McDonald's And Microsoft Among 12 Companies To Announce Annual Increases In September

August saw robust dividend growth from several companies, including Chemed (20%) and Badger Meter (17.6%), while long-term dividend champions like American States Water (72 years) and Dover (71 years) continued their streaks, though some firms like Nordson and Westlake Chemical delivered smaller increases than predicted. For September, expectations are for generally mid-single digit dividend boosts, with McDonald's projected to slow its growth to 2.8-4.5% as it begins its second half-century of increases, contrasting with Microsoft, which is anticipated to maintain strong double-digit growth (10.2-12.0%) driven by robust segment performance, particularly in cloud and software.

Analysis

A review of August's dividend announcements reveals a clear divergence in corporate performance and capital return policies. Strong performers included Chemed Corporation (CHE), which delivered a 20% dividend increase alongside a $300 million share buyback, and Badger Meter (BMI), with a 17.6% boost. Financial sector firms like CBOE Global Markets (CBOE) and Broadridge Financial (BR) also posted double-digit increases of 14.3% and 10.8% respectively. Conversely, several companies disappointed, with Nordson (NDSN) raising its dividend by only 5.1% amid flat earnings, and Westlake Chemical (WLK) announcing a minimal 1.0% increase. The outlook for September highlights a critical theme: the direct link between earnings power and dividend growth. Microsoft (MSFT) is projected to announce a 10.2% to 12.0% increase, underpinned by strong 16% EPS growth in fiscal 2025. In stark contrast, McDonald's (MCD), despite its 50-year dividend growth history, is expected to slow its increase to the 2.8% to 4.5% range, reflecting a 2% EPS decline in 2024 and only modest growth thereafter. This bifurcation suggests that while dividend growth streaks continue, the magnitude of increases is becoming highly dependent on current financial performance.

Key Decisions for Investors

• Investors should prioritize dividend growth companies with demonstrated earnings acceleration, such as Microsoft, over those like McDonald's where slowing fundamentals are now visibly constraining capital return growth.
• The significantly smaller-than-expected dividend increases from companies like Nordson and Westlake Chemical should be viewed as potential leading indicators of business weakness, warranting a re-evaluation of the investment thesis for these names.
• Consider overweighting companies that deliver positive surprises through combined dividend hikes and share buybacks, as seen with Chemed, as this signals strong management confidence and robust free cash flow generation.
• For income-focused portfolios, balance the reliability of long-streak dividend payers like Dover and American States Water with the reality of their minimal growth rates, and consider blending them with companies offering higher, earnings-driven dividend expansion.