You'll Never Guess Which Dow Stock Has the Fastest-Growing Dividend

With every Dow component growing its dividend over the past decade, this company stands head and shoulders above the crowd with its 3,633% payout increase.

May 4, 2014 at 1:01PM

The Dow Jones Industrial Average (DJINDICES:^DJI) is one of the oldest and most followed market barometers around the world. Of course, even the oldest index in the world isn't without its shortcomings. It's needed to be updated a number of times as more relevant companies have wiggled their way into the index, and it's basis solely on share price, not market cap, has left some investors scratching their head as to its relevance.

The Dow's best attribute
One area where the Dow is most definitely relevant is with dividend seeking investors. There's nothing that makes an income investor happier than scurrying through the list of the Dow's top paying dividend stocks. And it should be noted that there are nearly 2,000 companies paying a dividend in some form or shape now, but Dow components have a special draw for income investors that few other companies have. This could be due to their status as belonging to the Dow and requiring index funds that track the index to buy in, or, more likely, it's because these are stable businesses and they've demonstrated decades of steady growth.

Source: Chris Potter, Flickr.

Here are a few other dividend facts about the Dow that you may not be aware of:

  • Every single Dow component has raised their dividend over the past 10 years. Even components that were forced to at one point drastically cut their dividend due to the recession (JPMorgan Chase and General Electric) or a large strategic purchase (Pfizer) are paying out more now on a quarterly basis than they were 10 years ago. I should note that Visa and Cisco Systems were excluded since they only began paying a dividend within the past few years -- but if it makes you feel any better their payouts are up substantially, too, since they started!
  • Not only has every Dow component raised its dividend over the past decade, but excluding the one company whose dividend increase over that time period is light years ahead of its peers the average Dow component is paying out 198% more than what it did at this time in 2004.
  • 20 out of 30 Dow components have raised their payout by triple digits over the trailing decade with 11 companies topping the 200% mark, eight surpassing 300% dividend growth, and five lifting their payout by better than 400%!

In other words, the Dow is an income investor's paradise!

The Dow's fastest growing dividend
But can you guess which company has rocketed to the forefront and raised its dividend faster than any other Dow component over the trailing decade? I've already given you a clue that the preceding five companies aren't in contention, so that narrows your selection down to the remaining 25 companies.

Think for a moment which company you believe would fit the bill as the Dow component with the fastest growing dividend over the past decade.

Got it?


Did you say McDonald's (NYSE:MCD)? If you did, you managed to pick a company that's grown its dividend by an impressive 489% over the trailing decade, from just $0.55 per year to $3.24 annually now. McDonald's has benefited by adapting its menu to include healthier food and beverage choices and also offer consumers more price points to choose from. Also a big part of its success was the redesign of its interior restaurants which made them more inviting to families within the U.S. However, its 489% payout increase was only good enough for fourth-best on the list.

Ibm Cloud Commitment

Source: IBM.

Raise your hand if Big Blue, IBM (NYSE:IBM), came to mind. It's one of Warren Buffett's largest holdings, and this Buffett character has demonstrated his ability to know a thing or two about stock-picking and finding steady income generators over the years. While IBM has struggled a bit recently with the transition to mobile-based products, its efforts to boost R&D and focus on cloud and big data are expected to result in much improved cash flow in the latter half of the decade. To add, IBM has also increased its payout by a whopping 494% since 1994. But, like McDonald's it wasn't the top dog in dividend increases.


How about the home-improvement giant Home Depot (NYSE:HD)? Home Depot has been able to take advantage of both sides of the aisle, benefiting from low lending rates and a rebound in the commercial and homebuilding sector, which has boosted sales to contractors, while also basking in steady remodeling growth from the consumer side of the equation. With a high barrier to entry in the home improvement market, Home Depot has built a pretty commanding market share lead over its primary rival. The end result has been an astronomical 571% increase in its payout over the past decade to $0.47 per quarter compared to just $0.07 previous. And still, this isn't good enough for the top spot!

In actuality, the fastest growing dividend within the Dow is (drumroll, please) ...

Source: National Cancer Institute, Wikimedia Commons. 

UnitedHealth Group (NYSE:UNH).

I told you that you weren't going to guess it!

Before 2009, UnitedHealth Group didn't do a particularly good job of going the extra mile for shareholders. In fact, between 2001 and 2009 it paid out just a $0.03 annual payout per year. It was the equivalent of dropping a marble on the ground and seeing if it registered on the Richter Scale. However, in 2010 UnitedHealth Group started to get serious, and income investors took notice.

Since 2010, UnitedHealth Group, the nation's largest health-benefits provider, has delivered a payout increase in each successive year. What was once a $0.03 annual payout is now a $0.28 quarterly payout, translating to an increase of 3,633% over the past decade!

Moreover, it's quite possible that this dividend could be primed to head even higher. Obamacare is creating a number of long-term opportunities for UnitedHealth including the ability to sign up uninsured people who are now compelled to purchase health insurance by law, as well as an ongoing push toward electronic health management services where its Optum subsidiary could thrive. It's going to be tough for UnitedHealth to top its past decade of growth in the coming years, but it could very easily remain one of the fastest growing dividend payers within the Dow moving forward.

Your search for the next great dividend stock doesn't have to stop now. Here are a few handpicked dividend stocks from our top analysts
The smartest investors know that dividend stocks simply crush their non-dividend paying counterparts over the long term. That's beyond dispute. They also know that a well-constructed dividend portfolio creates wealth steadily, while still allowing you to sleep like a baby. Knowing how valuable such a portfolio might be, our top analysts put together a report on a group of high-yielding stocks that should be in any income investor's portfolio. To see our free report on these stocks, just click here now.

Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong.

The Motley Fool owns shares of, and recommends McDonald's and Visa. It also owns shares of General Electric, IBM, and JPMorgan Chase, as well as recommends Cisco Systems, Home Depot, and UnitedHealth Group. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

Click here to learn about this incredible technology before Buffett stops being scared and starts buying!

David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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