Fact: Dividends are hot right now.

Fact: In the period 1972-2010, S&P 500 companies that raised their dividend demolished the returns of companies that eliminated, reduced, didn't pay, or held steady on their dividend.

Fact: Top 5 lists are better than Top 4 lists.

With this established, I decided to research the companies with the highest 10-year compound annual growth rate in dividends per share. My only parameter was to look for companies trading on major U.S. exchanges. Here's what I found:

Company

10-Year Dividend CAGR

Current Yield

10-Year Return

Cracker Barrel Old Country Store (Nasdaq: CBRL)

66.5%

1.6%

208%

Waste Management (NYSE: WM)

61.9%

3.7%

64%

UnitedHealth Group (NYSE: UNH)

49.6%

1.4%

139%

Fastenal (Nasdaq: FAST)

45.0%

1.4%

361%

Maxim Integrated Products (Nasdaq: MXIM)

45.0%

3.5%

(55%)


Source: Capital IQ, a division of Standard & Poor's. Returns data are from Google Finance and don't include dividends.

If you guessed sleepy old restaurant chain Cracker Barrel would be our winner ... well, you're probably alone. (Although Cracker Barrel's breakfast is delicious.)

Notably, four of the five stocks surged past the market's return of negative 4%, which shouldn't be surprising given the confidence their management teams showed by kicking back cash to shareholders. Maxim Integrated Products, a semiconductor company, rode the tech-bubble wave of the late '90s and early 2000s; my starting point in researching this article (December 2000) makes its 10-year return rather ugly.

It's worth mentioning that three of these five dividend stocks had relatively small payout bases on which to grow. Thus, even after substantial dividend increases over the years, their current yields do not even top the S&P's (around 1.9%). (On a side note, read why my colleague Jeremy Phillips believes Waste Management is the most outstanding dividend stock he's seen.)

So ... why is this important? As I've written before, companies that raise their dividends consistently can be powerful. Companies hate to cut or eliminate a dividend. When a payout has been established to shareholders, it's a way of indicating that you're a financially stable concern producing enough cash to return some to investors. Plus, a reduced or eliminated dividend is usually greeted by Wall Street unceremoniously.

Also, as my colleague Todd Wenning has written:

As a 2003 study by Robert Arnott and Clifford Asness showed, there's a link between higher dividend payouts and higher earnings growth. Why? One reason is that when company management teams are forced to dole out a portion of earnings each year as dividends, they have to be more deliberate in choosing value-creating projects and have less chance to "empire-build" with shareholder cash.

Adding it up
The dividend growth rates in the above table are impressive. For current investors, though it's unlikely you'll see those same 45%-plus annualized rates, you'll want to keep an eye on these stocks to see if they continue to increase their dividend payments -- and possibly one day join the elite Dividend Aristocrats, companies that have raised payments for 25 consecutive years.

Interested in some other dividend ideas? Click here to check out the Fool's special dividend report, revealing 13 high-yielding opportunities our analysts and editors like. You can download it right now for free.

Fool.com managing editor Brian Richards loves dividends but does not own shares of any companies mentioned. UnitedHealth Group and Waste Management are Motley Fool Inside Value selections. UnitedHealth is a Stock Advisor recommendation. Waste Management is an Income Investor selection. Motley Fool Options has recommended a diagonal call position on UnitedHealth. Motley Fool Options has recommended a write covered straddle position on Waste Management. The Fool owns shares of UnitedHealth and has a disclosure policy.