5 Top Stocks Growing Their Dividends by 10% 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 midcap, 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 last year:

Company

1-Year Dividend Growth Rate

Caterpillar (NYSE: CAT  )

14.3%

Costco Wholesale (NASDAQ: COST  )

13.6%

General Electric (NYSE: GE  )

11.8%

Chevron (NYSE: CVX  )

11.1%

Philip Morris International (NYSE: PM  )

10.4%

Source: S&P Capital IQ.

Caterpillar is the world's leading manufacturer of construction and mining equipment, diesel and natural gas engines, industrial gas turbines, and diesel-electric locomotives. Caterpillar currently has a three-star ranking on CAPS and offers investors a 2.8% yield.

Costco Wholesale operates an international chain of membership warehouses that carry brand-name and private-label merchandise at substantially lower prices than are typically found at conventional wholesale or retail sources. Fool's appreciate the stickiness of Costco's membership model, its relentless focus on delivering value to its customers, as well as its growing 1% dividend, and have awarded the company a top five-star CAPS rating.

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 paying a 2.8% dividend.

As a major integrated energy company, Chevron is involved in many aspects of the energy production spectrum, from the exploration and production of oil and natural gas, to the refining of crude oil and the manufacture of petrochemicals, to coal mining operations and alternative fuel sources. This energy titan has earned a four-star rating in CAPS and is yielding 3.3%.

Philip Morris International manufactures and sells cigarettes and other tobacco products in markets outside of the United States. The company's portfolio of brands include Marlboro, Merit, Parliament, Virginia Slims, L&M, Chesterfield, Bond Street, Lark, Muratti, Next, Philip Morris, and Red & White, along with various local cigarette brands. CAPS participants have awarded Philip Morris with the highest five-star rating, and the company is paying out a solid 4.2% dividend.

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


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