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 0.94%), home improvement retailer Home Depot (HD -1.14%), and ski resort company Vail Resorts (MTN -1.08%). Here's how each company's dividend is growing by double digits, and why strong dividend growth is likely to continue.
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.
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.
