One of the challenges income investors face is generating a consistent stream of dividend income each month. In order to do this, investors need information on which stocks pay dividends in each month of the calendar year.
Many high-quality stocks pay dividends in September. Microsoft (MSFT, Financial), Exxon Mobil (XOM, Financial) and PepsiCo (PEP, Financial) are three of the best blue-chip dividend stocks that make quarterly payouts during the month.
A dividend stock with its head in the cloud
The technology sector is not typically known for dividend stocks, but Microsoft has a 1.5% dividend yield, and the company has increased its dividend for over 10 years in a row. Its next quarterly dividend will be paid on Sept. 13. In the past 10 years, Microsoft has increased its dividend by 14% per year on average.
Microsoft has maintained its high dividend growth rate due to the company’s high earnings growth, which is the result of a successful transition to cloud computing. Microsoft’s cloud offerings, such as Azure, Office 365 and Dynamics 365, are performing extremely well. In fiscal 2018, Microsoft’s total revenue increased 14% to $110.4 billion. This led to 16% growth for Microsoft’s adjusted earnings per share in the recently completed fiscal year.
The cloud will continue to serve as a major growth engine for Microsoft. In the most recent quarter, Office 365 registered commercial revenue growth of 35%, while Dynamics 365 revenue increased 56% from the same quarter last year. Separately, the company’s Intelligent Cloud revenue increased 20% to $9.6 billion. Server products and cloud services revenue increased 24%, driven by Azure revenue growth of 85%.
Microsoft should have no trouble increasing its dividend each year moving forward. The company has a current annualized dividend payout of $1.68, while adjusted earnings per share grew to $3.88 in fiscal 2018. This means Microsoft had a dividend payout ratio of 43% in fiscal 2018, which leaves plenty of room for annual dividend hikes.
Pumping out profits and dividends
When it comes to dividend stocks, Exxon Mobil is about as steady as they come. The company has paid a dividend to shareholders for more than 100 years, and it has increased its annual dividend payment to shareholders for 36 consecutive years. The next quarterly dividend will be paid on Sept. 10. Its dividend growth streak qualifies Exxon Mobil as a Dividend Aristocrat, an exclusive group of stocks in the S&P 500 Index with over 25 consecutive years of dividend increases.
Exxon Mobil is the largest publicly traded oil and gas company in the U.S., with a market capitalization of $337 billion. It has the financial strength to continue paying and raising its dividend each year, even though it operates in a highly cyclical industry. Oil and gas production can be a “boom-or-bust” industry, but even the steep downturn of 2014 to 2016 did not prevent Exxon from continuing to reward shareholders. This is because of the company’s high-quality assets and industry-leading balance sheet. Over the first half of 2018, Exxon Mobil generated operating cash flow of $16.3 billion, which allowed the company to pay dividends of $6.8 billion, while leaving enough cash flow to invest in growth initiatives.
Exxon Mobil stock has a 4.1% dividend yield, which is roughly double the average dividend yield in the S&P 500 Index. This makes Exxon Mobil a particularly attractive stock for investors who desire higher levels of investment income, such as retirees.
Satisfying your thirst for income
Lastly, beverage giant PepsiCo is a rock-solid dividend stock. PepsiCo has paid consecutive quarterly cash dividends since 1965, and has increased its dividend for 46 consecutive years, including a solid 15% raise in 2018. The next quarterly dividend is payable on Sept. 28, to shareholders of record at the close of business on Sept. 7.
PepsiCo’s long history of dividend growth is due to its strong brand portfolio. In addition to its core sparkling beverages such as Pepsi, it has a number of highly popular brands outside soda, including Frito-Lay, Quaker, Tropicana and Gatorade. PepsiCo has also branched out into healthier food and beverages, to meet the needs of changing consumer preferences. Its health-conscious brands include Naked, Sabra, Kevita, Aquafina and more.
PepsiCo’s strong brands have provided the company with steady growth for years. Over the first half of 2018, PepsiCo achieved 2.5% organic revenue growth, along with 4% adjusted earnings-per-share growth. Snacks propeled PepsiCo’s growth in North America, as Frito-Lay posted 3.5% organic growth in that time. The emerging markets are also a major growth catalyst for the future. In the first half of 2018, PepsiCo generated 6% organic growth in Latin America, and also in North Africa, the Middle East and Asia.
PepsiCo has an attractive current yield of 3.4% and the ability to raise its dividend in the mid-to-high-single digits over the long term. PepsiCo stock is an appealing mix of current yield and dividend growth.
Disclosure: I am long Exxon.
