A couple of Fridays ago, I sat down to film a quick video about the state of the commercial real estate market. (I hope you took a few minutes to check it out.)

But as soon as I wrapped things up, I loaded the family up, and we took a trip.

When you have kids in college, you gotta make the most of the time you have together. I imagine many of you are in the same boat (or have been there before.)

It’s no wonder then, that the market can become a little languid during the summer months.

But that’s not necessarily true of dividend hikes.

As some of you know, I make a regular habit of looking for dividend hikes. As Chief Strategist of High-Yield Investing, it’s part of my job.

Each month, I flag these stocks first for my premium readers so that they can research them and get a head start. Then, I share them with the public. Ideally, I’m looking for hikes that could happen over the next four to six weeks. I also highlight noteworthy special distributions on the horizon.

We don’t do this just for fun. In a perfect scenario, we find great ideas for consideration in our premium portfolio… Companies posting outsized double-digit increases, and reliable dividend-payers that have been steadily growing payouts for a decade or more.

This month, I have two stocks I’d like to highlight. So if you’re looking for a potential addition to your income portfolio, consider looking at these names further…

2 Upcoming Dividend Hikes

1. Illinois Tool Works (NYSE: ITW) – Founded over a century ago, ITW manufactures a wide range of specialized machinery and industrial equipment. The product lines, grouped into seven segments, are too numerous to list here… auto parts, welding tools, restaurant dishwashers, and refrigerators.

It may seem like a hodge-podge, but this proud American company has become a global leader, operating in more than 50 countries. And its financial results speak for themselves. Despite foreign currency headwinds, ITW has expanded its operating margins by 150 basis points over the past year and just upped its full-year earnings guidance to $9.65 per share.

And from every dollar of profit, it returns $0.50 to investors.

This Dividend Aristocrat has raised payouts like clockwork for 58 consecutive years… and counting. Those hikes are generally announced in early August. While most of its peers offer little more than a token increase of a penny or two, ITW has doubled its quarterly payouts from $0.65 per share in 2017 to $1.31.

That’s a healthy compounded annual growth rate of nearly 14%.

Having the financial wherewithal to lift payouts for over half a century without a single cut (or even a pause) speaks to the firm’s ability to generate cash even in recessions. It doesn’t hurt that it also has over a billion in cash on hand and zero short-term debt.

A few other 2023 operating goals: 30% operating margin, 35% return on invested capital (RoIC), and 100% free cash flow as a percentage of GAAP net income.

I think this shareholder-friendly company will come through again with another hike next month.

2. Kroger (NYSE: KR) – According to S&P Global, nearly one-third of all companies in the consumer staples sector are slated to raise dividends over the next couple of months. At the top of that list is Kroger, the nation’s largest supermarket chain and the second biggest retailer behind Walmart.

Founded in 1883 with a single location in downtown Cincinnati, the grocery giant has absorbed numerous regional competitors over the years. Fred Meyer, Harris Teeter, and a pending takeover of Albertson’s, just to name a few. It now controls 2,800 stores across the country that rake in nearly $150 billion in annual sales.

The grocery business is a cutthroat industry with notoriously thin margins. But Kroger is lean and efficient, relentlessly cutting costs, optimizing its supply chain, and manufacturing most of its own private-label goods. Management has wrung out over $1 billion in cost savings in each of the past five consecutive years. So while profits are characteristically low as a percentage of sales, the more important metric, returns on equity (ROE), are quite impressive — about double the industry average.

Kroger has cultivated a deep base of rewards cards members whose loyalty is bought with compelling fuel discounts. And its targeted digital coupon promotions are driving store traffic, reaching 900,000 new households over the past four quarters alone.

The company is aiming for $2.5 billion in free cash flow this year. And with a modest payout ratio, there is room for distributions to continue climbing. Dividends have been marching at a 14% pace since 2006. The board typically approves hikes in mid-summer, having raised quarterly payouts from $0.18 to $0.21 to $0.26 per share the past couple years.

While balance sheet deleveraging has become a larger priority recently, I expect to see another uptick to $0.30 per share in the weeks ahead.

Action To Take

We’ve had a pretty good run of finding solid ideas from this exercise, so it pays to follow along each month. Some of them end up paying off big time. So, if you’re looking for a potential addition to your income portfolio, then I can’t think of a better place to start your research.

But remember, just because I highlight stocks that 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.

And if you want to know about my absolute favorite high-yield picks, you need to check out my latest report…

You’ll learn about 12 ultra-generous dividend payers that put more money in your pocket. And the best part? They pay dividends monthly. Go here to learn more now.