By Ian Salisbury
Finding stocks with attractive yields isn't easy these days. Focus instead on companies that have raised their dividend and might raise it again soon.
The yield on the S&P 500 is 1.2%, lower than at any time other than the dot-com bubble, when it touched 1.1%. Blame the runaway popularity of tech giants that emphasize growth over shareholder payouts.
To find dividend-paying stocks poised to outperform, Trivariate Research screened for stocks that recently announced dividend increases that also boasted payout ratios in the bottom one-fifth of dividend payers.
Dividend hikes signal management confidence -- in addition to increasing checks investors can cash every quarter.
The dividend payout ratio is the percentage of a company's net income that funds its dividend. Trivariate didn't say what payout ratio served as the cutoff for the bottom fifth. In general, payout ratios of 80% or more are considered risky, while figures below are seen as healthy. The average payout ratio for stocks in the Vanguard Dividend Appreciation ETF, an exchange-traded fund that targets dividend growers, is just under 40%, according to FactSet.
Why focus on companies with very low payout ratios? "They are poised to increase their dividend again in the future," wrote Trivariate founder Adam Parker.
The largest stock by market cap on Trivariate's list is already red hot. Memory chip maker Micron Technology has seen shares climb more than 400% in the past 12 months.
That huge run-up could be justified. Wall Street analysts expect profits to grow more than 50% this year. And shares trade at just under 7 times earnings for the current fiscal year, which ends in August, despite their recent rally, according to FactSet.
In March, Micron hiked its dividend 30% to 15 cents a share from 11.5 cents a share. With analysts forecasting 2026 earnings of more than $56 a share, Micron's payout ratio should end up under 2%. Its current dividend yield is a microscopic 0.16%.
At least some Wall Street analysts think the stock has a lot more gas. Earlier this week, KeyBanc analyst John Vinh reiterated his overweight rating and $600 price target on the stock. The target implies 60% upside for the shares, which are currently trading at around $373.
Other stocks on Trivariate's list have also seen their share prices double in the past 12 months, such as Applied Materials, Dell Technologies, Venture Global, and WESCO International.
The full list also includes material companies Commercial Metals and Steel Dynamics; industrials Allison Transmission Holdings and Valmont Industries; energy companies Range Resources and Constellation Energy; healthcare stocks Thermo Fisher Scientific and Danaher; insurer Chubb; and home builder Toll Brothers.
Write to Ian Salisbury at ian.salisbury@barrons.com
This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.
(END) Dow Jones Newswires
April 08, 2026 03:30 ET (07:30 GMT)
Copyright (c) 2026 Dow Jones & Company, Inc.
Comments