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.
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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%.
14. Intel Corporation (NASDAQ: INTC)
Intel is an international technology company most famous for its semi-conductor chips and microprocessors. It is the largest semi-conductor chip manufacturer worldwide and was ranked 48th in terms of revenue in the Fortune 500 list. Intel still manages to grow rapidly because of its ability to adapt with the dynamic industry of technology and bring about a shift from desktop-centric business and focusing more on applications of Artificial Intelligence. The company has a market value of $210.5 billion, dividend CAGR of 4.6% and a 2.6% dividend yield.
13. Northern Trust Corporation (NASDAQ: NTRS)
Northern Trust is a financial services company based in Illinois. It is one of the largest and oldest banking institutions in the United States. The company has gained a competitive advantage in the industry by incorporating the latest technology like Artificial Intelligence and Robotics to introduce advanced asset and risk management tools and make the process of wealth management extremely easy for its clients. Northern Trust Corp. has a dividend CAGR of 6.4% and a dividend yield of 2.1%.
12. TC Energy Corporation
TC Energy Corp. is one of the largest energy companies in all of North America. It is based in Calgary, Alberta and was founded in 1951. The company owns the largest natural gas distribution networks in North America. It is the leading power generator in Canada and has expansion projects in the pipeline that will extend its distribution networks in USA and Mexico. The company has managed to maintain a dividend growth streak for 18 years now and has achieved a dividend CAGR of 7.2% with a dividend yield of 5.3%.
11. Bristol Myers Squibb (NYSE: BMY)
Bristol Myers is an American pharmaceutical company founded in 1858 by Edward Robinson Squibb. The company has a focused growth strategy which is executed through expansions in terms of geography, markets and products which brings in organic growth and a push growth strategy that includes acquisitions. Bristol Myers has a dividend CAGR of about 8.8% and a dividend yield of 2.8%.
10. Cabot Corporation (NYSE: CBT)
Cabot is a US based organization which was founded in 1882 by Godfrey Lowell Cabot. The company offers a wide range of specialty chemicals and performance materials across many countries most recently focusing on Asian countries such as China. Cabot has successfully achieved a growth of 18% in earnings per share over the last three years which is why the company’s stock makes it to this list. Cabot has a five-year dividend CAGR of 9.7% and a dividend yield of 2.1%.
9. Steris Corporation (NYSE: STE)
Steris is an American organization headquartered in Ohio but legally registered in Dublin, Ireland. The organization has a wide range of product portfolio within the category of sterilization and infection protection. The organization mostly deals with the healthcare industry such as pharmaceuticals and hospitals. With the rising awareness about the risks posed by infections especially after the pandemic, Steris has become more relevant worldwide and has managed to generate an 8% growth in sales over the last decade. The company’s stock is one of the fastest growing with a 1.2% yield and 10.2% five-year dividend CAGR.
8. Group 1 Automotive (NYSE: GPI)
Group 1 Automotive is an international auto retailer founded in 1997. The corporation sells vehicles in various countries and also provides many other related services. Group 1 is a Fortune 500 company and is the 3rd largest dealership in the United States. The organization has opened up many new dealerships recently in USA and has also increased its dividend payout in the past years and now has a dividend yield of 1.6% which has helped its stock grow rapidly. The company has achieved a revenue growth of 12% and has a dividend CAGR of 11%.
7. Illinois Tool Works Inc. (NYSE: ITW)
Illinois Tool Works is an industrial manufacturing company which produces a wide range of products mostly related, but not limited to, construction and automotive. Being an old and well-established company, Illinois Tool Works has dedicated about 40% of its operating income to dividend payout. The company has had 56 consecutive dividend increases and has a dividend CAGR of 15.7% and a dividend yield of 3.1%.
6. Hormel Foods Corporation (NYSE: HRL)
Hormel Foods Corp. is an American company founded by George A. Hormel in 1891. The company operated in more than 80 countries and offers a wide range of packaged and refrigerated food products. Hormel is a food giant and is a market leader in quite a few food categories. The company’s unmatched dividend growth that climbed from 16.3% to 19.3% in the last decade is the reason why its stock is one of the fastest growing dividend stocks. Hormel has a dividend CAGR of 18.4% and dividend yield of 1.9%.
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Disclosure: No position. 15 fastest growing dividend stocks is originally published at Insider Monkey.