7 Dividend Growth Stocks to Buy Now
A payout that increases.
The appeal of dividend investing is clear. Instead of banking on a stock that sees impressive short-term improvement in its profits or sales based on a passing trend, investors in dividend stocks can rely on regular payouts from the company each quarter. While getting a guaranteed stream of income via quarterly payouts is good, what's even better is to invest in a company that pays you more and more with each passing year. That's the power of dividend growth. Not only are you getting a stable return on your initial investment, but your payouts continue to increase. Here are seven dividend growth plays to consider.
Procter & Gamble Co. (NYSE: PG)
No dividend list would be complete without consumer products king Procter & Gamble. P&G stock yields about 3 percent at present, and has increased its payouts for a simply amazing 60 consecutive years. With a wide product portfolio that includes Pampers diapers, Tide laundry detergent, Charmin toilet paper and a host of other big brands, you can be sure this stock will have stable revenue (and reliable dividends) for many years to come. And with payouts at just two-thirds of earnings, that growth has a good chance of continuing as the company prospers.
Lowe's Cos. (LOW)
Retail is a rough business these days, and many dividend stocks in the sector are in danger of cutting payouts -- not raising them. But home improvement retail is one bright subgroup within the broader industry that continues to do well thanks to a strong housing market and the dominance of just a few names. Lowe's is one of those companies, and as it has seen strong financial performance lately, it has also seen strong dividend growth. LOW was paying just 8.5 cents quarterly at the beginning of 2009 amid the Great Recession; however, it now pays 41 cents quarterly after a dividend boost this summer -- with more than 50 consecutive years of increases.
Cisco Systems (CSCO)
When investors look for reliable dividend stocks, often they overlook the tech sector. That's a big mistake, as evidenced by Cisco. Not only does the IT giant currently yield 3.8 percent, but it has steadily increased quarterly dividend payouts since it began paying a dividend in 2011. Thanks to another increase just a few months ago, payouts have more than quadrupled in six years from 6 cents to 29 cents in quarterly dividends. And because that payout is less than half of profits, CSCO stock has room to grow its dividend even more in the years ahead.
Starbucks Corp. (SBUX)
Coffee queen Starbucks is another example of a recent dividend payer that has done a great job of committing increasingly more money to shareholder payback. It debuted a dividend of 5 cents in 2010, and in seven short years the payout is already five times that at 25 cents, and ripe for yet another bump soon. While the headline yield of the dividend isn't tremendous at just 1.9 percent, the company also has married strong dividend growth with strong long-term share performance. SBUX is up 125 percent in the last five years versus just 70 percent or so for the Standard & Poor's 500 index.
Hormel Foods Corp. (HRL)
Meats mega brand Hormel is as stable a stock as they come. Its consumer staples focus provides a steady revenue stream, and more than 50 straight years of dividend increases show its income power is reliable, too. But don't think this is one of those stocks increasing payouts modestly; adjusted for two 2-for-1 splits, payouts have increased more than 350 percent in the last 10 years. Hormel continues to grow and dominate the processed meat space, as evidenced by its 2015 acquisition of organic foods giant Applegate and its more recent buyout bid for food service company Fontanini Italian Meats & Sausages. That will help ensure continued success -- and dividends.
CVS Health Corp. (CVS)
While prescription drug retail and pharmacy benefits management aren't high margin businesses, they are a lucrative and steadily growing segment of the economy. That means as one of the few big guys in the space, CVS has a main line into reliable revenue to feed strong dividends. As the space has consolidated over the last decade, CVS has taken its quarterly payouts from just 6 cents a share in 2008 to 50 cents a share currently -- a whopping 733 percent in dividend growth. What's more, payouts are still roughly a third of profits so there is a lot of potential for those dividends to increase even more.
American States Water Co. (AWR)
When investors think about reliable and stable businesses, utilities are often the go-to choice. However, while there are plenty of strong energy utilities out there worth buying, it's easy to overlook the strength of a company like American States Water, which deals in water and sewer infrastructure. As water issues increasingly become a concern amid drought and shortages in the American West, you can be sure AWR is going to be even more important in the years ahead. And it has increased dividends annually for 62 years -- the longest streak of any publicly traded company.
Jeff Reeves is currently executive editor of InvestorPlace.com. He is a stock analyst and financial commentator with almost two decades of newsroom and markets experience, contributing to The Wall Street Journal network, USA Today, CNBC, TheStreet.com, Fox Business Channel and US News. Follow him on Twitter @JeffReevesIP.
