Bigger isn't always better when it comes to dividend. Investors often happily find a company that pays a huge dividend but are soon disappointed when it's cut. Instead of focusing on yield alone, find a company with the ability to not only back its dividend, but also boost it. Here are three overlooked dividend stocks to consider in 2014.
CSX's (NASDAQ:CSX) dividend yield recently hit 2.2%. The railroad operator raised its dividend 6% this year and has doubled it in the past five years. Better yet, CSX's low 31% payout ratio signals that the company has plenty of room to continue to grow its dividend. CSX is one of the largest railroads in the U.S. Even though utility coal demand remains sluggish, export coal continues to deliver strong growth for U.S. railroads. CSX has greatly benefited from this trend and has also managed to demonstrate strong pricing power. The company's renewed focus on efficiency will likely propel future earnings growth, allowing CSX the flexibility to increase its dividend.
Qualcomm (NASDAQ:QCOM) pays a modest 1.9% dividend yield, but the real power in its dividend is its growth story. The tech company recently raised it by more than 40% and has nearly doubled it during the past four years. Better yet, Qualcomm's low payout ratio indicates the company has tons of room to further grow its dividend. Qualcomm develops and patents new technologies and then licenses the rights to use them. For example, networks being upgraded to fourth-generation (a.k.a. 4G) are based on a technology developed by Qualcomm. By holding the patents, Qualcomm collects royalties from the smartphone and tablet makers that use it. Also, as Android-based devices -- commonly run on Qualcomm's Snapdragon chip -- continue to snatch market share, Qualcomm will likely benefit.
While Disney (NYSE:DIS) pays a mere 1.2% dividend yield, its payout ratio is a healthy 22%. The company increased its dividend 15% this year and has nearly doubled its dividend in the past three years. Mickey's massive empire, which includes branded merchandise, theme parks, movies, and television, boasts a diversified stream of revenue. Disney's sometimes overlooked cable networks account for almost half of company revenue and two-thirds of operating profit. And the company's Lucasfilm, Marvel, and Pixar acquisitions should create billion-dollar movie franchises for many years to come.
By ignoring companies that pay lower yields, you may be missing out on the best dividend growth stocks of the coming decade.
Fool contributor Nicole Seghetti has no position in any stocks mentioned. Follow her on Twitter @NicoleSeghetti. The Motley Fool recommends Walt Disney. The Motley Fool owns shares of CSX, Qualcomm, and Walt Disney. 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.