A simple method to identify companies capable of raising dividends

Another screening criterion is a total debt-to-equity ratio no higher than 50%. The rationale is that, as interest rates rise, highly leveraged companies may find it increasingly difficult to maintain—let alone raise—their dividends. The screening also considers the dividend payout ratio—the percentage of earnings paid out as dividends. Barron’s sought companies with a payout ratio below 55%, a relatively conservative figure that provides sufficient flexibility for dividend growth. The table below lists the seven selected companies. All are S&P 500 constituents whose free cash flow yield exceeds their dividend yield—indicating that their dividends are secure and have room to grow. Data as of July 29. Pennington Financial Group (PFG), an asset management firm that assists clients with retirement investments, exhibits the largest spread between its free cash flow yield and dividend yield: 16.6% versus 3.8%, respectively, as of the July 29 close. Including dividends, the stock has returned –6% year-to-date. By comparison, the S&P 500 is down 13%. Regions Financial (RF), a regional bank headquartered in Birmingham, Alabama, boasts a free cash flow yield near 14%, substantially above its recent dividend yield of 3.8%. Last month, Regions Financial announced plans to raise its quarterly dividend from $0.17 to $0.20 per share—a $0.03 increase, or nearly 18%. Two major global energy companies—ExxonMobil (XOM) and Chevron (CVX)—also made the list, both benefiting from rising oil and gas prices. Although questions arose early in the pandemic about whether ExxonMobil could sustain its dividend, the company ultimately raised its quarterly payout by $0.01—to $0.88 per share—last autumn. This enabled it to retain its place in the S&P 500 Dividend Aristocrats Index, whose members have increased dividends for at least 25 consecutive years. On July 29, ExxonMobil reported $16.9 billion in second-quarter free cash flow—up from roughly $7 billion a year earlier—and paid $3.7 billion in dividends last quarter. Chevron reported $10.6 billion in second-quarter free cash flow—up from $5.2 billion a year earlier—with a quarterly dividend of $1.42 per share. Pharmaceutical giant Pfizer (PFE) also appears on the list. In the first half of this year, it paid $4.5 billion in dividends, with a quarterly dividend of $0.40 per share. In 2021, Pfizer generated $29.9 billion in free cash flow—up from $10.5 billion in 2019—and approximately $6 billion in the most recent quarter. Pfizer defines free cash flow under U.S. GAAP as net operating cash flow minus capital expenditures for property, plant, and equipment. Cisco Systems (CSCO) is the sole technology company on the list, with a 7.1% free cash flow yield—more than double its 3.4% dividend yield.

Coca-Cola’s stock price quietly hits a new high again

Tech Stocks vs. 'Old-Timer Stocks': Two Logics, One Common Thread We must acknowledge that investing in tech stocks and investing in Coca-Cola–style stocks operate on two fundamentally distinct logics. First, their pricing targets differ. Tech stocks price in the idea that “the world will change”—betting on narratives, potential, and growth expectations. Once a technology path proves unviable, valuations can collapse instantly. Coca-Cola, by contrast, prices in the idea that “human nature remains unchanged”: sugar, caffeine, and social consumption contexts remain relevant after a century; demand curves are so flat they border on dull. Second, their cash flow profiles differ. Tech firms generate most profits in the future, requiring continuous investment—and often ongoing financing—so shareholder returns hinge on distant, uncertain realizations. Coca-Cola’s profits are here and now: over $12 billion in free cash flow annually, delivered reliably, with dividends and buybacks arriving quarterly without fail. Third, the odds embedded in expectation management differ. For tech stars to exceed expectations, they must surpass already sky-high forecasts—an outcome so demanding that even positive earnings surprises sometimes trigger share-price declines. No one harbors unrealistic fantasies about Coca-Cola; a modest beat plus upgraded guidance is often enough to lift the stock. △ Coca-Cola and Warren Buffett Yet these two logics are not mutually exclusive—in fact, their intersection is precisely where alpha emerges. First, pricing power is the common language of both assets. This quarter, Coca-Cola raised prices by 2% while volume rose 5%—a textbook case of “price hikes without volume loss.” In tech firms, this manifests as switching costs and ecosystem lock-in: only companies bold enough to raise prices—and retain customers afterward—deserve valuation resilience. Growth fueled solely by subsidies and market-share grabs? That’s naked swimming once the tide recedes. Second, cash flow is genuine optionality. Coca-Cola uses its flagship brand’s cash flow to incubate new growth vectors—zero-sugar variants, coffee, dairy products—this quarter, zero-sugar Coke sales surged 16%. In 2024, it signed an $1.1 billion AI cloud-services agreement with Microsoft. It never bets the farm—but never stops evolving, either. Third, compounding’s true vehicle is time—not volatility. Buffett’s initial 0.9% dividend yield, compounded across 36 years of dividend growth, yielded a staggering 62.77% return on his original cost basis. This machine runs slowly and quietly—but never shuts down. The 2026 market offers a perfect controlled experiment: on one side, the AI sector is experiencing sharp divergence—leading names have pulled back nearly 20% from June highs, with forward P/Es compressed to levels not seen since 2019, prompting investors to reassess valuation and crowding; on the other, defensive sectors like staples and utilities are attracting fresh capital—Coca-Cola’s 20% year-to-date gain starkly contrasts the S&P 500’s 8%. Rather than heralding “the triumph of old-timer stocks,” this reflects a reversion to a premium for certainty. When markets begin questioning the premium paid for “stories,” cash flow, pricing power, and predictability get repriced upward. Of course, this doesn’t signal the end of the tech logic—it’s more like a rebalancing between two valuation frameworks. Savvy investors won’t choose one over the other; instead, they’ll hold assets betting on “change” alongside those betting on “constancy.” Three Key Takeaways (I) Even great companies can be bad buys at bad prices In 1998, Coca-Cola’s stock peaked with a P/E ratio approaching 50x. For the next full decade, the company’s earnings grew, its dividends rose—but its share price went nowhere. It spent ten years paying off that initial valuation premium. This stands as perhaps the best cautionary tale in value investing: even the finest company can deliver zero returns for a decade—if bought at too high a price.

Stepan Increases Quarterly Cash Dividend, Marking the 59th Consecutive Year of Increases

4 days ago

Stepan Company declared a quarterly cash dividend of $0.405 per share, marking its 59th consecutive year of increases. The specialty chemical manufacturer serves industries including cleaning, agriculture, and oilfield solutions.

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