One of the best facets of quality dividend stocks isn't their regular payout or even their dividend history, but rather their track record of dividend increases. Companies that regularly increase their dividends give investors a growing stream of income and confidence of a likelihood of more payout increases in the future.
But what companies are paying out meaningful, growing dividends that are likely to keep seeing growth in the coming years? Two stocks that fit these characteristics are Home Depot (HD -0.20%) and Wendy's (WEN -0.72%), both of which announced significant increases to their dividends in February.
Here's a look at each of these dividend stocks.
Check out the latest earnings call transcripts for Home Depot and Wendy's.
Alongside its fourth-quarter results on Feb. 26, Home Depot announced it was increasing its dividend by 32%. This is a significant acceleration over the company's 15.8% dividend increase last year. Indeed, it's even higher than the company's average annualized dividend growth of 25% over the last five years.
The company's new quarterly dividend is $1.36, up from $1.03 previously and amounting to $5.44 annually. This translates to a forward dividend yield of 3%.
The 32% dividend increase marks the company's 10th straight year of increases. The meaningful increase is "a testament to our commitment to create value for our shareholders and a demonstration of confidence in the business going forward," said Home Depot CEO Craig Menear in the company's fourth-quarter earnings release.
The company has plenty of room for further growth in its dividend. Over the trailing 12 months, just $4.6 billion of Home Depot's $10.1 billion in free cash flow was paid out in dividends.
Wendy's announced an 18% increase to its quarterly dividend on Feb. 13. This put the company's quarterly dividend at $0.10, up from 0.085 cents. On an annual basis, Wendy's new dividend comes out to $0.40, giving the stock a forward dividend yield of 2.3%.
"Returning cash to shareholders remains a key priority for us," said Wendy's CEO Todd Penegor in a press release when the company announced its higher dividend. "This is the seventh consecutive year that we have increased our dividend, which is a testament to the strong cash flow generation from our resilient and predictable business model."
This is a slight deceleration from a 21% increase last year, but it still represents a strong, double-digit percentage increase.
Like Home Depot, Wendy's has more room for dividend growth, as it paid out just $81 million of its $154 million in trailing-12-month free cash flow.