Dividend payments are on the rise. The U.S. stock market saw an increase in dividend payouts during this year’s third quarter, according to an analysis by S&P Dow Jones Indices. The Q3 increase in dividend payments comes after a decline seen in this year’s second quarter.
The average dividend yield among companies listed on the benchmark S&P 500 index stood at 1.63% on the last trading day of September this year. Real-estate and utilities stocks continue to offer the highest dividend yields among the S&P 500’s 11 subsectors at 3.89% and 3.72%, respectively.
Dividend payouts in Q3 got a lift from the $3.1 billion dividend initiation of T-Mobile (NASDAQ:TMUS), and a $2.1 billion increase to the dividends paid by tech giant Microsoft (NASDAQ:MSFT). Many other companies have either raised their regular dividend payments, issued a special one-time dividend or announced plans to offer a dividend for the first time in recent weeks.
But if you can only buy one dividend stock in December, it better be one of these three names.
General Motors (GM)
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On the day of this writing, General Motors (NYSE:GM) announced that it is raising its quarterly dividend payment to stockholders by 33% to 12 cents a share starting in 2024. The dividend hike will take the Detroit automaker’s dividend yield up close to 2%. News of the dividend increase, along with a $10 billion stock buyback, sent GM stock up 11% in a single trading session, its biggest one-day move in more than a year. The company also reinstated its 2023 earnings guidance.
The dividend increase is aimed at helping GM regain the confidence of investors after a labor strike by the United Auto Workers (UAW) union that cost the automaker $800 million in lost vehicle production and led to an expensive new collective agreement. The strike was the latest issue to weigh on GM stock, which has been a chronic underperformer and is now trading at the same level it was at a decade ago. That said, at only four times future earnings estimates, the shares look undervalued right now.
Ryanair Holdings (RYAAY)
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Earlier in November, Irish airline Ryanair (NASDAQ:RYAAY) announced that it will pay its first ever dividend to shareholders following record results that saw its profit increase nearly 60%. The carrier said it would spend 400 million euros (US$440 million) on dividend payments in 2024, making the payments to shareholders in February and September. The dividend payment for the entire year works out to 1.57 euros (US$1.72) per share.
Ryanair said it plans to return 25% of its after-tax profits to stockholders in the form of dividend payments. The inaugural dividend comes after Ryanair posted a record profit of 2.18 billion euros (US$2.39 billion) for the six months ended Sept. 30. The company attributed the strong result to airfares that rose 24% during the summer. Ryanair’s latest profit was 59% higher than a year earlier. RYAAY stock jumped 10% in one day on news of the dividend payment. The shares are now up 60% on the year.
HSBC Holdings (HSBC)
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HSBC Holdings (NYSE:HSBC) announced that it will pay its shareholders a special dividend after the bank reported that its third-quarter profit rose 135% from a year earlier. The London-based lender said that its Q3 after tax profit totaled $6.26 billion, up from $2.66 billion in the same period of 2022. Europe’s largest bank attributed the profit increase to higher interest rates charged on its loans. Consequently, HSBC’s board of directors approved a special one-time dividend payment of 10 cents per share.
The bank also said that it will initiate a new share buyback program worth $3 billion, which is to be completed by the end of February 2024. In the past year, HSBC has undertaken three share buybacks totaling $7 billion, as well as three special dividend payouts that total 30 cents a share. This is on top if its regular quarterly dividend payment of 66 cents per share. The combined regular and special dividend payments have given HSBC a sky high annual dividend yield of 7%, making it a dividend stock to own.
Over the past 12 months, HSBC’s stock has increased 25%.
On the date of publication, Joel Baglole held a long position in MSFT. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.