3 Dividend Stocks With Payouts That Jumped Over 10% This Year

If you invest in a dividend stock that increases its payout by 10% each year, your dividend income from that investment would double within eight years. But just because a company has made a large rate hike once doesn't mean it'll do it every year.

Let's look at three stocks that had double-digit percentage increases to their payouts this year and assess the likelihood of whether you can expect similar levels of increases from them in the future. The dividend stocks in question are Humana (HUM 1.48%), Winnebago Industries (WGO 1.91%), and Target (TGT 0.69%). 

1. Humana

Humana is a top health insurance company. Excelling in this type of business helps make this stock a relatively stable, low-volatility investment to hold. It's also a trusted government contractor, with more than 80% of the company's premium and service revenue coming from its Medicare products.

The stock has the added benefit of offering investors a growing yield as well. In February, the company declared a per-share dividend of $0.7875, which represented a 12.5% increase from the previous dividend of $0.70.Over the span of five years, the company has now nearly doubled its dividend. 

At 0.6%, Humana still pays a comparatively low yield (the S&P 500 average is 1.7%), but that could improve over time. Not only has Humana consistently posted a profit over the years, but with a payout ratio of only 14%, the company still has lots of room to allocate more of its earnings toward dividend payouts. For 2022, the company forecast that its adjusted earnings per share will come in at around $25, which would be an increase of 21% from the previous year.

Shares of Humana are up 14% this year as it has been defying the bear market and proving to be a safe place to invest in. And with its low payout ratio and continued growth, it can also be a great option for long-term investors as it's possible that investors will see more generous rate hikes in the future.

2. Winnebago

Winnebago is a top name in motorhomes. The company is coming off a strong year amid reopenings in the economy as people have been traveling and vacationing again. Sales for the company's fiscal year ending Aug. 27 topped $5 billion and was a record high, rising 37% from the previous year. Net income of $390.6 million jumped 39%.

As it was experiencing a strong year, the company announced in August that its Board of Directors approved a mammoth 50% increase to the dividend, plus $350 million in new share buybacks. What's even more impressive -- this is the second straight year the company has made such a large rate increase. Last year, it boosted its quarterly per-share dividend from $0.12 to $0.18.

The quarterly dividend of $0.27 has now more than doubled from the $0.12 Winnebago was paying its shareholders less than two years ago. At around 1.9%, the stock provides investors with an above-average yield. And its payout ratio, remarkably, remains incredibly low at just 5%. Even if there's a slowdown in the economy next year, Winnebago could be in a strong position to make another big rate hike -- however, I wouldn't expect one as generous as 50% again. But more increases are certainly in the cards for this dividend stock. 

3. Target

In June, big-box retailer Target announced it was increasing its dividend for the 51st year in row. And at 20%, the rate increase would be an incredibly generous one for the Dividend King. 

Given the company's impressive track record for increasing dividends, I expect that Target will continue to boost its dividend next year and beyond. But a 20% increase seems incredibly unlikely given that the business is struggling of late as high inventory levels and rising costs put pressure on its margins. But at around 50%, Target's payout ratio is still relatively low.

While the company is confident that better days may be ahead, I wouldn't be surprised to see the retailer continue to struggle into next year; its margins could face more pressure as it may need to offer more aggressive product discounts to help move merchandise.

At 2.9%, Target offers the highest yield on this list. But with the stock near its 52-week low and potentially more pain ahead amid a struggling economy, the stock could become an even cheaper buy in the not-too-distant future.