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 15% or more over the past year:
| Company | 1-Year Dividend Growth Rate |
|---|---|
| Yum! Brands, Inc. (NYSE:YUM) | 17.5% |
| Ross Stores, Inc. (NASDAQ:ROST) | 17% |
| Darden Restaurants, Inc. (NYSE:DRI) | 16.3% |
| B&G Foods, Inc. (NYSE:BGS) | 16.3% |
| Apache Corporation (NYSE:APA) | 15.6% |
Source: S&P Capital IQ.
Yum! Brands, Inc. (NYSE:YUM) is the company behind quick-service restaurants such as KFC, Pizza Hut, and Taco Bell. While the company is based in the U.S., it’s very much a global operation, with 39,000 restaurants spread across 125 countries and territories. Yum! Brands, Inc. (NYSE:YUM) currently has a four-star ranking on CAPS and offers investors a 1.8% yield.
Ross Stores, Inc. (NASDAQ:ROST) operates two chains of off-price retail apparel and home accessories stores, under the Ross Stores, Inc. (NASDAQ:ROST) Dress for Less and dd’s DISCOUNTS brand names in the United States. They target value-conscious women and men between 18 and 54, primarily from middle-income households. Ross Stores, Inc. (NASDAQ:ROST) currently sports a four-star rating in CAPS and is paying a growing 1% dividend.
Darden Restaurants, Inc. (NYSE:DRI) owns and operates full-service restaurants in the United States and Canada, including Red Lobster, Olive Garden, LongHorn Steakhouse, The Capital Grille, Bahama Breeze, Seasons 52, Eddie V’s Prime Seafood, and Wildfish Seafood Grille. Darden Restaurants, Inc. (NYSE:DRI) currently has only a two-star rating in CAPS, but it offers investors a tasty 4.3% yield.
