In this article we are going to list the 15 fastest growing dividend stocks. Click to skip ahead and jump to the 5 fastest growing dividend stocks.
Dividend stocks are shares from companies who regularly distribute dividends amongst their shareholders. Companies who offer dividend stocks are mostly well-established organizations who have been in the business for a relatively long time and have a stable revenue stream. Dividends are a kind of bonus for the shareholders of the company with which they get a chance to have a share of the profits from the growth of the organization, above and beyond the increase in the price of the shares.
Dividends could be distributed in different intervals and in different forms varying from organization to organization. The two most common types of dividends are cash dividends and stock dividends. Cash dividends are just like cash bonuses which are simply cash payments made to shareholders in a particular set time interval. These cash payments depend on the number of stocks a shareholder has, for instance, if a company distributes a dividend of 50 cents per share then a shareholder will receive 50 cents for every share that he holds. Stock dividends are a little more complicated than that. In the case of stock dividends, no cash payment is made, instead, the number of shares an investor holds are increased. This increase is made in terms of percentage for instance, if a company announces a 10% stock dividend then a shareholder will receive 10% more shares of the amount he holds currently.
No matter how established and financially stable an organization is, there are always contingencies which are unforeseeable and sometimes unavoidable. Hence, dividends are never guaranteed to the shareholders by any organization and a company has all the right to delay or temporarily discontinue dividends if they deem necessary. There are also instances where an organization can pay dividends only selectively which means they do not have enough in profits to distribute to all the shareholders. In such a case the differentiation in the kinds of stocks, shareholders hold, helps decide who is paid dividends first. Shareholders holding preferred stocks, as the name suggests, are prioritized for dividend payments over those who hold common stocks.
Initially when companies start paying dividends their payout ratio is quite low as they want to gradually increase the dividend payments to make sure that they do not promise more than they can give in the long-term. It is always better to start from a lower, single digit payout ratio and then increase instead of starting from a higher one and then decreasing it because of any instability in business. Thus, growth rates are usually high for companies who have just started because they have more potential for growth then the more stable larger dividend paying stocks which are just maintaining their position in the stock market. However, the net stock growth is always higher for a company which has lesser fluctuations in sales volume and revenue and a more stable standing.
Many investors prefer dividend stocks because the risk is somewhat mitigated with a chance to earn some profit along the way even if the stock price eventually depreciates. With the rising instability in the economic conditions throughout the world and how the pandemic has brought about severe recessions, dividend stocks from companies who diligently pay dividends to their shareholders are gaining more popularity and investor confidence. Such shares are the safest bet for any investor for at least the next 5-10 years to come because investing in a non-dividend paying stock is riskier as the stock prices might depreciate owing to the poor economic conditions.
With the constant increase in risk aversion of investors the quality of shares and the kind of company is becoming a major factor in helping investors decide what to put their money on. This can also be seen in growth numbers as most stocks that are growing rapidly are stocks from companies who have not missed dividend payments in decades. Naturally, the pattern of dividend payments reflects how the company is performing and it affects the stock’s growth which in turn affects the organization’s future performance and the cycle continues.
Following is the list of the fastest-growing dividend stocks. The rankings and listings have been compiled from Kiplinger, The Fortune, Finbox and Forbes. So let’s take a look the companies where you are guaranteed a high dividend, starting with number 15:
15. Leggett and Platt Inc. (NYSE: LEG)
Leggett and Platt Inc. is a designer and manufacturer of various household and automotive products and components. The company has used a growth and expansion strategy and has grown exponentially by market penetration and mergers and acquisitions. Over the coming years the company expects to further boost its sales and earning per share. Currently, the company has a five–year dividend CAGR of 4.4% and a dividend yield of 3.5%.