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2 Top Under-the-Radar Dividend Stocks

By Daniel Sparks - May 28, 2021 at 10:45AM

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These stocks' rapidly growing dividends offer promising long-term prospects for income investors.

When looking for dividend stocks, many investors start their search with dividend yield, or dividends paid per share annually as a percentage of the stock price. The issue with this approach is that it can often miss some great companies that have small dividend yields today but are rapidly increasing the dividend amount paid.

Two examples of great dividend stocks that could go under the radar are financial technology company Intuit (INTU -0.47%) and pizza delivery king Domino's Pizza (DPZ 1.79%). Despite their sub-1% dividend yields, these cash-paying stocks should be considered for an income portfolio.

Here's a closer look at both.

A sketch of a bar chart with an arrow highlighting a growth trend.

Image source: Getty Images.

Intuit

Intuit, the maker of Turbotax and Quickbooks software (among other personal finance software products), has a dividend yield of just 0.5%. A dividend investor screening for yields of 2% or higher would miss this stock by a mile.

Yet a healthy underlying business and a long history of rapid dividend growth make Intuit very attractive as a dividend stock.

Since 2011, Intuit's quarterly dividend has increased nearly fourfold. And rapid growth in the payout continues. In 2020, Intuit's quarterly dividend rose 11%. Furthermore, over the past three years, the tech company's dividend has compounded at an average rate of 14.8%.

Importantly, Intuit's strong dividend growth should persist for years to come. Not only is the company paying out just 29% of its earnings in dividends, but its bottom line is growing rapidly. In its most recently reported quarter, Intuit saw GAAP and non-GAAP earnings per share climb by 29% and 35%, respectively, year over year.

Domino's Pizza

With a dividend yield of 0.9%, Domino's Pizza offers a better annualized cash payout for investors. But the payout is still low enough for some income investors to easily overlook the company as a dividend stock.

Domino's dividend is growing even faster than Intuit's, rising nearly fivefold between 2013 and 2021. The company's most recent dividend hike was 21%, and its dividend's annualized growth rate over the past three years has averaged out at 20%.

Like Intuit, Domino's has a low payout ratio of just 27%, leaving plenty of room for dividend hikes. Notably, the company's underlying business is healthy, with global retail sales rising nearly 17% year over year in the company's first quarter of 2021.

Both of these companies look poised to pay out a rapidly growing stream of dividend payments for years to come, making these dividend stocks better than they seem on the surface.

Daniel Sparks has no position in any of the stocks mentioned. His clients may own shares of the companies mentioned. The Motley Fool owns shares of and recommends Intuit. The Motley Fool recommends Domino's Pizza. The Motley Fool has a disclosure policy.

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Stocks Mentioned

Domino's Pizza, Inc. Stock Quote
Domino's Pizza, Inc.
DPZ
$394.89 (1.79%) $6.96
Intuit Inc. Stock Quote
Intuit Inc.
INTU
$466.76 (-0.47%) $-2.23

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