Finding good dividend stocks among the thousands of publicly listed dividend-paying companies can get so overwhelming that income investors often pick the easy route and buy popular stocks.
In doing so, investors often miss some great dividend stocks with impeccable track records and solid dividend growth potential. Here are three such little-known but amazing dividend stocks that may have flown under your radar.
Look beyond the yield
If you look up RPM International's (RPM -0.21%) website, one line stands out: "Our brands pay dividends." The company clearly prides itself on its dividends, and rightly so. RPM International has increased dividends every year since 1973. The company has come a long way since, growing its revenue from only around $25 million back then to $5.5 billion in 2020.
Image source: Getty Images.
That's really impressive growth for a company operating in a boring industry like specialty chemicals. Part of the credit goes to RPM's aggressive acquisitive growth strategy -- it made 70 acquisitions in just the past decade. In doing so, RPM grew its portfolio of specialty coatings, sealants, and building materials manifold, and now owns more than a hundred brands, including well-known global names like Rust-Oleum, Zinsser, and DAP.
RPM has kicked off fiscal 2021 on a solid note. In early January, it delivered record sales, earnings, and cash from operations for the second quarter. Meanwhile, RPM's cost-cutting efforts could save it $290 million this fiscal year. Importantly, RPM's cash flows are now at record highs, so another dividend hike is almost assured. RPM's small yield of 1.9% is perhaps why income investors often overlook the stock, but its dividend growth makes up when it comes to shareholder returns -- the stock's total returns in the past decade was 360% -- and that's exactly what makes RPM an amazing dividend stock.
RPM Dividend data by YCharts
This multibagger stock is about to announce a dividend increase
A 1.7% yield surely wouldn't excite you, but what if I tell you the stock is a proven multibagger and could multiply your wealth in the years to come? Check out the returns you could've made had you invested in American Water Works (AWK -0.49%) shares 10 years ago and reinvested the dividends it paid all along:
That's the power of owning a resilient business and allowing compounding to work its magic. American Water has increased dividends every year since it went public in 2008, thanks to a regulated water business that serves 15 million customers today.
The best part is the company's commitment to dividend growth. After increasing dividend by 10% in 2020, American Water aims to grow annual dividend at the higher end of 7% to 10% through 2024 as it expects billions of dollars worth of spending on infrastructure to drive earnings growth. I bet it will achieve its targets, which means I'm pretty sure this world-class dividend stock -- also among the best in the utility sector -- will generate some big returns for investors in the years to come.
A blistering dividend growth stock
Brookfield Infrastructure Partners (BIP -1.88%) is turning out to be an incredible dividend stock with blistering growth prospects. The stock has shot up nearly 700% since going public in 2008, with dividends accounting for nearly half of those jaw-dropping returns.
How has Brookfield Infrastructure pulled that streak off? Several factors are at play. The company, for instance, generates most of its cash flows from regulated or long-term contracted assets in sectors like utilities, transportation, energy, and data. Also, it regularly sizes up assets to sell mature ones and reinvest proceeds into more lucrative projects. Brookfield's track record of turning assets into cash-cow machines is incredible. For example, it is selling Enwave -- a business it acquired in 2012 for only 480 million Canadian dollars -- for a whopping $4.1 billion. Lately, Brookfield has been eyeing growth markets like India and has made big investments in upcoming technologies like 5G.
Operating a largely regulated portfolio while investing in growth opportunities has worked incredibly well in Brookfield's favor, and should continue doing so. In fact, management is so confident about its business that it's targeting 5% to 9% growth in annual dividends, hoping to generate shareholder returns of 12% to 15% in the long run. Add a dividend yield of 3.8% to that, and you could proudly say you own a winning dividend stock in Brookfield Infrastructure.
The key to earning good dividends
By now, it's evident that dividend yield isn't everything. You can build great wealth if you can scratch the surface and find stocks that are as serious about paying out regular, rising dividends as they are about growing their businesses.
