one stock that looks to be a slam dunk to raise its dividend this March is Colgate-Palmolive. It's the only stock on this list that is a Dividend King with a streak that goes back 60 years. Last March, it bumped up its dividend by a couple of cents to the $0.47 per share that it pays today. While it is a relatively safe dividend stock, Colgate-Palmolive is also the lowest-yielding one on this list at 2.6%.
The consumer goods company, which is known for its personal, home, and oral care products, still looks to be in excellent shape. For the last three months of 2022, sales were up 5.1% year over year to $4.6 billion. While its earnings per share nearly evaporated to just $0.01, that was due to goodwill and intangible asset impairment charges.
Its free cash flow over the trailing 12 months has totaled $1.9 billion, which is still sufficient to cover the $1.7 billion Colgate-Palmolive has paid out in dividends during that time frame.
Although I wouldn't expect a big rate hike, it still appears likely that the company will announce an increase to the dividend again this year. Colgate-Palmolive can be a suitable option for risk-averse investors looking for a safe dividend stock that they can just buy and hold.
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David Jagielski has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Innovative Industrial Properties. The Motley Fool has a disclosure policy.
