Dividend payouts could hit a record this year. These stocks are Wall Street's favorites

CNBC

14-07-2025

While dividend growth continued to slow in the second quarter, there is some encouraging news on what may lie ahead. The net change in dividends — the increases minus decreases — for domestic U.S. common stocks rose $7.4 billion in the second quarter of 2025, according to S & P Dow Jones Indices . That is significantly less than the $16 billion increase in the year-ago period and the $15.3 billion gain in the first quarter of this year, the firm found. Economic uncertainty may have had companies limiting the size of their dividend increases, but once policies become clear, they will be in a better position to adjust their business plans — which may include a higher commitment to dividends, said Howard Silverblatt, senior index analyst at S & P Dow Jones Indices. He anticipates the second half of 2025 could see stronger than historical averages for dividends. Help from banks "Q3 is expected to start out with an improvement from big banks as they continue to increase their dividends, helped by the Fed's recent positive stress test results ; the third quarter has the potential to set a new quarterly dividend payment record," Silverblatt said in a statement last week. "For 2025, the S & P 500 is expected to post a record payment, posting a 6% increase in dividend payments," he added. That is down from 8% anticipated before the year began and below the 6.4% increase in 2024. In 2023, dividends rose 5.1%, Silverblatt said. To be sure, dividends are not as favored as they once were and the yield on the S & P 500 is near all-time lows, Deutsche Bank said in a July 8 note. Instead, companies have turned to share buybacks, which overtook dividends in the mid-2000s as the primary way companies returned capital to shareholders, said Jim Reid, global head of macro and thematic research at Deutsche Bank. Buyback risk However, buybacks create more risk in the market, since they are discretionary, are often bought during market highs and may inflate corporate earnings, Reid explained. If a downturn hits, buybacks can stop much more quickly than dividends — and that can pull away a key pillar of market support, he said. "With dividend yields now approaching all-time lows, there's a case to be made that valuations and investor expectations have become stretched," Reid wrote. "In a crisis, the lack of durable income from dividends may matter more than markets currently appreciate." Still, there are some who think dividends will return to their former glory — or at least trend in that direction over time. Federated Hermes senior portfolio manager Daniel Peris, who wrote the book " The Ownership Dividend, " predicted on CNBC last year a major paradigm shift in the market as dividends come back in vogue. "Will we get back to the very, very high rate of companies that pay dividends as opposed to a much lower rate currently? Over time, yes," Peris said. In the meantime, for investors looking for dividends, there are still plenty of options available. Favorite dividend payers To find names that consistently grow their dividends and are favored by Wall Street, CNBC Pro screened for stocks in the Vanguard Dividend Appreciation ETF that are covered by at least 15 analysts and are rated buy by at least 55% of them, according to FactSet. The companies also have at least a $10 billion market cap and an upside to the average price target of 10% or more. Here are the names that made the cut. Bank of America has a dividend yield of 2.2% and 13% upside to the average price target. The Charlotte, N.C.-based money center bank recently raised its quarterly dividend by 8% to 28 cents, starting in the third quarter, after passing the Federal Reserve stress test, which measures banks' financial health in the event of an economic downturn. Bank of America is set to report second-quarter financial results on Wednesday. Shares have gained 7% year to date. BAC YTD mountain Bank of America year to date Coca-Cola is expected to release its latest results next week. In its last report in April, the soft drink maker beat analysts' expectations and largely reaffirmed its full-year outlook. Coke also called the effect of higher tariffs "manageable," but said it expects some short-term choppiness tied to trade conflicts. The stock is up 11.5% so far this year, has a 2.9% dividend yield and 13.5% upside to analysts' average price target. KO YTD mountain Coca-Cola year to date Procter & Gamble currently yields 2.7% and has 11.7% upside to the average price target. While the majority of analysts rate the stock a buy, there was one notable downgrade on Monday when Evercore ISI changed its rating to in line from outperform. The investment bank pointed to the loss of P & G market share on Amazon. . P & G hit a 52-week low on Monday and is down about 8% year to date. PG YTD mountain Procter & Gamble year to date