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|
|Goldman Sachs Group, Inc. (NYSE:GS)||29.8%|
|Novo Nordisk A/S (ADR) (NYSE:NVO) ||28.6%|
|Seaspan Corporation (NYSE:SSW)||28.3%|
|Williams-Sonoma, Inc. (NYSE:WSM)||27.7%|
|Golar LNG Limited (USA) (NASDAQ:GLNG)||27.3%|
Founded in 1869, Goldman Sachs Group, Inc. (NYSE:GS) is a leading global investment banking, securities, and investment management firm that provides a wide range of financial services to a diversified client base that includes corporations, financial institutions, governments, and high-net-worth individuals. Goldman Sachs Group, Inc. (NYSE:GS) currently has a three-star ranking on CAPS and offers investors a growing 1.2% yield.
Novo Nordisk A/S (ADR) (NYSE:NVO) is a global health-care company with 90 years of innovation and leadership in diabetes care. The company also has leading positions within haemophilia care, growth hormone therapy, and hormone replacement therapy. Novo Nordisk A/S (ADR) (NYSE:NVO) sports a four-star rating in CAPS and is yielding 1.4%.
Seaspan Corporation (NYSE:SSW) owns and operates a fleet of approximately 70 containerships chartered primarily under long-term fixed-rate time charters to major container liner companies. These long-term contracts produce steady cash flows that Seaspan Corporation (NYSE:SSW) passes on to investors in the form of a sizable 5.5% yield, helping the company earn a top five-star rating on CAPS.