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 last year.

Company

1-Year Dividend Growth Rate

Goldcorp (NYSE: GG  )

14%

EXCO Resources (NYSE: XCO  )

12.5%

Applied Materials (NASDAQ: AMAT  )

11.8%

Deere (NYSE: DE  )

11.5%

Norfolk Southern (NYSE: NSC  )

11.1%

Source: S&P Capital IQ.

Goldcorp is engaged in the acquisition, exploration, development, and operation of precious-metal properties, including gold, silver, copper, lead, and zinc. Goldcorp currently has a three-star ranking on CAPS and offers investors a 2% yield.

EXCO Resources is an independent oil and natural gas company engaged in the acquisition, exploration, and production of onshore U.S. oil and natural gas properties with a focus on shale resource plays. EXCO Resources currently sports a four star rating in CAPS and is yielding 2.7%.

Applied Materials develops, manufactures, markets, and services fabrication equipment for the semiconductor, flat panel display, solar photovoltaic, and related industries. Fools have given Applied Materials a four-star rating in CAPS, and its stock is yielding 2.6%.

Deere, which originally began as a blacksmith shop in 1837, is now a global enterprise that manufactures and distributes agriculture, turf, construction, and forestry equipment worldwide. CAPS participants have awarded Deere with a four-star rating, and the company is paying out a 2.4% dividend yield.

Norfolk Southern is one of the largest freight rail transportation companies in the United States. It operates approximately 20,000 route miles in 22 states and the District of Columbia, serves every major container port in the eastern United States, and operates the most extensive intermodal network in the region. This Fool favorite has a top five-star CAPS rating and offers investors a growing 2.9% dividend.

The Foolish bottom line
Had you invested in these companies a year ago, you would have enjoyed total dividend increases ranging from 11% to 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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