5 Stocks Growing Their Dividends by 20% 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 20% or more over the past year:

Company

1-Year Dividend Growth Rate

UnitedHealth Group (NYSE: UNH  )

31.1%

Home Depot (NYSE: HD  )

25.9%

Monsanto (NYSE: MON  )

25%

Disney (NYSE: DIS  )

25%

Target (NYSE: TGT  )

20%

Source: S&P Capital IQ

Health insurance giant UnitedHealth Group provides consumer-oriented health benefit plans and services through a network of 780,000 physicians and 5,900 hospitals. UnitedHealth Group has a four-star CAPS rating, and offers investors a fast-growing 1.6% dividend.

Home Depot is the world's largest home-improvement specialty retailer, with more than 2,200 retail stores in the United States, Canada, and Mexico. Its stores sell home improvement products, building materials, and lawn and garden products, as well as provide installation, home maintenance, and professional service programs to do-it-yourself, do-it-for-me, and professional customers. Home Depot currently has a three-star ranking on CAPS and offers investors a 2.1% yield.

Monsanto provides agricultural products for farmers worldwide. The company produces row crop and vegetable seeds, along with insect and weed control products under brands such as YieldGard and Roundup. CAPS participants have given Monsanto a three-star rating, and the company is paying out a growing 1.6% dividend yield.

The House of Mouse has grown into a media giant, and Disney's empire now includes movies (including Pixar, Marvel, and Lucasfilm), television (featuring ESPN and ABC), and theme parks. This Fool favorite has a top five-star CAPS rating, and offers investors a growing 1.2% dividend.

Target shoots to be more upscale than rival retailers with a focus on design and innovation. Its stores sell household essentials, sporting goods, toys, electronics, apparel, food, and pet supplies, among many other items. Its stock has a four-star CAPS rating, and is yielding 2.7%. Dividend investors may also find it interesting that Target has paid a dividend every quarter since going public in 1967.

The Foolish bottom line
Had you invested in these companies a year ago, you would have enjoyed total dividend increases ranging from 20% to more than 30%. 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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  • Report this Comment On October 01, 2013, at 7:24 AM, funfundvierzig wrote:

    Superior-managed Monsanto has not only richly rewarded its long-term shareholders with a 600% capital appreciation over the past decade but has shown an increase in the dividend in each of those ten years...funfun..

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