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 25% or more over the last year:
|Company||1-Year Dividend Growth Rate|
|Northstar Realty Finance Corp. (NYSE:NRF)||29.8%|
|U.S. Bancorp (NYSE:USB)||27.3%|
|Church & Dwight Co., Inc. (NYSE:CHD)||26.8%|
|The Kroger Co. (NYSE:KR)||25.6%|
|Monsanto Company (NYSE:MON)||25%|
Northstar Realty Finance Corp. (NYSE:NRF) is a real estate investment trust that operates as a commercial real estate investment and asset management company in the U.S. NorthStar focuses on originating, structuring, acquiring, and managing senior and subordinate debt investments secured primarily by commercial, multifamily, and health-care properties. NorthStar currently has a three-star ranking on CAPS and offers investors a sizable 9.2% yield.
U.S. Bancorp (NYSE:USB) is one of the largest bank holding companies in the country and it offers a diversified suite of financial services such as lending, depository, cash management, capital market, trust, and investment management services. US Bancorp currently sports a four-star rating in CAPS and is yielding 2.5%. Fools may also find it interesting that Berkshire Hathaway Inc. (NYSE:BRK.A) — led by legendary investor Warren Buffett — recently increased its investment in US Bancorp by more than 27%.
Church & Dwight Co., Inc. (NYSE:CHD) develops, manufactures, and markets a range of household, personal care, and specialty products under valuable brand names like Arm & Hammer, Orajel, and OxiClean. Fools have given Church & Dwight a four-star rating in CAPS and its stock is yielding 1.9%.