The 5 Fastest-Growing S&P 500 Dividends of the Past Decade

By Brian Richards | More Articles
February 13, 2012 | Comments (2)

Dividend-paying stocks are wildly popular right now, and for good reason: Yields elsewhere are paltry. I'm a particular fan of companies that have shown a commitment to increasing their dividends -- Ned Davis Research showed that from 1972 to 2010, S&P 500 companies that raised their dividends thrashed the returns of companies that eliminated, cut, or didn't pay a dividend at all.

Given that, I set out to find the S&P 500 stocks that have been the most aggressive dividend-raisers over the past 10 years. Currently, about 400 of the stocks in that index pay a dividend, but only five have increased their dividend payouts by more than 50% per year over the past decade:

Company	Current Yield	10-Year Return	10-Year Dividend CAGR
Waste Management (NYSE: WM )	3.9%	6.7%	63.1%
UnitedHealth (NYSE: UNH )	1.2%	11.3%	55.3%
AmerisourceBergen (NYSE: ABC )	1.3%	10.2%	53.6%
Aetna (NYSE: AET )	1.5%	18.6%	51.2%
Fastenal (Nasdaq: FAST )	1.4%	19.8%	50.0%

Dividend growth data from S&P Capital IQ; returns data from Yahoo! Finance. CAGR = compound annual growth rate.

A few takeaways
Three of the five stocks here operate in the health-care industry: Aetna, UnitedHealth, and AmerisourceBergen. Waste Management and Fastenal are market leaders in their own sleepy industries.

Their overall performance confirms (on a smaller scale) the Ned Davis Research study mentioned above. The broader S&P 500 index returned 3.9% per year over the time frame tracked here, meaning all of these stocks handily outperformed the index.

Yet, these current yields aren't all that impressive. With the exception of Waste Management, all have yields below that of the broader S&P index.

That the payouts have been raised so aggressively while the trailing yield is so small shows how tiny these payouts were 10 years ago. For example, UnitedHealth Group paid out a $0.03 per-year dividend until 2010, when it increased both the size and frequency of that dividend. It's now paying $0.1625 every quarter.

The dividend growth rates of these five stocks are incredible. For current investors, though it's unlikely you'll get 50%-plus annualized rates, keep an eye on these stocks to see if they continue to increase their payments -- and maybe one day join the elite Dividend Aristocrats, companies that have raised payments for 25 consecutive years.

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Fool.com managing editor Brian Richards does not own shares of any companies mentioned. The Motley Fool owns shares of UnitedHealth Group and Waste Management. Motley Fool newsletter services have recommended buying shares of UnitedHealth Group and Waste Management, as well as writing a covered strangle position in Waste Management. The Motley Fool has a disclosure policy.

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Report this Comment On February 20, 2012, at 7:32 PM, footchester wrote:

While I have bought into the idea of a well balanced, diversified portfolio of dividend paying stocks as the foundation of my retirement portfolio, one question nags at me.
Lets assume that I have identified (and purchased) stocks with long history of consistently growing dividends, while maintaining a small payout ratio. And lets say that I have 20 years until retirement (at age 70). The typical holding currently has a 3 to 4% yield and grows its dividend by 5 to 10% per year. For this discussion, lets use 4% yield and 8% annual growth in the dividend.
Ignoring all other factors, if we let history be our guide, the yield on these stocks should grow over time from the current 3 to 4% to something more like 15 to 20% twenty years down the road. This sounds wonderful and would go a long way to funding a comfortable retirement.
But where are all of the companies currently paying 15% to 20% (real companies that make and sell stuff, not crazy, exotic financial outfits.) They don't exist, but why not? And if they don't exist currently, what makes anyone think that they will exist in twenty years? It makes me believe that there is something wrong with the whole premise. I'm still buying strong companies, with little or no debt, decent current yields and a history of consistently growing those dividends. But the idea tossed out on the investing websites that these companies will turn into money printing machines 20 years down the road just doesn't seem likely. I honestly don't know what is wrong with the original premise, other than there should be current examples of companies that have achieved this kind of success. And I can't find even one example.
Can someone please explain what I'm missing?
Report this Comment On February 20, 2012, at 8:12 PM, rd80 wrote:

@footchester,
"the yield on these stocks should grow over time from the current 3 to 4% to something more like 15 to 20% twenty years down the road."
The yield on your cost would be 15-2% twenty years down the road, but the stock price will also increase so that the then-current yield would be more in line with the market. Remember, dividend yield = annual dividend rate / stock price.
The ten-year returns in Brian's table indicate all these stocks had a much lower share price ten years ago.

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