Prediction: These 3 High-Yield Dividend Stocks Will Raise Their Payouts to Record Highs in October or November

Key Points

• Lockheed Martin is a top choice for investors seeking passive income in the defense industry.

• ExxonMobil has ambitious plans to expand its business and distribute substantial cash to shareholders.

• Starbucks in undergoing a lot of changes, but its dividend is intact.

• 10 stocks we like better than Lockheed Martin ›

When scanning the market for prospective dividend-paying companies, it's easy to get enamored by stocks with high yields. And there are definitely some examples of beaten-down stocks with high yields that are great buys now.

Instead of overly focusing on yield, a better approach is to build your passive income portfolio around companies with the characteristics necessary to grow their earnings and, in turn, their dividends for years to come.

Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. Continue »

Investors can expect Lockheed Martin (NYSE: LMT), ExxonMobil (NYSE: XOM), and Starbucks (NASDAQ: SBUX) to raise their dividends this month or next. Here's why all three dividend stocks are worth buying now.

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Lockheed Martin is a cash cow with a massive backlog

Like clockwork, Lockheed Martin tends to raise its dividend between reporting second-quarter and third-quarter earnings. Last year, it boosted its payout on Oct. 2. The year before that, it was Oct. 6. Regardless of the exact time of the raise, investors can count on the defense contractor to increase its payout this fall, as it has done for 22 consecutive years.

The dividend is an integral part of Lockheed's investment thesis. Lockheed's stock price has been lagging many of its defense contractor peers. But its yield is one of the highest in the industry at 2.7%. What's more, Lockheed is a great value, sporting a forward price-to-earnings ratio of 22.2.

Lockheed's growth hasn't been great in recent years, namely due to one-off charges that have been dragging down its results. The company's highly profitable F-35 program should provide steady earnings for decades to come. Lockheed exited its most recent quarter with a total backlog of $166.5 billion -- which is more than double its 2024 revenue. The backlog should help Lockheed generate a boatload of free cash flow (FCF) to support its growing payout.

Growth-focused investors may prefer RTX over Lockheed Martin. But investors looking for passive income at a good value may want to take a closer look at this high-yield dividend stock in October.

ExxonMobil's dividend is the gold standard in the energy sector

On Nov. 1, 2024, ExxonMobil increased its dividend for the 42nd consecutive year. The integrated major has one of the most reliable dividends in the oil patch, due to its track record and potential for future growth.

By focusing on production quality over quantity, ExxonMobil should be able to steadily grow its FCF, return value to shareholders through buybacks and dividends, and invest in low-carbon ventures.

In December, ExxonMobil released a corporate plan that aims to grow earnings by $20 billion and operating cash flow by $30 billion by 2030 (relative to 2024). The forecast is based on Brent Crude oil prices of $65 per barrel and 10-year average energy, chemical, and specialty product margins. It also assumes ExxonMobil spends $28 billion to $33 billion per year on cash capital expenditures (capex) from 2026 to 2030 as it invests in growing production offshore Guyana, the Permian Basin, and liquefied natural gas. Based on 2024 cash capex of $25.6 billion, ExxonMobil is essentially forecasting $30 billion in increased annual cash flows while only spending $5 billion more per year on capex.

The excess cash flow generation will benefit shareholders through buybacks and dividends, which are an integral part of the company's 2030 corporate plan. ExxonMobil plans to buy back a staggering $20 billion in stock in 2025 and 2026 and is on track to distribute over $17 billion in dividends this year.

With a yield of 3.4% and achievable long-term goals, ExxonMobil stands out as a top dividend stock to buy now.

Starbucks is struggling, but the company has an excellent dividend

Last October, Starbucks increased its dividend for the 14th consecutive year. But instead of disrupting the global coffee and tea industry, Starbucks is now being disrupted by value options from fast food giants, fast-growing companies like Dutch Bros, and local or regional competitors.

Mobile order and pay, paired with the Starbucks Rewards program, were seen as strengths during the pandemic. But there are downsides to convenience. Mobile orders can overwhelm Starbucks staff and make the experience more transactional -- a far cry from the "third place" philosophy that was instrumental in the company's early growth as an internet café for socializing and work.

Starbucks brought in a new CEO, Brian Niccol, in September of last year to turn the company around. When the announcement was made in August, Starbucks surged nearly 25% in a single session. But now, the stock price is down 10% from that pop, despite strong gains in the broader market.

Years of price increases have taken a toll on demand. Lackluster growth and margin compression are signals that something has to change.

In fact, Starbucks is now closing stores and refurbishing some existing locations in a costly effort to return to growth. Part of Niccol's strategy is to improve the in-store experience for both workers and customers. If the experience is better, it could sway some consumers to accept higher prices relative to competitors. But there's only so much Starbucks can control, as consumer budgets are strained by cost-of-living increases.

Starbucks is on the right track, but the turnaround could take years to pay off. Store locations are no longer a good metric for valuing the company. Starbucks needs to find a way to have stores that can process high-volume orders with mobile pickup and drive-thru capabilities, while also maintaining an appealing coffeehouse vibe. It's no easy task.

A falling stock price, paired with consistent dividend raises, has pushed Starbucks's yield up to 2.9%.

In sum, Starbucks is a compelling passive income opportunity, but only for investors who believe its brand is strong enough to overcome some very real challenges in the core business.

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Daniel Foelber has positions in Starbucks and has the following options: short October 2025 $85 calls on Starbucks. The Motley Fool has positions in and recommends Starbucks. The Motley Fool recommends Dutch Bros, Lockheed Martin, and RTX. The Motley Fool has a disclosure policy.