3 stocks set to increase their dividends

Investors may have to search hard to find companies with growing dividends this year.

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It’s perhaps no surprise that the perennial favourite amongst income-seeking investors Telstra Corporation Ltd (ASX: TLS) is on the following list of three companies with an appealing outlook for dividend growth over the coming 12 months. Perhaps more surprising however, is that the other two companies on the list hail from the media sector which is beset by structural challenges. It would appear a credit to both companies that they are managing their businesses well in the face of these structural headwinds.

  • According to Morningstar Research, Telstra is forecast to raise its long sought after 28 cents fully franked dividend to 29 cents per share (cps) in financial year (FY) 2014. Although the stock currently trades near its 52-week high, at $5.23 the forecast dividend yield is a juicy 5.54%.
  • Southern Cross Media Group Ltd (ASX: SXL) operates across the spectrums of radio, television and online. A small increase in the dividend from 9 cps to 9.2 cps is forecast which puts the stock on a dividend yield of 5.82%, based on a share price of $1.58.
  • STW Communications Group Ltd. (ASX: SGN) is a diversified advertising and communications company that owns a number of iconic advertising agencies. The consensus forecast is for a rise in the dividend from 8.3 cps to 8.7 cps. With the stock price at $1.50, the yield equates to 5.8%.

Foolish takeaway

The lacklustre state of the domestic economy and particularly the slowdown within the resources sector has created a headwind for company earnings and in turn for the ability of companies to raise and in some cases even maintain their dividends.

Identifying companies with the ability to grow their dividends this year is likely to be harder than perhaps is usual, however thorough search by savvy investors will uncover opportunities.

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Motley Fool contributor Tim McArthur does not own shares in any of the companies mentioned in this article.

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