When looking for a stock that provides a dividend income, be sure to check a company's free cash flow to gauge whether they can continue to fund their dividend payment.
Below we report 10 dividend stocks that have had high dividend growth over the past 10 years, as well as an increase in the current year's dividend estimate.
Furthermore, all of the names have positive operating cash flows and significant assets vs. current liabilities. Market caps over $150M.
Lastly, all the names are rallying above their 20, 50, and 200-day moving averages (MA).
Don't fully understand these terms? Have no fear! Everyone starts from the beginning. Let's take a look at what each of these metrics mean and why they are important.
Dividends/Share: Dividends are a payment made by a company to its shareholders. The money is a portion of the company's profits. Cash dividends are paid as a % of the share value. That percentage is called the "dividend yield." In this article, all stock dividends per share have been increasing with the five-year growth rate higher than the 10-year, and the three-year growth rate higher than the five-year rate.
Assets vs. Liabilities: In accounting terms, assets are anything owned by the company that generates income and is of value. This includes cash and inventory. Liabilities are the opposite -- the total of all debts, loans, mortgages, etc. It is an obligation to transfer something of value away from the company. All of the stocks on our list have assets that outweigh their liabilities.
Rallying: When a stock is rallying, it means it is performing above its market average for a given time period. It is presented as a % of performance relative to the average. When a stock is performing above its 20-day moving average (MA) as well as its 50 and 200 day market averages, it signals bullish momentum. All the stocks in this list are rallying above their 20, 50, and 200-day MA.
Payout Ratio: It is the amount of earnings paid out to shareholders represented as a percentage. It is calculated as the dividends per share / earnings per share. A low payout indicates a company is keeping its earnings, while a high payout ratio indicates the company uses its earnings for dividend purposes. This ratio also gives an investor an idea of how well the company's earnings can support its dividend payments (generally, the higher, the better).
Operating Cash Flow/Revenue: Free operating cash flow (FOCF) is the total operating cash flow minus all operating expenditures, such as wages, repairs, and depreciation. Strong free cash flow signals a company's ability to pay debt, dividends, and invest in their business growth. For this list, all stocks have a positive operating cash flow/revenue.
Data sorted by market cap. (Click here to access free, interactive tools to analyze these ideas.)
1. Novo Nordisk
2. Abbott Laboratories
3. Union Pacific
4. Lockheed Martin
6. Ross Stores
8. Hormel Foods
9. Church & Dwight
10. Tupperware Brands
Interactive Chart: Press Play to compare changes in analyst ratings over the last two years for the stocks mentioned above. Analyst ratings sourced from Zacks Investment Research.
Kapitall's Becca Lipman does not own any of the shares mentioned above.
The Motley Fool owns shares of Lockheed Martin, Abbott Laboratories, and Tupperware Brands. Motley Fool newsletter services have recommended buying shares of Abbott Laboratories. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.