5 Stocks Growing Their Dividends by 10% 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 10% or more over the past year:

Company

1-Year Dividend Growth Rate

Caterpillar (NYSE: CAT  )

13.7%

General Electric (NYSE: GE  )

12.1%

McDonald's (NYSE: MCD  )

11.1%

Devon Energy (NYSE: DVN  )

10.8%

T. Rowe Price (NASDAQ: TROW  )

10.8%

Source: S&P Capital IQ.

Caterpillar is the world's leading manufacturer of construction and mining equipment, diesel and natural gas engines, industrial gas turbines, and diesel-electric locomotives. Caterpillar currently has a four-star ranking on CAPS and offers investors a 2.9% yield.

General Electric is a massive conglomerate offering everything from light bulbs to power plants, jet engines to water processing, financial services to oil and gas equipment, and a host of other products and services. GE currently sports a four-star rating in CAPS and is yielding 3.2%.

With its universally recognized Golden Arches, McDonald's franchises and operates more than 34,000 fast-food restaurants in 119 countries. Fools have given the McEmpire a four-star rating in CAPS, and its stock is yielding 3.2%.

Devon Energy is an independent energy company focused primarily on the exploration, development, and production of oil, natural gas, and natural gas liquids. This Fool favorite has a top five-star CAPS rating and offers investors a growing 1.5% dividend.

T. Rowe Price is a respected asset-management firm that offers a host of mutual funds and related products to individual and institutional investors, retirement plans, and financial intermediaries. CAPS participants have given T. Rowe Price a four-star rating, and the company is paying out a 2.1% dividend yield.

The Foolish bottom line
Had you invested in these companies a year ago, you would have enjoyed total dividend increases ranging from 10% to nearly 14%. 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 The Motley Fool's 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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  • Report this Comment On August 27, 2013, at 6:00 AM, xahne wrote:

    it has been a year since GE 'grew' its dividend.

    another blatherish article not really saying much.

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