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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 past year:


1-Year Dividend Growth Rate

Honeywell (NYSE: HON  )


Coca-Cola (NYSE: KO  )


Kimberly-Clark (NYSE: KMB  )


Colgate-Palmolive (NYSE: CL  )


Activision Blizzard (NASDAQ: ATVI  )


Source: S&P Capital IQ

Honeywell is a diversified technology and manufacturing company, serving customers worldwide with aerospace products and services; environmental and sensing controls; and security technologies for homes, buildings, and industrial facilities. Honeywell currently sports a five-star rating in CAPS and is yielding 2%.

As the world's leading soft-drink company, Coca-Cola needs little introduction. Coca-Cola has built a beverage empire on the globally popular Coke and Diet Coke brands, but its offerings also include noncarbonated drinks such as Minute Maid juices, Powerade sports drinks, and Dasani bottled water. Fools have given Coca-Cola a four-star CAPS rating, and its stock pays a 2.9% dividend.

With brands like Kleenex, Scott, Huggies, and Pull-Ups, Kimberly-Clark's paper and personal care products hold the No. 1 or No. 2 brand share in more than 80 countries. In fact, nearly one-quarter of the world's population purchase Kimberly-Clark's products every day. Its top-selling brands have earned the trust of billions of consumers , and its solid 3.4% yield has led income-seeking investors to award Kimberly-Clark with a four-star CAPS rating.

From Colgate to Softsoap to Speed Stick to Ajax, Colgate-Palmolive is a leading provider of cleaning and personal care products. CAPS participants have awarded Colgate-Palmolive with the highest five-star rating, and the company is paying out a 2.3% dividend yield.

Activision Blizzard is a leading publisher of video games, including valuable franchises such as World of Warcraft, Call of Duty, StarCraft, and Diablo. This Fool favorite has a four-star ranking on CAPS, and its strong free cash flow generation has allowed Activision Blizzard to return cash to shareholders in the form of share buybacks and rising dividend payouts, with shares currently yielding 1.1%.

The Foolish bottom line
Had you invested in these companies a year ago, you would have enjoyed total dividend increases ranging from 5% to more than 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

9/28/2016 4:00 PM
ATVI $44.16 Down -0.05 -0.11%
Activision Blizzar… CAPS Rating: *****
CL $73.60 Up +0.14 +0.19%
Colgate-Palmolive CAPS Rating: ****
HON $117.16 Up +0.95 +0.82%
Honeywell Internat… CAPS Rating: ****
KMB $126.48 Up +0.79 +0.63%
Kimberly-Clark CAPS Rating: ****
KO $42.15 Down -0.44 -1.03%
Coca-Cola CAPS Rating: ****