The start of 2025 has brought some good news for income-focused investors, with three companies announcing dividend increases, showing they’re in solid financial shape. This comes after the S&P 500 Index ($SPX) had another great year in 2024, gaining over 20% for the second year in a row and bringing total returns since October 2022 to a whopping 70.1%, including dividends.

The Federal Reserve’s recent moves have also made dividend stocks more appealing. In December 2024, Chairman Jerome Powell announced a smaller-than-expected rate cut but kept a cautious stance, causing many stocks to drop. This has pushed many investors to look at dividend stocks as safer options. Analysts are even predicting more dividend growth in 2025, with S&P 500 companies expected to raise payouts by a median of 6%.

What’s interesting is that even Big Tech companies are jumping on the dividend bandwagon. In 2024, Meta Platforms (META) and Alphabet (GOOGL) paid their first-ever dividends, and Salesforce (CRM) coughed up some cash for shareholders as well. 

Now, with Scully Royalty (SRL), Alamo Group (ALG), and Bank OZK (OZK) all announcing dividend hikes, it raises an important question: Are these companies the smart defensive plays your portfolio needs right now? Let’s take a closer look at each one to find out.

Dividend Stock #1: Scully Royalty (SRL)

Scully Royalty (SRL), operates primarily through its significant royalty interest in Tacora Resources’ Scully iron ore (IPUG25) mine in Newfoundland and Labrador, Canada. SRL’s business revolves around collecting a 7% royalty on iron ore shipments and a 4.2% royalty on tailings, with a guaranteed minimum annual payment of $3.25 million from Tacora. 

The mine produces over 6 million tonnes of high-grade iron ore concentrate each year, with more than 65% iron content — critical for the steel industry’s shift toward greener production methods. Recently, Tacora underwent restructuring, backed by a $250 million equity injection and a new 10-year supply deal with Cargill, which should help stabilize the mine’s operations for the long term.

The stock has had mixed performance lately. It’s up 15% over the past month but down 1% over the last year. 

The company recently announced a dividend increase to $0.26 per share, up from $0.23. This marks a 2.4% boost in payouts.

Financially, SRL has faced challenges. Revenue fell by 32% to 18.1 million Canadian dollars in the first half of 2024, and the company posted a net loss of 19.9 million Canadian dollars compared to a small profit of 890,000 Canadian dollars the year before. For now, SRL doesn’t have analyst coverage, making it challenging to gauge price targets for the stock.

Dividend Stock #2: Alamo Group (ALG)

Alamo Group (ALG), makes equipment for infrastructure maintenance and vegetation management, running 28 factories across North America, Europe, Australia, and Brazil. The company recently raised its quarterly dividend by 15.4%, from $0.26 to $0.30 per share. This brings its dividend yield to a modest 0.57%.

ALG is trading near $174 but has had a tough time recently, dropping 10% in the past month, 6.6% in the year to date, and 14.5% over the past year. 

Even so, its valuation remains appealing, with a forward P/E ratio of 15.63x, better than the sector median of 19.77x. With a market cap of $2.09 billion and enterprise value of $2.19 billion, ALG still holds a strong position in its market.

However, in the third quarter of 2024, ALG’s revenue fell by 4.4% to $401.3 million, and net income dropped by 22% to $27.4 million. Its profit margin also shrank to 6.8% from 8.3%, while EPS decreased from $2.93 to $2.29 year-over-year. Analysts are expecting modest annual revenue growth of 1.1% over the next three years — slightly below the industry’s projected growth of 3%.

Alamo Group recently approved a $50 million share buyback, reflecting confidence in its financial strength. CEO Jeff Leonard emphasized the buyback reflects confidence in the company’s financial strength, aligning with its strategy to enhance shareholder value and support future cash flow generation.

Analysts are optimistic about ALG’s prospects, giving it a “Strong Buy” consensus.  All three covering analysts rate it a "Strong Buy," with a mean price target of $231.33, suggesting potential upside of nearly 34%.

Dividend Stock #3: Bank OZK (OZK)

Bank OZK (OZK), a regional bank with $37.44 billion in assets and around 240 branches across nine states, recently raised its quarterly dividend for the 58th consecutive time. The new payout is $0.42 per share, up from $0.41, representing a 2.4% increase.

Shares of Bank OZK are priced at $42 as of Jan. 13, reflecting a drop of 10.5% over the past month and 6% in the year to date. 

Despite these declines, the stock appears undervalued with a forward P/E ratio of 7.71x, well below the sector median of 11.96x. The bank’s market capitalization stands at $4.73 billion.

In Q3 2024, it reported EPS of $1.55, beating estimates by $0.02, and revenue of $423 million, slightly above expectations of $419 million. Analysts forecast a slight decline in earnings for next year, with EPS expected to drop by 1% to $5.96. 

To manage risks tied to large construction loans, Bank OZK has capped new loan sizes at $500 million and launched a loan syndication desk to share larger loans with other lenders. It also plans to reduce its commercial real estate (CRE) loan exposure from 64% to 50% by the end of 2025 while diversifying into areas like RV and marine lending. These moves aim to strengthen the bank’s financial stability.

The consensus among analysts is “Hold,” reflecting mixed opinions on the stock’s outlook. The mean price target is $51.88, indicating potential upside of about 24%. Of nine analysts covering Bank OZK, two rate it as a “Strong Buy,” five recommend holding it, and two strongly suggest selling it. 

Conclusion

So, should you buy these dividend-boosting stocks? It’s a mixed bag. All three stocks — SRL, ALG, and OZK — offer compelling reasons for dividend investors to take notice. SRL’s high yield appeals to income seekers, ALG’s dividend growth and share buyback reflect confidence in its future, and OZK’s consistent payouts paired with undervaluation make it intriguing despite risks. However, each comes with challenges, from market pressures to strategic shifts. Whether you should buy depends on your risk tolerance and investment goals, but their recent dividend hikes make them worth considering.

On the date of publication, Ebube Jones did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.