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5 Rock-Solid Stocks Growing Their Dividends Well Above Inflation

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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 significantly above the rate of inflation in the last year :


1-Year Dividend Growth Rate

Becton, Dickinson (NYSE: BDX  )


Diageo (NYSE: DEO  )


Spectra Energy (NYSE: SE  )


Gentex (NASDAQ: GNTX  )


Medtronic (NYSE: MDT  )


Source: S&P Capital IQ.

Becton, Dickinson is a medical technology company that manufactures and sells a broad range of medical supplies, devices, laboratory equipment, and diagnostic products to health care institutions, life science researchers, clinical laboratories, and the general public. Becton, Dickinson has a top five-star ranking on CAPS and offers investors a 2% yield.

Diageo is the world's leading premium-drinks business, with a valuable collection of beverage alcohol brands across spirits, beer, and wine. These brands include Johnnie Walker, Crown Royal, Smirnoff, Ciroc, Ketel One, Baileys, Captain Morgan, Tanqueray, and Guinness. CAPS participants have awarded Diageo with a five-star rating, and the company is paying out a 2.3% dividend.

Spectra Energy owns and operates a portfolio of natural gas-related energy assets and is one of North America's leading pipeline and midstream companies. Spectra's natural gas operations include approximately 19,000 miles of transmission pipeline and 305 billion cubic feet of storage capacity in the U.S. and Canada, which help fuel the four-star CAPS-rated company's growing 3.7% yield.

Gentex is a global, high technology electronics company that is vertically integrated in highly automated electronics, CMOS camera development and manufacturing, vacuum coatings, and glass bending and fabrication for the automotive, aerospace, and fire-protection industries. Gentex sports a five-star rating in CAPS and is yielding 2.3%.

Medtronic is the world's largest medical-technology company, with a global reach that extends to more than 140 countries. Medtronic's therapies are targeted around its stated mission of "alleviating pain, restoring health, and extending life." Last year, more than 9 million people benefited from Medtronic's medical therapies, which treat cardiac and vascular diseases, diabetes, and neurological and musculoskeletal conditions. This Fool favorite has a top five-star CAPS rating and offers investors a growing 2.1% dividend.

The Foolish bottom line
Had you invested in these companies a year ago, you would have enjoyed total dividend increases ranging from 7% to nearly 10%. 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 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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Related Tickers

9/23/2016 4:00 PM
BDX $179.50 Down -2.05 -1.13%
Becton Dickinson CAPS Rating: ****
DEO $116.35 Down -0.47 -0.40%
Diageo CAPS Rating: *****
GNTX $17.63 Down -0.08 -0.45%
Gentex CAPS Rating: *****
MDT $87.71 Down -0.11 -0.13%
Medtronic CAPS Rating: *****
SE $42.31 Down -0.17 -0.40%
Spectra Energy CAPS Rating: *****