5 Stocks Growing Their Dividends by 20% Per Year

Dividend investors would be wise to focus not just on a stock's current yield, but also on the long-term growth potential of its dividends. That's because strong businesses that consistently raise their dividend payouts reward shareholders with a steadily rising income stream that essentially equates to a raise every year. And, well, who doesn't like a raise?

But there are other reasons to 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 five stocks that have grown their dividends by 20% or more over the last year:

Company

1-Year Dividend Growth Rate

Home Depot (NYSE: HD  )

21.4%

Accenture (NYSE: ACN  )

20%

Moody's (NYSE: MCO  )

20%

Safety Insurance Group (NASDAQ: SAFT  )

20%

Target (NYSE: TGT  )

20%

Source: S&P Capital IQ

Home Depot is the world's largest home improvement specialty retailer, with more than 2,200 retail stores in the United States, Canada, and Mexico. Its stores sell home improvement products, building materials, and lawn and garden products, as well as provide installation, home maintenance, and professional service programs to do-it-yourself, do-it-for-me, and professional customers. Home Depot currently has a three-star ranking on CAPS, and offers investors a 2.1% yield.

Accenture is a top-tier management consulting, technology services, and outsourcing organization. Its areas of specialization include finance, enterprise performance, systems integration, risk management, sales, and talent management, as well as industry-specific consulting services. Accenture currently sports a four-star rating in CAPS, and is yielding 2.3%.

Moody's provides credit ratings, research covering debt instruments and securities, as well as software and advisory services for economic analysis and financial risk management. Moody's believes itself to be an essential component of the global capital markets. Fools, however, only see fit to give Moody's a lower-tier two-star rating in CAPS. Still, its stock has outperformed the S&P 500 over the last year, and is yielding a growing 1.6%.

Safety Insurance Group provides private passenger automobile insurance in Massachusetts. It also offers a portfolio of property and casualty insurance products, including commercial automobile, homeowners, fire, umbrella, and business owner policies. CAPS participants have awarded Safety Insurance Group with the highest five-star rating, and the company is paying out a hefty 4.7% dividend yield.

Target shoots to be more upscale than rival retailers with a focus on design and innovation. Its stores sell household essentials, sporting goods, toys, electronics, apparel, food, and pet supplies, among many other items. Its stock has a four-star CAPS rating, and is yielding 2.5%. Dividend investors may also find it interesting that Target has paid a dividend every quarter since going public in 1967.

The Foolish Bottom Line
Had you invested in these companies a year ago, you would have enjoyed total dividend increases of 20% or more. That level of growth would provide a substantial boost to just about any investor's dividend income. 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 9 Rock-Solid Dividend Stocks." Today, I invite you to download it at no cost to you. To discover the identities of these companies before the rest of the market catches on, you can access this valuable free report by simply clicking here now.


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Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On August 17, 2013, at 9:26 AM, 3l1ngeniero wrote:

    If you can't trust Moodys ratings (and the evidence is pretty well damning), how can you trust their annual report?

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