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 25% over the past year:
|Company||1-Year Dividend Growth Rate|
|Amgen, Inc. (NASDAQ:AMGN)||29.7%|
|Corning Incorporated (NYSE:GLW)||29.1%|
|Coach, Inc. (NYSE:COH)||26.9%|
|Cummins Inc. (NYSE:CMI)||25%|
|The Walt Disney Company (NYSE:DIS)||25%|
Amgen, Inc. (NASDAQ:AMGN) is a biotechnology company that discovers, develops, manufactures and markets human therapeutics based on advances in cellular and molecular biology. Major products include Neulasta and Neupogen, used to stimulate the production of white blood cells; Enbrel, an inhibitor of tumor necrosis factor that plays a role in the body’s response to inflammatory diseases; and Aranesp and Epogen, which stimulate the production of red blood cells. Amgen currently has a four star ranking on CAPS and offers investors a 1.7% yield.
Corning Incorporated (NYSE:GLW) produces and sells specialty glasses, ceramics, and related materials worldwide. Its products are used in everything from flat-screen TVs to optical fiber to biosensors for drug research. And its popular Gorilla Glass technology is used in smartphones, tablets, and touch-enabled laptops. Corning currently sports a five star rating in CAPS and is yielding 2.7%.