3 Dividend Stocks for December 2023

David Harrell: Hi. I’m David Harrell with Morningstar Investment Management. 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 December 2023

1. Amgen AMGN
2. Enbridge ENB
3. Fidelity National Information Services FIS

First up this month is Amgen, a biopharmaceutical firm that initiated its dividend in 2011. Following a 10.2% dividend increase for 2022 and a 9.8% increase for 2023, Amgen’s five-year annualized dividend growth stands at 11%. The stock currently yields 3.2% and trades in line with its Morningstar fair value estimate. Given the timing of its past raises, Amgen is likely to declare its next dividend increase this month, effective with its February 2024 payout. While the recently completely acquisition of Horizon Therapeutics will increase Amgen’s debt levels, Morningstar analysts think that Amgen’s cash flows will be sufficient to handle debt coming due as well as continued prioritization of share repurchases and dividend programs.

Enbridge is a Canadian midstream energy firm. It pays a fixed quarterly dividend, in Canadian dollars, so the amount received by U.S. investors will vary slightly from quarter to quarter, based on exchange rates. U.S. investors are also subject to a 15% withholding tax on dividend payments, which may be recoverable. The stock currently yields around 7.7% and is trading at a 10% discount to its Morningstar fair value estimate. In base currency, Enbridge has grown its dividend at a 7.4% annualized rate over the past five years, and the firm remains committed to dividend growth. In its Nov. 3 earnings call, management noted its past reliable dividend growth and said it expects it to continue. However, the rate of growth is likely to be more modest; the prior dividend raise was 3.2% and Enbridge just declared a 3.1% dividend raise for 2024. Morningstar analysts expect dividend growth to be about 3% annually for the foreseeable future.

Last up this month is Fidelity National Information Services, which provides processing, recordkeeping, and other services to banks and investment firms. FIS currently yields around 3.6%, trades at a 25% discount to fair value, and has grown its dividend at a 10.1% annualized rate over the past five years. A year ago, management was touting an even higher level of dividend growth, with a commitment to 20% annual increases. However, the company’s most recent increase was 10.6%, and during the Nov. 7 earnings call, management said, “We intend to maintain a competitive dividend, and we will grow the dividend in line with adjusted net earnings.” Morningstar analysts forecast modest earnings growth over the next five years.

I’m David Harrell with Morningstar Investment Management. Thanks for watching, and we’ll see you next month.

Watch “3 Dividend Stocks for November 2023″ for more from David Harrell.