We've exited the penultimate earnings season of this year, which means the usual seasonal flow of dividend declarations has also ended. Most publicly traded companies, after all, tend to announce their latest shareholder payouts either along with the publication of quarterly results, or a short time before. This is when we get the bulk of dividend raise pronouncements.
There are always outliers, though, and in mid-September two high-profile companies in their respective industries pushed their payouts higher -- tech titan Microsoft(NASDAQ: MSFT) and beverage conglomerate Keurig Dr Pepper(NASDAQ: KDP). In both cases the dividend raises were relatively generous and -- the best part for income investors -- declared with enough time for opportunistic investors to qualify for the higher amounts.
1. Microsoft
Folks of a certain age like, well, myself can remember when Microsoft resolutely stuck to a "plow the profits back into the business" strategy. That all changed in 2003 when the highly profitable software giant announced its first dividend, to great and understandable fanfare. For two years, that payout was dispensed on an annual basis. Then the company switched to a quarterly distribution, and has stuck to that policy ever since.
It's also been a habitual lifter, reliably declaring dividend raises once per year. In mid-September, Microsoft kept this tradition alive by declaring that its next quarterly distribution would be $0.83 per share. That's nearly 11% higher than the previous dividend, consistent with the hikes management has enacted since 2019.
Microsoft is also opening its coffers for more share buybacks. The company's board has authorized a new stock repurchase program for up to $60 billion in its shares. The initiative has no expiration date, but it may be ended at any time at the company's discretion.
Both moves come several weeks after Microsoft closed the door on its 2024 fiscal year. As it usually does, the company managed to post encouraging growth numbers that topped analyst estimates (although only slightly).
Fourth-quarter revenue rose by 15% to almost $65 billion, while headline net income improved by nearly 10% to $22 billion. Not for the first time, its Microsoft Cloud offerings were a real motor of growth, increasing their take by 21% to just under $37 billion. The company is also suffusing its product line with artificial intelligence (AI) capabilities -- it's a top investor in the well-known ChatGPT developer OpenAI -- which positions it well to profit from this hot, in-demand technology.
Microsoft's freshly raised dividend will be paid on Dec. 12 to investors of record as of Nov. 21. Despite the double-digit raise, it's not exactly a high-yield dividend -- at the most recent closing share price, the new amount would yield 0.8%.
2. Keurig Dr Pepper
Like Microsoft, Keurig Dr Pepper was in no great rush to declare its latest dividend raise. More than a month after unveiling its second-quarter fundamentals, the company said its next quarterly payout will be $0.23 per share, an amount 7% higher than the last distribution.
Keurig Dr Pepper began life in its current form with a special dividend of $103.75 per share in 2018. Since that attention-grabbing move, the company has consistently paid a dividend every quarter, and starting in 2021, has raised it every year.
This latest hike feels well-timed. It comes only a few months after The Wall Street Journal published an article stating that Dr Pepper's sales volumes had edged past PepsiCo's storied Pepsi as the No. 2 soda in the U.S. (behind, of course, Coca-Cola's signature product). That's quite a feat, as Pepsi had been the runner-up for most of the past 40 years or so.
So it wasn't surprising that in the company's most recently reported quarter, its "refreshment beverages" -- i.e., soft drinks including Dr Pepper and Snapple -- saw an increase in U.S. net sales, and much of the 3.3% year-over-year increase was due to price hikes. Coffee, meanwhile, fell by 2.1%. Happily, refreshment beverages is the larger of the two businesses.
The company saw some encouraging growth in international sales, which surged nearly 16% higher to around $600 million in total. That's not huge when placed against total net sales of over $3.9 billion, but it indicates a promising opportunity for the future.
Keurig Dr Pepper is anticipating a good 2024 at the end of the day. The company recently guided for year-over-year improvement in overall net sales in the mid-single-digit percentages, and in the high single digits for non-GAAP (adjusted) earnings per share. The consensus analyst estimates basically track with these projections.
Keurig Dr Pepper will pay its new dividend on Oct. 11 to stockholders of record as of Sept. 27. At the current stock price, the raised amount would yield about 2.5%.
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Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Microsoft. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.
