3 Dividend Stocks for August 2024

David Harrell: Hi. I’m David Harrell, editor of the Morningstar DividendInvestor newsletter. In this monthly series, we take a look at the dividend prospects of three stocks that are popular with income investors.

3 Dividend Stocks for August 2024

1. Duke Energy DUK
2. American Tower AMT
3. Wells Fargo WFC

Duke Energy is one of the country’s largest regulated utilities. On July 15, Duke declared a quarterly dividend of 1 dollar and 4.5 cents a share, a 2% increase from its previous rate, which is in line with the utility’s 2.2% annualized dividend-growth rate over the past five years. The stock currently yields 3.7% and is trading roughly in line with its Morningstar fair value estimate.

Morningstar analysts believe Duke’s dividend is well covered with its regulated utilities’ earnings, and they forecast average annual dividend growth of 4%, which implies a 63% payout ratio, based on their 2028 earnings estimate.

American Tower owns and operates more than 220,000 cell towers. The firm initiated a quarterly dividend in 2012 when it converted to a real estate investment trust. American Tower yields 3% and has increased its dividend at an annualized rate of 8.6% over the past five years. But don’t expect any dividend growth in 2024. After bumping its quarterly rate to $1.70 per share for its first payout of the year, the company returned to the previous rate of $1.62 for the next two payouts, which will keep the total dividend for 2024 roughly the same as it was in 2023. Morningstar analysts expect dividend growth to resume in 2025 after the company has reduced its debt; during American Tower’s April 30 earnings call, management indicated its intention for that as well. The stock currently trades just below its Morningstar fair value estimate.

Wells Fargo, one of the Big Four US banks, made a large dividend cut in 2020, reducing its quarterly dividend rate from $0.51 to $0.10. Following stress-test results, Wells Fargo has increased its quarterly payout to $0.40 per share, up from $0.35. Based on the new annual rate of $1.60, the stock is yielding 2.7%. While the quarterly dividend remains below its 2020 precut rate, Wells has now increased the quarterly dividend rate fourfold over the past four years. Morningstar analysts expect the annual dividend to increase to $1.73 over the next four years, with a payout ratio of roughly 30% to 35%. Like the previous two stocks, Wells is also trading in line with its Morningstar fair value estimate.

I’m David Harrell from Morningstar DividendInvestor. Thanks for watching, and we’ll see you next month.

Watch 3 Dividend Stocks for June 2024 for more from David Harrell.