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.


1-Year Dividend Growth Rate

Toronto-Dominion Bank  (NYSE:TD)


KKR Financial (NYSE:KFN)


Main Street Capital (NYSE:MAIN)


Air Products & Chemicals (NYSE:APD)


L-3 Communications (NYSE:LLL)


Source: S&P Capital IQ.

Toronto-Dominion Bank and its subsidiaries are collectively known as TD Bank Group. TD is the sixth largest bank in North America by branches and serves approximately 22 million customers in four key businesses: Canadian personal and commercial banking, wealth and insurance, U.S. personal and commercial banking, and wholesale banking. Toronto-Dominion Bank currently has a four-star ranking on CAPS and offers investors a 3.7% yield.

KKR Financial operates as a specialty finance company and invests in a range of asset classes, including debt and equity securities, commercial real estate, and royalty interests in oil and natural gas properties. KKR Financial sports a four-star rating in CAPS and is yielding 8.7%.

Main Street Capital is a principal investment firm that provides long-term debt and equity capital to companies with annual revenues generally between $10 million and $150 million. Main Street's portfolio investments are typically made to support management buyouts, recapitalizations, growth financings, refinancings, and acquisitions. Fools have given Main Street Capital a four-star rating in CAPS, and its stock is yielding 6.5%.

Air Products & Chemicals supplies a portfolio of atmospheric gases, process and specialty gases, performance materials, equipment, and services to a range of industries, including the food and beverage, health and personal care, energy, transportation, and semiconductor markets. CAPS participants have awarded Air Products with a top five-star rating, and the company is paying out a 2.6% dividend.

L-3 Communications provides command, control, communications, intelligence, surveillance, and reconnaissance systems; aircraft modernization and maintenance; and national security solutions. L-3 is also a leading provider of a broad range of electronic systems used on military and commercial platforms, with customers that include the U.S. Department of Defense, allied foreign governments, and commercial customers. The company has a four-star CAPS rating and offers investors a growing 2.3% dividend.

The Foolish bottom line
Had you invested in these companies a year ago, you would have enjoyed total dividend increases ranging from 10.5% to nearly 13%. 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.

Joe Tenebruso manages a Real-Money Portfolio for The Motley Fool and is an analyst on the Fool's Stock Advisor and Supernova premium service teams. You can connect with him on Twitter @Tier1Investor. Joe has no position in any stocks mentioned.

The Motley Fool owns shares of L-3 Communications Holdings. 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.