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The 4 Dow Stocks With the Fastest-Growing Dividends

http://www.fool.com/investing/dividends-income/2013/05/25/the-4-dow-stocks-with-the-fastest-growing-dividend.aspx

Dan Caplinger
May 25, 2013

The Dow Jones Industrials (INDEX: ^DJI) have gained the respect of investors around the world not just because of their status as high-quality blue-chip companies that offer stability and security. They also represent a solid dividend-producing portfolio, with the Dow as a whole offering a dividend yield of 2.4% and with many of its components yielding far more than that.

But as smart dividend investors know, yield is only part of the story when it comes to picking the best dividend stocks. It's also important to find companies that will be able to grow their dividends well into the future, to ensure that the money you receive will rise to meet the increased demands of inflation and other financial needs. So with that in mind, I looked at the components of the Dow Jones Industrials that have succeeded in raising their dividends the most over the past five years. Here are the four top companies.

4. Microsoft (NASDAQ: MSFT), 2.6% dividend yield, 15.7% average annual dividend growth rate since 2008
Microsoft's dividend has more than doubled since early 2008 as investors have slowly realized that the company doesn't have the growth prospects it once had. Because of the huge amounts of cash flow that Microsoft generates from sales of its legacy operating-system and office-productivity software, it has increasingly been able to afford more lucrative payouts to its shareholders. Moreover, given the mixed success the company has had using capital in other ways, such as through acquisitions, investors seem just as happy to keep more cash in hand.

3. IBM (NYSE: IBM), 1.8% yield, 16.3% growth rate
Unlike many tech stocks, IBM has paid a dividend for decades, but until recently, the company tended to make small payments and even smaller increases on an annual basis. Yet in the mid-2000s, the company dramatically accelerated its dividend growth, and since the beginning of 2008, the dividend has risen on six different occasions to jump by 138%. Even with the latest rise, however, the company yields less than 2%, and traditionally, IBM has preferred using spare cash for buybacks that will lead to a direct upward push to earnings per share.

2. Disney (NYSE: DIS), 1.1% yield, 16.5% growth rate
Like IBM, Disney has long had a reputation for stingy dividend payments. But in the past three years, the company has boosted its dividend by 150%, sticking with an old-style single an