7 Top Stocks Growing Their Dividends By 15% Per Year

The Motley Fool Income Investor team's mandate is to seek out and invest in the world's best dividend stocks. As part of our process, we focus not just on a stock's current yield, but also on the long-term growth potential of its dividends. We understand that many of our members rely on these dividend payments as a source of income, and, well, who doesn't like a raise? 


But there are other reasons we value dividend growth so highly, and they're well supported by research. For instance, a study by C. Thomas Howard published in Advisor Perspectives found that for every percentage point a stock's yield rises, its annual return increases by 0.22 percentage points if it's a large cap, 0.25 if it's a mid cap, and 0.46 if it's a small cap. Even better, Howard found that dividend-growing stocks outperformed dividend cutters by 10 percentage points per year from 1973 to 2010 and beat both flat- and no-dividend stocks. And the icing on the cake is that Howard showed that this outperformance came with a third less volatility. Higher returns, less volatility-induced stress, and a steadily growing income stream -- what's not to love?

With that in mind, here are seven stocks that have grown their dividends by more than 15% annually over the past five years:

Company

Five-Year Annualized Dividend Growth Rate

Annaly Capital (NYSE: NLY  ) 39.2%
Flower Foods (NYSE: FLO  ) 23.2%
IBM (NYSE: IBM  ) 22.9%
Hasbro (Nasdaq: HAS  ) 20.6%
McDonald's (NYSE: MCD  ) 19.5%
Wal-Mart Stores (NYSE: WMT  ) 16.5%
Republic Services (NYSE: RSG  ) 16.2%

Had you invested in these companies five years ago, you would have enjoyed total dividend increases ranging from 112% to 423%. And, importantly, all of these companies grew their payout much faster than the rate of U.S. inflation during that time, thereby protecting (and growing) your purchasing power. But more important to investors today is to identify the companies that will grow their dividends substantially in the years ahead. If you're interested in hearing about some excellent companies that are likely to boost their dividends from this point forward, I'd like to offer you a brand-new free report from Motley Fool expert analysts called "Secure Your Future With 11 Rock-Solid Dividend Stocks." Today I invite you to download it at no cost to you. Get instant access to the names of these 11 high yielders -- it's free.

Joe Tenebruso manages a real-money Rising Star Portfolio for The Motley Fool and is an analyst for the Fool's Million Dollar Portfolio and Income Investor premium services. You can follow him on Twitter, where he goes by @Tier1Investor. Joe owns no shares in any company mentioned above.

The Motley Fool owns shares of IBM, Wal-Mart Stores, and Annaly Capital Management. Motley Fool newsletter services have recommended buying shares of Flowers Foods, Republic Services, Hasbro, Annaly Capital Management, Wal-Mart Stores, and McDonald's and creating a diagonal call position in Wal-Mart Stores. 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.


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  • Report this Comment On December 24, 2011, at 5:48 AM, brokeassbroad wrote:

    I'm just playing with numbers and thinking "out loud" on Annaly...

    Annaly has lowered its dividend for the last two quarters of 2011.

    Annaly's annual dividend for 2010 was $2.65; for 2011 it was $2.44.

    Outside the five year parameter of the article, in 2002, Annaly paid an annual dividend of $2.67.

    I'm not sure I'd classify it as a grower of dividends.

    Merry Christmas!

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