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3 Stocks With Mind-Boggling Double-Digit Dividend Growth

By Daniel Sparks - Oct 4, 2017 at 5:07PM

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We're talking year-over-year dividend growth of 24% or higher.

Dividends are nice. But growing dividends are even better. These three stocks are not only increasing their dividends every year, but their most recent increases were up double-digit percentage points over last year's dividends.

These three companies are analog chipmaker Texas Instruments (TXN 0.57%), home improvement retailer Home Depot (HD 0.15%), and ski resort company Vail Resorts (MTN -2.45%). Here's how each company's dividend is growing by double digits, and why strong dividend growth is likely to continue.

Young couple on a chairlift at a ski resort

Image source: Getty Images.

Texas Instruments

Market Capitalization

Dividend Yield

Most Recent Dividend Increase

3-Year Average Annual Dividend Growth

$89 billion

2.3%

24% 

22%

Data sources: Yahoo! Finance and Texas Instruments' investor relations website. Table by author.

Paying dividends since 1962, Texas Instruments has a rich dividend history. Even more, the company's dividend has been increasing particularly rapidly in the last few years. Announced last month, Texas Instruments just increased its dividend by 24%. This extended the company's trend of high double-digit dividend growth rates in recent years; the semiconductor company has increased its dividend at an average compound rate of 22% over the past three years.

Of course, there's no guarantee every year will bring such a sharp dividend increase. But Texas Instruments' payout ratio of 47% (relatively low for a company with a 2.3% dividend yield and such strong dividend growth), along with its recent strong earnings growth (second-quarter EPS was up 30% year over year), make a strong case for more dividend growth ahead.

Home Depot

Market Capitalization

Dividend Yield

Most Recent Dividend Increase

3-Year Average Annual Dividend Growth

$195 billion

2.3%

29% 

24%

Data sources: Yahoo! Finance and Home Depot's investor relations website. Table by author.

Thanks to strong revenue, earnings per share, and comparable-store sales growth in 2016, Home Depot was able to serve investors an impressive 29% increase in its dividend earlier this year. This brought the company's 3-year average annual dividend growth to 24%.

Looking ahead, Home Depot looks poised for more meaningful growth, supported by management's recent commitment to paying out a larger portion of its earnings, targeting a 55% payout ratio instead of 50%. Not only is Home Depot's payout ratio today just 45%, but earnings have continued to rise rapidly. EPS in Home Depot's second quarter was up 14% year over year.

Vail Resorts

Market Capitalization

Dividend Yield

Most Recent Dividend Increase

3-Year Average Annual Dividend Growth

$8.9 billion

1.9%

30%

37%

Data sources: Morningstar and Vail Resorts' investor relations website. Table by author.

Vail has seen the strongest dividend growth of these three stocks. Vail announced a 30% hike to its dividend in March, bringing its 3-year average annual dividend growth to a whopping 37%. The higher dividend was achievable thanks to strong earnings growth recently. EPS in Vail's fiscal 2016 (ending July 31, 2016) was up 31% year over year. And EPS in Vail's fiscal 2017 (ending July 31, 2017), was up 30% year over year.

Like Texas Instruments and Home Depot, Vail looks poised for more dividend growth in the years ahead. In the company's just-released fourth-quarter results for fiscal 2017, Vail said its season pass sales through Sept. 24 for the 2017/2018 North American ski season were up 17% in units and 23% in dollars compared to the comparable year-ago period.

Roll of 100 dollar bills with a sign reading, "dividends."

Image source: Getty Images.

All three of these dividend stocks look enticing -- Texas Instruments, Home Depot, and Vail Resorts. With meaningful dividends, strong dividend growth, and likely more meaningful dividend growth ahead, dividend stocks don't get much better than this.

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Stocks Mentioned

Texas Instruments Incorporated Stock Quote
Texas Instruments Incorporated
TXN
$153.65 (0.57%) $0.87
The Home Depot, Inc. Stock Quote
The Home Depot, Inc.
HD
$274.27 (0.15%) $0.40
Vail Resorts, Inc. Stock Quote
Vail Resorts, Inc.
MTN
$218.05 (-2.45%) $-5.47

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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