Prepared for 2025's Market, This Dividend Booster Stands Set for a Surge
I'd like to introduce my straightforward "2025-focused" Dividend Strategy, which I'm open to sharing. This strategy involves identifying dividend stocks with payouts set to escalate further.
As these dividends expand, so do the associated stock prices.
This strategy has proven effective, irrespective of the economic climate, the Federal Reserve's actions, or even the executive branch of the federal government's decisions. It's the path to substantial price growth from reliable payers.
Let's delve into a recent example—a potential dividend dip to capitalize on. During his campaign, President-Elect Trump hinted at a potential pullback in consistent dividend grower Deere & Co (DE) due to these comments:
"They've recently mentioned that they plan to transport a significant portion of their manufacturing business to Mexico. Allow me to alert John Deere at this moment that if you proceed with this, we are imposing a double-cent percent tax on anything you wish to sell within the United States."
Undoubtedly, Deere will keep production in the US until 2028 (at least). While they navigate this period, favorable agricultural conditions should boost their cyclical business, consequently boosting their dividend and stock price. Deere performs exceptionally well when grain prices rise. It's a leading manufacturer and distributor for agricultural, construction, and forestry equipment.
To secure Deere holdings during the rise, the best time to buy is when grain prices—particularly wheat prices—are low. Low wheat periods often mark declines in Deere's earnings, signaling a forthcoming upswing. As contrarian investors, we aim to buy DE when wheat is low instead of high.
Consider Purchasing This Dividend Growth Stock When Wheat Prices Are Low
Over the past 20 years, wheat and grain prices have fluctuated and reversed numerous times. However, one constant for Deere has been its distribution of cash to shareholders, a key factor in Deere's substantial 2,000% stock growth over the past 20 years:
The graph below demonstrates the cash Deere has gathered over the past two decades. They've intelligently utilized this money to acquire new businesses, invest in their core business, and develop a new financial services sector. However, the majority of Deere's cash—an impressive 60%—has been returned to shareholders through dividends and buybacks:
Let's examine this trend of shareholder returns more closely over the past 10 years. Deere has increased its dividend by 145% most notably during wheat's last significant surge. During this period, management purchased back 21% of the stock's outstanding float:
This is excellent news for shareholders. With fewer shares, fewer dividends need to be paid, creating more cash for Deere to boost its dividend. This positive cycle enriches investors.
Management knows how to navigate low wheat prices: reduce costs, maintain cash flow, and prepare for the next boom.
Agricultural prices will rebound soon. It's not a question of if but when. They are currently at their lowest point.
Meanwhile, Deere has been relatively stagnant since 2022, making it "dead money" to Wall Street. However, management sees the light at the end of this cyclical tunnel—they recently increased the dividend by 10.2%. A bold move, indeed!
Brett Owens serves as Chief Investment Strategist for Contrarian Outlook. For more outstanding income ideas, obtain a free copy of his latest special report: Your Early Retirement Portfolio: Consistent Dividends—Every Month—Forever.
Disclosure: none.
Given the context, here are two sentences that contain the given words:
'Given the potential dip in Deere's dividends due to political factors, this could be an opportune time for share buybacks to support the stock price.'
'Retirement income seekers might find interest in Deere, a dividend growth stock, as it has returned an impressive 60% of its cash to shareholders through dividends and buybacks over the past 20 years.'
