5 Top 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 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 20% over the past year.

Company

1-Year Dividend Growth Rate

Corning (NYSE: GLW  )

26.7%

Cummins (NYSE: CMI  )

25%

Williams (NYSE: WMB  )

23.3%

Sherwin-Williams (NYSE: SHW  )

23.1%

Polaris Industries (NYSE: PII  )

22.1%

Source: S&P Capital IQ.

Corning produces and sells specialty glasses, ceramics, and related materials worldwide. Its products are used in everything from flat-screen TVs to optical fiber to biosensors for drug research. And its popular Gorilla Glass technology is used in smartphones, tablets, and touch-enabled laptops. Corning currently sports a top five-star rating in CAPS and is yielding 2.4%.

Cummins designs, manufactures, distributes, and services diesel and natural gas engines, electric power generation systems, and engine-related component products. CAPS participants have awarded Cummins with the highest five-star rating, and the company is paying out a 1.9% dividend.

Williams is an energy infrastructure company that owns and operates midstream gathering and processing assets, and interstate natural gas pipelines. In addition, Williams processes oil sands off-gas and produces olefins for petrochemical feedstocks. Fools have given Williams a three-star rating in CAPS and its stock is yielding 4.2%.

As a trusted brand for paint and related products for both retail and professional customers, Sherwin-Williams has benefited tremendously from the recovery in the housing market, with its shares more than doubling in the last two years. But most CAPS participants think Sherwin-Williams will continue to outperform the market, and its shares are paying a 1.1% dividend.

Polaris Industries designs, manufactures, and markets high-performance motorized products including all-terrain recreational and utility off-road vehicles, such as ATVs and side-by-sides; snowmobiles; on-road vehicles, including motorcycles and small vehicles; and related parts, garments, and accessories. Polaris Industries currently has a four-star ranking on CAPS and offers investors a growing 1.3% yield.

The Foolish bottom line
Had you invested in these companies a year ago, you would have enjoyed total dividend increases ranging from 22% to nearly 27%. 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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