Dividend payments are on the rise. The U.S. stock market saw an increase in dividend payouts during this year’s third quarter, according to an analysis by S&P Dow Jones Indices. The Q3 increase in dividend payments comes after a decline seen in this year’s second quarter.
The average dividend yield among companies listed on the benchmark S&P 500 index stood at 1.63% on the last trading day of September this year. Real-estate and utilities stocks continue to offer the highest dividend yields among the S&P 500’s 11 subsectors at 3.89% and 3.72%, respectively.
Dividend payouts in Q3 got a lift from the $3.1 billion dividend initiation of T-Mobile (NASDAQ:TMUS), and a $2.1 billion increase to the dividends paid by tech giant Microsoft (NASDAQ:MSFT). Many other companies have either raised their regular dividend payments, issued a special one-time dividend or announced plans to offer a dividend for the first time in recent weeks.
But if you can only buy one dividend stock in December, it better be one of these three names.
General Motors (GM)
On the day of this writing, General Motors (NYSE:GM) announced that it is raising its quarterly dividend payment to stockholders by 33% to 12 cents a share starting in 2024. The dividend hike will take the Detroit automaker’s dividend yield up close to 2%. News of the dividend increase, along with a $10 billion stock buyback, sent GM stock up 11% in a single trading session, its biggest one-day move in more than a year. The company also reinstated its 2023 earnings guidance.
The dividend increase is aimed at helping GM regain the confidence of investors after a labor strike by the United Auto Workers (UAW) union that cost the automaker $800 million in lost vehicle production and led to an expensive new collective agreement. The strike was the latest issue to weigh on GM stock, which has been a chronic underperformer and is now trading at the same level it was at a decade ago. That said, at only four times future earnings estimates, the shares look undervalued right now.
Ryanair Holdings (RYAAY)
Earlier in November, Irish airline Ryanair (NASDAQ:RYAAY) announced that it will pay its first ever dividend to shareholders following record results that saw its profit increase nearly 60%. The carrier said it would spend 400 million euros (US$440 million) on dividend payments in 2024, making the payments to shareholders in February and September. The dividend payment for the entire year works out to 1.57 euros (US$1.72) per share.
Ryanair said it plans to return 25% of its after-tax profits to stockholders in the form of dividend payments. The inaugural dividend comes after Ryanair posted a record profit of 2.18 billion euros (US$2.39 billion) for the six months ended Sept. 30. The company attributed the strong result to airfares that rose 24% during the summer. Ryanair’s latest profit was 59% higher than a year earlier. RYAAY stock jumped 10% in one day on news of the dividend payment. The shares are now up 60% on the year.
HSBC Holdings (HSBC)
HSBC Holdings (NYSE:HSBC) announced that it will pay its shareholders a special dividend after the bank reported that its third-quarter profit rose 135% from a year earlier. The London-based lender said that its Q3 after tax profit totaled $6.26 billion, up from $2.66 billion in the same period of 2022. Europe’s largest bank attributed the profit increase to higher interest rates charged on its loans. Consequently, HSBC’s board of directors approved a special one-time dividend payment of 10 cents per share.
The bank also said that it will initiate a new share buyback program worth $3 billion, which is to be completed by the end of February 2024. In the past year, HSBC has undertaken three share buybacks totaling $7 billion, as well as three special dividend payouts that total 30 cents a share. This is on top if its regular quarterly dividend payment of 66 cents per share. The combined regular and special dividend payments have given HSBC a sky high annual dividend yield of 7%, making it a dividend stock to own.
Over the past 12 months, HSBC’s stock has increased 25%.
On the date of publication, Joel Baglole held a long position in MSFT. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
