Dividend investors would be wise to focus not just on a stock's current yield but also on the long-term growth potential of its dividends. That's because strong businesses that consistently raise their dividend payouts reward shareholders with a steadily rising income stream that essentially equates to a raise every year. And, well, who doesn't like a raise?

But there are other reasons to value dividend growth so highly, and they're well supported by research. For instance, a study by C. Thomas Howard published in Advisor Perspectives found that for every percentage point a stock's yield rises, its annual return increases by 0.22 percentage points if it's a large cap, 0.25 if it's a mid cap, and 0.46 if it's a small cap. Even better, Howard found that dividend-growing stocks outperformed dividend cutters by 10 percentage points per year from 1973 to 2010 and beat both flat- and no-dividend stocks. And the icing on the cake is that Howard showed that this outperformance came with a third less volatility. Higher returns, less volatility-induced stress, and a steadily growing income stream -- what's not to love?

With that in mind, here are five stocks that have grown their dividends by more than 30% over the last year:


1-Year Dividend Growth Rate

Baxter International (BAX -1.02%)


W&T Offshore (WTI -3.54%)


Ashland (ASH -1.57%)


Packaging Corp. of America (PKG -0.58%)


Innophos Holdings (IPHS)


Source: S&P Capital IQ.

Baxter International is a global diversified health-care company that develops, manufactures, and markets medical devices, pharmaceuticals, and biotechnology products that save and sustain the lives of people with hemophilia, immune disorders, infectious diseases, kidney disease, trauma, and other chronic and acute medical conditions. Baxter currently has a top five-star ranking on CAPS and offers investors a 2.7% yield.

W&T Offshore is an independent oil and natural gas exploration and acquisition company, with operations offshore in the Gulf of Mexico and onshore in the Permian Basin of West Texas and in East Texas. W&T Offshore sports a four-star rating in CAPS and is yielding 2.1%.

Ashland provides specialty chemicals and technologies to help customers create new and improved products in a wide variety of markets and applications, including architectural coatings, automotive, construction, energy, food and beverage, personal care, pharmaceutical, tissue and towel, and water treatment. Fools have given Ashland a five-star rating in CAPS and its stock is yielding 1.5%.

Packaging Corp. of America manufactures containerboard and corrugated packaging products for industrial and consumer markets in the United States. Investors are excited about PCA's recently announced acquisition of rival packaging and paper products company Boise, and CAPS participants have awarded Packaging Corp. with a five-star rating. Its shares are paying out a 2.9% dividend.

Innophos is a leading producer of specialty grade phosphate products for the food, beverage, dietary supplements, pharmaceutical, oral care, and industrial markets. This Fool favorite has a top five-star CAPS rating and offers investors a growing 2.8% dividend.

The Foolish bottom line
Had you invested in these companies a year ago, you would have enjoyed total dividend increases ranging from 34% to nearly 40%. That level of growth would provide a substantial boost to just about any investor's dividend income. But more important to investors today is to identify the companies that will grow their dividends substantially in the years ahead. If you're interested in hearing about some excellent companies that are likely to boost their dividends from this point forward, I'd like to offer you a brand-new free report from Motley Fool expert analysts called "Secure Your Future With 9 Rock-Solid Dividend Stocks." Today, I invite you to download it at no cost to you. To discover the identities of these companies before the rest of the market catches on, you can access this valuable free report by simply clicking here now.