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 30% over the past year.
|Company||1-Year Dividend Growth Rate|
|National-Oilwell Varco, Inc. (NYSE:NOV)||36.2%|
|Texas Instruments Incorporated (NASDAQ:TXN)||35.9%|
|CVS Caremark Corporation (NYSE:CVS)||34.8%|
|The Western Union Company (NYSE:WU)||31.9%|
|UnitedHealth Group Inc. (NYSE:UNH)||31.1%|
National-Oilwell Varco, Inc. (NYSE:NOV) is a global titan in the oil and gas services industry. It provides many types of equipment and components used in oil and gas drilling and production operations, from complex deepwater drilling rigs to small spare parts. Workers in its industry say there’s “No Other Vendor,” and CAPS participants have awarded National Oilwell Varco with the highest five-star rating. Its stock is currently yielding a growing 1.4%.
Texas Instruments Incorporated (NASDAQ:TXN) designs and manufactures semiconductors. Its diversified product lineup includes data converters, digital signal processors, microcontrollers, applications processors, and calculators, among many other items. Texas Instruments currently has a four-star ranking on CAPS and offers investors a 2.9% yield.
CVS Caremark Corporation (NYSE:CVS) operates more than 7,000 drugstores across the United States. It also offers pharmacy benefit management services to employers, unions, government groups, and other sponsors of health benefit plans. Fools have given CVS Caremark a four-star rating in CAPS, and its stock is yielding 1.5%.
The Western Union Company (NYSE:WU) offers money movement and payment services, providing people and businesses with fast, reliable, and convenient ways to send money around the world. Western Union currently sports a four-star rating in CAPS and is yielding 2.7%.
Health-insurance giant UnitedHealth Group Inc. (NYSE:UNH) provides consumer-oriented health-benefit plans and services through a network of 780,000 physicians and 5,900 hospitals. UnitedHealth Group has a four-star CAPS rating and offers investors a fast-growing 1.6% dividend.
The article 5 Stocks Growing Their Dividends by 30% Per Year originally appeared on Fool.com.
Joe Tenebruso manages a Real-Money Portfolio for The Motley Fool and is an analyst on The Fool’s Stock Advisor and Supernova premium service teams. You can connect with him on Twitter: @Tier1Investor. Joe has no position in any stocks mentioned. The Motley Fool recommends National Oilwell Varco, UnitedHealth Group, and Western Union and owns shares of National Oilwell Varco.
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