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 more than 10% over the past year.


1-Year Dividend Growth Rate

Costco Wholesale (NASDAQ:COST)




General Electric (NYSE:GE)


Applied Materials (NASDAQ:AMAT)


Deere (NYSE:DE)


Source: S&P Capital IQ.

Costco Wholesale operates an international chain of membership warehouses that carry brand-name and private-label merchandise at substantially lower prices than at conventional wholesale or retail sources. Fools appreciate the stickiness of Costco's membership model, its focus on delivering value to its customers, and its growing 1.1% dividend, and have awarded the company a top five-star CAPS rating.

ONEOK is the general partner and owns about 40% of ONEOK Partners, which is a leader in the gathering, processing, storage, and transportation of natural gas in the United States. ONEOK is also among the largest natural gas distributors in the U.S., serving more than 2 million customers in Oklahoma, Kansas, and Texas . And ONEOK's energy services segment offers natural gas supply and risk-management services for utility, commercial, and industrial customers. This Fool favorite has a top five-star CAPS rating and offers investors a solid 2.8% dividend.

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%.

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 five-star rating in CAPS, and its stock is yielding 2.3%.

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 2.5% dividend yield.

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.

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 recommends Costco Wholesale, ONEOK, and ONEOK Partners and owns shares of Costco Wholesale and General Electric. 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.