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After McDonald’s and Microsoft, Six More Big Dividend Hikes Coming Before 2014

Jon C. Ogg

This week we have seen dividend hikes from Dow Jones Industrial Average (DJIA) components Microsoft Corp. (MSFT) and McDonald's Corp. (MCD). 24/7 Wall St. expects that there will be five, maybe six, more big dividend hike announcements from major companies before the end of 2013.

24/7 Wall St. believes that AT&T Inc. (NYSE: T), General Electric Co. (GE), Goldman Sachs Group Inc. (GS), J.P. Morgan Chase & Co. (JPM), Nike Inc. (NKE) and Walt Disney Co. (DIS) will all make dividend hike announcements before the end of 2013.

We have analyzed and predicted dividend hikes and other dividend initiations for years now. Investors should not expect that all these payments will be paid out in this calendar year, but the corporate announcements should come before year-end. In fact, some of these should come in the next few weeks, and most will be better than the mere 5% hike from McDonald's.

AT&T Inc. (NYSE: T) is the king of dividends among DJIA stocks, having the highest yield in that index of a whopping 5.2%. Its stock would have to rally more than 10% before hitting a 52-week high. AT&T pays out close to 72% of normalized per-share income as dividends now, so we only expect the hike to be from $0.45 to $0.46 per share per quarter. While a small hike, it has such a high yield already that it is very significant.

General Electric Co. (GE) is likely a shoe-in for a higher dividend later in 2013. Jeff Immelt is in the midst of separating off parts of GE Capital. We predicted this GE dividend hike earlier in the year, and we think that the raise will be to $0.21 per share from $0.19 per quarter, based on close to 10% expected earnings growth. This hike would represent close to 46% of normalized earnings per share for GE in 2014.

Goldman Sachs Group Inc. (GS) is about to be formally added to the DJIA. It last announced a dividend hike last October, along with earnings, but its current $2.00 annualized payout currently is only about 13% of its normalized income. Its yield is a mere 1.2%. We would call for a 50% or even a 100% gain in how much it pays out, but we will not be greedy. Our take is that Goldman Sachs will get its yield up to at least 1.5%.

J.P. Morgan Chase & Co. (JPM) is the "possible" candidate, rather than one we are 100% certain will announce a dividend hike. The biggest bank already had a dividend hike in 2013, but at an investor presentation in early September its chief financial officer hinted at more dividends and buybacks that could be made later this year. Now Jamie Dimon and his team have to get the regulatory sentiment back in the bank's favor enough to be allowed to have another hike this soon.

Nike Inc. (NKE) is not your typical DJIA stock, but it is a newly announced component. Nike hikes its dividend regularly, but it currently only yields a paltry 1.2% for the common stock. We noticed that Nike's $0.84 annualized payout is only about 28% of its normalized earnings per share expected. That is just too low, although much of the income may be housed outside of the United States and may not be able to be counted on as easily as a simple normalized earnings number. Based on past hikes, we think the dividend will rise to $0.24 per share from $0.21 now, although we would welcome a much higher boost.

Walt Disney Co. (DIS) is the last American company in the DJIA that pays its dividend annually. We think this policy needs to change, but we do expect yet another Bob Iger dividend hike. Disney's dividend hike of 50% in 2011 was followed by a hike of 25% in 2012. We are looking for a hike of about 20% to $0.90 per share, although this could go up to as high as $1.00 per share. Currently, its payout is less than 30% of normalized income per share expectations.

Microsoft Corp. (MSFT) raised its dividend by 22%, and McDonald's Corporation (MCD) had a mere 5% dividend hike. Neither has really enthralled investors, but these next dividend hikes might do more for these stocks.