These companies are growing their dividends and may see upside, Morgan Stanley says

Morgan Stanley highlighted dividend growers to cushion portfolios during a volatile early-September tape, citing stocks up 0.4% in the S&P 500 despite swings from rising Treasury yields and oil prices. East West Bancorp raised its dividend to $0.80/quarter (+20 cents) and lifted its full-year net interest income growth forecast to 7%–9% (from 6%–8%) after a Q2 EPS beat ($2.63 vs. $2.61). Packaging Corp. raised its quarterly dividend by 20% to an annual $6/share, and Devon Energy pushed its dividend to 32 cents (+33%) as Morgan Stanley favored select E&Ps and integrated leverage near $100 oil; analysts’ consensus price targets suggest upside of ~7% (Packaging) and ~23% (Devon).

Analysis

The screen is less a “dividend story” than a positioning tell: in a choppy tape, investors are paying up for cash-return discipline and balance-sheet quality. That favors EWBC and PKG over generic yield names because both have an operating lever behind the payout—EWBC through net interest income sensitivity and PKG through pricing power in a low-growth industrial backdrop. If rates stay elevated for the next 1-3 months, the market should reward names where dividend growth is backed by earnings momentum rather than financial engineering.

DVN is the cleaner momentum trade but also the most fragile. Near-term upside comes from oil staying bid and buyback/dividend capacity remaining intact, yet the market will not grant much patience if crude stalls or if the curve signals demand destruction; in that case, the stock can lose its “capital return” premium quickly even if the headline payout is unchanged. Over 6-18 months, the key question is whether energy remains a cash-return sector or reverts to a commodity-beta trade with higher discount-rate sensitivity.

Contrarian take: dividend growers often screen well when the macro is noisy, but the signal can be late-cycle and crowded. Rising Treasury yields can compress multiples of high-dividend, low-growth names just as fast as they attract income buyers, so the safest longs are the ones with explicit fundamental drivers—not the highest yield. That makes EWBC a better relative-value bank than COF, and PKG a better quality defensive than more cyclical dividend industrials.

What would falsify the setup: a dovish Fed repricing and falling 10-year yields would reduce the defensive dividend bid; for EWBC, any NII guide rollback or credit deterioration; for DVN, a decisive break in crude momentum; for PKG, evidence that volume weakness is outrunning price discipline.

Key Decisions for Investors

• Long EWBC vs short KRE for the next 1-3 months: isolate the benefit of stronger NII guidance and capital returns while avoiding broad regional-bank beta; cut if the 10Y drops sharply or EWBC loses its NII growth trajectory.
• Accumulate DVN on oil strength, but size modestly: the stock should outperform if Brent holds near current levels into the next earnings cycle; reduce exposure if crude rolls over or if the market stops rewarding variable-return energy names.
• Long PKG vs short SWK as a quality/cash-flow pair trade over 2-4 months: PKG has better pricing discipline and less rate/consumer sensitivity; thesis fails if packaging volumes weaken materially or if input-cost deflation compresses spreads.
• Use the names as a defensive rotation basket only after a pullback, not after a gap higher: buy EWBC/PKG on intraday weakness and avoid chasing DVN after oil headlines, because the near-term reward is in mean reversion rather than momentum continuation.