If you're looking for the best dividend stocks for 2014, you aren't alone. Income investors have flocked to dividend stocks, especially in the wake of persistently low interest rates. In their quest for yield, some investors have overlooked lower-paying dividend stocks. But it's equally important to hunt for stocks that harness the potential to increase dividends over time. Here are three that may just prove to be the best dividend stocks for 2014 and beyond.
Cummins (CMI -1.09%) designs, makes, and services diesel and natural-gas engines, power generation systems, and engine-related components. It has benefited from both the surge in supply of domestically produced natural gas and the push for greater fuel efficiency in our big-rig trucks. As a result, trucking fleets are transitioning to natural gas for fuel. Cummins has teamed up with Westport Innovations to provide the long-haul trucking industry the capability to use liquefied natural gas as fuel. Strong demand for on-highway engines and component parts drove supercharged first-quarter results. Cummins also increased total sales guidance to 6%-10% growth for 2014, up from 4%-8% growth.
Cummins' dividend recently yielded 1.7%. The manufacturer grew its dividend 25% last year and increased it by a wildly impressive 257% in the past five years. With a payout ratio of 29%, the dividend still has lots of growth potential. The stock currently boasts a forward price-to-earnings ratio of 14. For investors interested in the best dividend stocks 2014 has to offer, look no further than Cummins.
Qualcomm (QCOM -2.53%) develops new technologies and then licenses the rights to use its patented technology. For example, networks being upgraded to 4G are based on a technology Qualcomm developed. By holding the patents, Qualcomm collects royalties from smartphone and tablet makers that use it. Also, as Android-based devices -- commonly run on Qualcomm's Snapdragon chip -- continue to snatch market share, Qualcomm is likely to benefit. And China presents a major opportunity for the San Diego-based company as consumers upgrade to smartphones and as China Mobile, the world's biggest carrier, rolls out its 4G network with technology that Qualcomm dominates.
Qualcomm's dividend recently yielded 2.1%, but the real power in its dividend is its growth story. The tech company just raised it by more than 20% and increased it by 147% over the past five years. Better yet, the payout ratio for Qualcomm's dividend now stands at 33%, indicating that the company has plenty of room to further grow its dividend. Keep your eye on Qualcomm. It may just prove to be one of the best dividend stocks for 2014.
Disney's (DIS -0.83%) massive empire, which includes a world-renowned brand, theme parks, television, and movies, yields a diversified stream of revenue. Its often overlooked cable networks account for almost half of company revenue and two-thirds of operating profit. Disney's successful Lucasfilm, Marvel, and Pixar acquisitions are generating seemingly endless billion-dollar movie franchises and assets that are likely to create shareholder value for years to come. And Disney's recent $1 billion investment in FastPass+ ride reservation technology will make it a smarter -- and probably even more profitable -- company in the future. Disney recently reported second-quarter earnings that finished ahead of expectations because of continued strength from its blockbuster Frozen movie, as well as strong revenue from U.S. parks.
Disney's dividend yields a mere 1.1%. But its payout ratio is a healthy 22%, which leaves lots of room for further growth. The company increased its dividend 15% last year and has raised the payout nearly 146% over the past five years. Without a doubt, Disney looks like one of 2014's best dividend stocks.
Looking for more great dividend stocks? Check out a recent article by longtime Fool contributor Selena Maranjian, who called out her best dividend stocks for 2014.
