The Best Dividend Stocks to Buy This Month

It is earnings season, and it already appears to be a pretty strong one with several bellwether banks posting better-than-anticipated numbers. Earnings season is also a time to watch for companies to declare dividends for the upcoming quarter.

Here are three companies that recently raised their dividends and have stocks that look like good buys this month.

JPMorgan Chase

JPMorgan Chase & Co (NYSE:JPM) is one of the best dividend stocks you can buy, and it just got a little better. In September, the nation’s largest bank raised its dividend from $1 to $1.05 per share — a 5% increase. This is the 13th straight year the firm has boosted its annual dividend payout.

Several factors make JPMorgan Chase a particularly reliable dividend stock. For starters, it has an excellent dividend yield of 2.9%, which is higher than the 1.57% average dividend yield on the S&P 500. More importantly, it has what CEO Jamie Dimon describes as a fortress balance sheet, which allows it to consistently fund its dividend and navigate difficult markets better than its competitors.

The bank had a blowout third quarter, beating earnings estimates and posting a 22% year-over-year increase in revenue to $41.7 billion and a 35% jump in net income to $13.2 billion. It also lowered its efficiency, or overhead, ratio to 55%, from 59% a year ago in the third quarter, and raised its common equity tier 1 (CET1) ratio to 14.3% from 12.5% a year ago.

The CET1 is a measure of a bank’s liquidity. The fact that JPMorgan’s CET1 is way above the regulatory minimum is another good sign that it can keep funding its dividend. A low 24% dividend payout ratio, which measures the percentage of a firm’s earnings paid out to shareholders in the form of dividends, is also a good sign.

McDonald‘s

McDonald’s Corp (NYSE:MCD) has been another reliable dividend stock over the years, and it just raised its payout again earlier this month. The fast-food chain declared a quarterly dividend of $1.67 per share for the fourth quarter, which is a 10% increase over the previous quarter. It also has a solid, above-average yield of 2.6% with a payout ratio of about 54%.

McDonald’s is a company that has long been dedicated to increasing its dividend, as it has done so for 47 consecutive years. There are only about 50 stocks that have longer streaks, and when McDonald’s hits 50 years, it will join the illustrious group of Dividend Kings.

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The company said the latest dividend increase reflects its confidence in its “Accelerating the Arches” growth strategy, a recent initiative focused on driving long-term growth for shareholders. That strategy led to an increase in global comparable sales growth of 11.7% in the second quarter, led by strong international growth. Revenue spiked 14% year over year while net income surged 94% in the quarter.

Third-quarter earnings are scheduled to be released on Oct. 30, but analysts are bullish on the stock, with a consensus price target that’s 28% over the current price of $262 per share.

Microsoft

Most people wouldn’t consider the technology giant Microsoft Corp (NASDAQ:MSFT) a dividend stock, but it has been remarkably consistent over the years in boosting its payout. In September, the company increased its dividend by 10% to 75 cents per share, marking the 18th consecutive year that it has boosted its annual dividend payout. Over the past five years, Microsoft has averaged a 10% dividend increase per year.

Microsoft has a low yield of 0.91%, which is below the average on the S&P 500. However, its benefits as a dividend stock go beyond the payout. As noted, it has regularly and reliably increased its dividend over the past two decades and has a low and manageable payout ratio of 27%.

More importantly, with Microsoft, you are investing in one of the largest companies in the world by market capitalization — and one that has consistently delivered an average annualized return of 25.3% over the past 10 years as of Oct. 19.

If you had reinvested the company’s dividend into its stock, you would’ve seen a 27.4% annualized return over that same period. When you add that type of capital appreciation to the dividend, it makes it a compelling buy.