5 Stocks Growing Dividends By 30% And More

An increasing dividend combined with an attractive yield will produce a growing cash income stream and capital gains that are an unmatched tool for increasing your wealth. These five stocks are perfect starting points for investors looking to earn an accelerating income stream and market-beating returns.

For the majority of individual investors, it is a difficult if not impossible task to time the stock market. The combination of much bigger players in the market, a very short news cycle, and our own fears and greed make it near impossible to get the timing right to buy low and then sell high. Also, as someone who focuses on dividend stock analysis, I realize that you cannot earn dividends unless you actually own shares of stock. Because of these facts, I have recently been giving presentations on a new approach to total return investing through high dividend growth rate stocks.

The math of the strategy is straight forward. If a company increases its dividend, for the yield to remain the same the share price must increase by the same percentage as the dividend increase.

Here is a hypothetical example: If a stock that yields 4% has its dividend increased by 6%, to keep the yield level, the share price must increase by 6% and match the dividend growth rate. If you own the stock you get a total return of the 6% share price gain plus the 4% dividend yield, or an annual total return of 10%. Of course, the market is not this logical, so the share price will move up and down for a variety of short-term reasons. But, if you do look at the longer-term results from stocks that have steadily grown their dividends, you will find that the average annual total returns land close to the yield plus dividend growth rates. An example I like to use is Tanger Factory Outlet Centers Inc. (NYSE: SKT).

Here are the SKT dividend growth and yield numbers:

  • 10-year average annual dividend growth: 7.37%
  • 10-year average yield: 3.34%
  • Mathematical annual return: 10.71%
  • Actual annual compound return: 12.81%
  • Total 10-year return: 342%
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Disclosure: There are currently over twenty of these stocks to choose from in my  more

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