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24/7 Wall St. Insights:
- For the first time in years, the Federal Reserve will lower interest rates this week.
- Dividend stocks can help generate passive income streams.
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With interest rates starting to be lowered this week, many investors will continue to turn to equities not only for the growth potential but also for solid and dependable dividends, which help to provide an income stream. This equates to total return , one of the most influential investment strategies.
We always like to remind our readers about the impact total return has on portfolios because it is one of the best ways to help improve the chances for overall investing success. Again, total return is the combined increase in a stock's value plus dividends. For instance, if you buy a stock at $20 that pays a 3% dividend, and it goes up to $22 in a year, your total return is 13%. That is, 10% for the increase in stock price and 3% for the dividends paid.
Two top companies that are Wall Street favorites are expected to raise their dividends this week, so we screened our 24/7 Wall St. research universe and found that both are rated Buy at almost all of the top firms on Wall Street.
While it’s always possible that the two fail to raise their dividends, top analysts expect them to, and generally, the data is based on past increases in the firm's dividend payouts. It is important to remember that no single analyst report should be used as the sole basis for any buying or selling decision.
Why do we cover dividend stocks? 
Dividend stocks provide investors with reliable streams of passive income. Passive income is characterized by its ability to generate revenue without requiring the earner's continuous active effort, making it a desirable financial strategy for those seeking to diversify their income streams or achieve financial independence.
Microsoft
The software giant has been on fire over the past two years, and investors will welcome yet another dividend increase. Microsoft Corp. ( NASDAQ: MSFT ) develops and supports software, services, devices, and solutions worldwide.
The Productivity and Business Processes segment offers:
- Office
- Exchange
- SharePoint
- Microsoft Teams
- Office 365 Security and Compliance
- Microsoft viva
- Microsoft 365 copilot
- Office consumer services, such as Microsoft 365 consumer subscriptions
- office licensed on-premises and other office services
This segment also provides LinkedIn and Dynamics business solutions, including Dynamics 365, a set of intelligent, cloud-based applications across ERP, CRM, power apps, and power automate, and on-premises ERP and CRM applications.
The Intelligent Cloud segment offers server products and cloud services, such as:
- Azure and other cloud services
- SQL and Windows server
- Visual studio
- System center
- Related client access licenses, as well as nuance and GitHub
- Enterprise services, including enterprise support services
- Industry solutions
- Nuance professional services
The More Personal Computing segment offers:
- Windows, including Windows OEM licensing and other non-volume licensing of the Windows operating system
- Windows commercials comprise volume licensing of the Windows operating system, Windows cloud services, and other Windows commercial offerings; patent licensing; Windows Internet of Things; and devices such as Surface, HoloLens, and PC accessories.
Additionally, this segment provides gaming, which includes Xbox hardware and content, and first- and third-party content; Xbox game pass and other subscriptions, cloud gaming, advertising, third-party disc royalties, and other cloud services; and search and news advertising, which includes Bing, Microsoft News and Edge, and third-party affiliates.
Shareholders currently receive a 0.70% yield. The company is expected to raise the dividend to $0.83 per share from $0.75.
Starbucks
After struggling for the last few years, the ubiquitous coffee retailer hired a new CEO looking to turn things around. Starbucks Corp. ( NASDAQ: SBUX ) operates as a roaster, marketer, and retailer of coffee worldwide.
The company operates through three segments:
- North America
- International
- Channel Development
Its stores offer:
- Coffee and tea beverages
- Roasted whole beans and ground coffee
- Single-serve products
- Ready-to-drink beverages
- Various food products, such as pastries, breakfast sandwiches, and lunch items
The company also licenses its trademarks through licensed stores and grocery and food service accounts.
Starbucks offers its products under these brand names:
- Starbucks Coffee
- Teavana
- Seattle's Best Coffee
- Ethos
- Starbucks Reserve
- Princi
Investors currently receive a solid 2.31% yield. The company is expected to raise the dividend to $0.61 per share from $0.57.
Two top companies, both with stocks rated Buy and analyst favorites across Wall Street, are expected to raise their dividends this week. Not only is increasing dividends and returning capital to investors very prudent, but it also shows that the company is doing well and has the earnings and cash flow strength to increase the payouts.
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