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 15% over the last year:
|Company||1-Year Dividend Growth Rate|
|Occidental Petroleum Corporation (NYSE:OXY)||18%|
|Kinder Morgan Inc (NYSE:KMI)||18%|
|Sherwin-Williams Company (NYSE:SHW)||17.9%|
|Freeport-McMoRan Copper & Gold Inc. (NYSE:FCX)||17.6%|
|Xerox Corporation (NYSE:XRX)||17.6%|
Occidental Petroleum Corporation (NYSE:OXY) is an international oil and gas exploration and production company that specializes in applying advanced technology to access hard-to-recover reserves and boost production from mature oil and natural gas fields. That, in turn, has allowed Occidental Petroleum to boost its dividend — currently 2.9% — and earn a four-star ranking on CAPS.
Kinder Morgan Inc (NYSE:KMI) is the largest midstream energy company in North America, with approximately 80,000 miles of pipelines that transport natural gas, refined petroleum products, crude oil, carbon dioxide, and other products. Most of Kinder Morgan’s businesses are able to avoid commodity price risk by operating like giant toll roads that receive a fee for their transportation services. That consistent cash flow is then passed on to shareholders in the form of a 4.3% dividend, helping Kinder Morgan earn a top-tier five-star rating in CAPS.