3 Stocks That Doubled Dividend Income in the Past 5 Years

If you buy and hold shares of dividend growth stocks, your dividend income is likely to rise over time. It's how much the company changes the dividend that tends to make all the difference for your portfolio.

If you had bought them in 2018, these three stocks -- Mastercard (MA 0.07%), Lowe's (LOW -0.04%), and UnitedHealth Group (UNH 0.30%) -- would have doubled your dividend income over the past five years. Here's a look at where the payouts for these three stocks stand today, whether they can repeat their past performance, and why they just might make great long-term investments for you.

1. Mastercard

Credit card payment processor Mastercard is an example of a business that performs well regardless of the economic situation. When times are tough, consumers tend to tap into their credit cards to buy what they need. And when things are going well, spending can still be on the rise due to a strong economy. The best part is that Mastercard manages to be incredibly profitable in its operations either way, with its net margins up around 45% last year.

Mastercard's dividend requires a very affordable payout ratio of less than 20%, which suggests there's plenty of room for the company to raise its dividend payments aggressively in the future. That's something it's already doing. Five years ago, it paid $0.25 per share in quarterly dividends. If you owned 100 shares of the company at the time (which would have cost you around $17,000), then your dividend income over the course of a full year would have totaled $100. Today, with the dividend now up to $0.57 per share per quarter, the annual dividend income you could expect to earn from the stock on that same investment would be $228.

Granted, that's not a huge amount given the stock's cost and Mastercard's yield remains relatively low at 0.6% (the S&P 500 average is 1.7%). But with the growth potential for the business and the massive room for bigger rate hikes in the future, this can be a top dividend stock to hold for decades.

2. Lowe's

Lowe's is a top name in home improvement. While people may be spending less on renovation projects, these are expenses that typically get delayed -- not avoided entirely. Despite a very mixed outlook for the economy and a possible recession coming, Lowe's still expects comparable sales in 2023 to be down by no more than 2%. And operating income will be close to 14% of revenue. These are good signs for investors because it means that even with the economic headwinds, things may not be so bad for the business.

Lowe's dividend creates a payout ratio of less than 40%, which is quite sustainable, especially if it's not expecting a big decline in earnings. Lowe's increased its quarterly dividend payment by 156% over the past five years, from $0.41 per share to $1.05. That means if you owned 100 shares of Lowe's five years ago (at a cost of about $8,500), your annual dividend income would have risen from $164 to $420. With a yield of 2.2%, new investors are getting a better yield with Lowe's than with Mastercard.

There can be a bit more volatility with Lowe's stock price due to the uncertainty in economic conditions, but this is another example of a solid dividend stock to own for the long haul.

3. UnitedHealth Group

Healthcare insurer UnitedHealth is another relatively resilient business to invest in. It is well-suited to meet the needs of the U.S.'s aging demographics and the ongoing need for quality healthcare. It has the potential to be a great investment to buy and hold.

UnitedHealth's profit margin is a bit more modest at around 6%, but for a business that generated $322 billion in sales last year, there's plenty in profit for the company to continue growing and pursuing acquisitions, and for use in paying its dividend. Its 1.4% yield is modest, but it has raised its payouts significantly.

From $0.75 per share in early 2018 to $1.65 today, UnitedHealth's quarterly dividend payment has risen by 120%. If you owned 100 shares of the stock five years ago (which would have been worth around $22,000 then), your annual dividend based on the previous rate would have been $300. Today, your dividend income would total $660 when combining the past four quarterly payments.

The company's 30% payout ratio suggests that investors can continue to expect more generous rate hikes in the future. When combined with the fantastic returns the stock has generated over the past decade, UnitedHealth may be one of the best income-generating investments for long-term investors to own.