Many of you know that I like to do a check-in on a monthly basis, screening for stocks that are likely put more cash in your pocket. As Chief Investment Strategist of High-Yield Investing, it’s part of my job. We took a break last month to focus intensely on important portfolio changes we’re making to respond to the Covid-19 selloff, but we’re back at it again this month.

If you’re new to this, here’s how it works… In each issue of my premium newsletter, I scan the market for potential dividend hikes. We’re looking for hikes likely to happen over the next four to six weeks. We also highlight noteworthy special distributions on the horizon. I give special attention to outsized double-digit increases and reliable dividend-payers that have been steadily growing payouts for a decade or more.

I flag these stocks first for my premium readers. Then, I share them with the public. If you’re looking for a potential portfolio addition to research further, I can’t think of a better place to start. So without further delay, here’s what I’ve found this month…

3 Upcoming Dividend Hikes

1. American Water Works (NYSE: AWK) – The more volatility the market throws at us, the more inviting the “boring” utility sector looks. While the economy may be in shambles for a while, don’t expect to see any diminished demand for municipal water service – especially with people washing their hands every five minutes.

OK, that last line was in jest. Still, water consumption is largely immune to our current woes.

Founded more than a century ago, American Water Works is the nation’s largest publicly-traded water utility. The company owns 600 treatment plants, 1,000 wells, and more than 50,000 miles of transmission pipeline. It provides clean water and wastewater removal service to 15 million customers in 46 states.

While regulated utilities aren’t known for growth, AWK has closed 65 deals over the past five years, adding 100,000+ customer connections. Over the same time frame, quarterly dividends climbed at a brisk double-digit pace, rising to the current $0.50 per share.

The annual step-ups have occurred in May.

The company invested $1.7 billion last year to modernize outdated infrastructure. It will be allowed to recoup with a fair return on that spending. And it has another 44,000 customer accounts waiting to be hooked-up, pending regulatory approval. Earnings are expected to increase at a steady 7% to 10% annual clip over the next few years, likely fueling another distribution hike within the next few weeks.

I’m expecting a bump to near $0.55 per share. The yield isn’t quite high enough to merit inclusion in our premium portfolio, but it’s a nice dividend-growth story.

2. Bank OZK (NYSE: OZK) – Headquartered in Little Rock, this small but well-run regional bank operates 250 branches and offices throughout Arkansas, Florida, Georgia, Texas, and several other states. The bank has attracted $19 billion in low-cost deposits, which support a loan book of $18 billion.

Instead of rattling off a bunch of statistics, let me just say this… OZK has been named the #1 bank in the United States for its asset size for the past eight years running. The bank has posted 41 consecutive years of positive net income. That’s zero annual losses in its entire history. I can’t think of many businesses that can make that claim. It doesn’t hurt that charge-offs for bad loans have been lower than the industry norm every year since the 1997 IPO.

Over the same time frame, OZK has generated record profits in 19 of its 23 years as a public company. The bank currently earns a wide net interest margin (NIM) of 4.15%, 90 basis points above the average FDIC-insured lender. It also has one of the industry’s leanest expense structures (top decile efficiency ratio for 18 straight years). So it’s easy to see why OZK has increased distributions for 38 straight quarters. And given the ultra-conservative payout ratio below 30%, I expect that trend to continue.

With the U.S. economy in lockdown, I expect to see softer origination volume and an uptick in soured loans. But bad debt likely won’t surpass the 2009 recession (which even then only rose to 1.75% of total loans). Even in economic slumps, this bank has been a well-oiled machine, delivering a 21% compounded annual growth rate (CAGR) in book value per share over the past decade. Today, it is trading at just half of book value. That’s a 50% discount from historical norms.

With another dividend hike on the way, today’s investors can lock down a yield above 6%.

3. Johnson & Johnson (NYSE: JNJ) – There are many promising Covid-19 vaccines currently under development. But JNJ may reach the finish line first. The company says it has a viable candidate that should go into production “imminently”.

To be clear, this vaccine hasn’t yet been given the green light by the FDA or other regulatory agencies. But JNJ is manufacturing “at risk”, meaning it will bear the losses if the final product doesn’t eventually gain approval. By getting a head start, the product could be on the market sooner rather than later.

JNJ expects the vaccine to undergo human clinical trials within the next five months. If the results are positive, approval could come as early as the first quarter of next year. Management expects to make up to 1 billion doses available worldwide.

In the meantime, the virus has taken a toll on the firm’s medical device sales (due to the postponement of elective surgeries). But JNJ is still forecasting sales to top $80 billion this year as other divisions such as pharmaceutical and consumer health pick up the slack.

First-quarter earnings set a positive tone, rising 10% to $2.30 per share. And rain or shine, JNJ investors count on to deliver a rising income stream to stockholders. Dividends have increased for 58 straight years now, but JNJ just set a new milestone… For the first time, quarterly payments will top to $1 per share mark. Starting in early June, stockholders will see payments of $1.01, pushing the annual distribution to $4.04. That puts the yield at about 2.7% based on recent prices.

Action To Take

Remember, just because these stocks are likely to increase dividends doesn’t necessarily make them “buys.” These are merely ideas to get you started in the hunt for high yields. I will say, however, that we did add one of these dividend payers to our High-Yield Investing portfolio. It’s just one of the dozens of high-yielders we’re finding right now in this market, and my readers and I plan to take full advantage.

A lot of quality equities and funds that were driven down because of the coronavirus pandemic. Many will still be around after this is all over. In the meantime, they’re left with sky-high payouts while prices are down. That gives investors a once-in-a-generation opportunity to find rare deals — and high yields they wouldn’t normally find.

If want to know about my absolute favorite high-yield picks, then I invite you to check out my latest report right here.