Equity investors who are looking for income are often tempted by a particular stock’s dividend yield. We believe they’d be wiser to focus on a company’s expected dividend growth. That’s the best way to earn long-term total returns.
Look at the amazing results of McDonald’s Corporation (NYSE:MCD) over the past several decades, for example. The company has been able to deliver outstanding total returns by paying out higher and higher dividends each year over an extremely long time horizon. Ultimately, investors are willing to pay higher and higher prices for shares that offer a growing stream of dividends.
Given the importance of dividend growth for driving long-term, total returns, we’ve identified five remarkable companies that are projected to grow their dividends significantly over the next five years.
1. Coach, Inc. (NYSE:COH)
Coach, Inc. (NYSE:COH) designs, markets, and sells fashion handbags, apparel, and accessories.
Investing thesis: Coach will likely deliver increases in both its share price and its dividend payout over the next five years. That attractive combination could result in multibagger total returns for investors over the long term.
2. McDonald’s Corporation (NYSE:MCD)
McDonald’s Corporation (NYSE:MCD) is a global fast-food restaurant powerhouse.
Investing thesis: McDonald’s Corporation (NYSE:MCD) has increased its dividend each and every year since it first started paying one in 1976. And the iconic fast-food franchise shows no signs of slowing down its ever-growing dividend payouts. The end result for investors will be market-beating total returns in the future.
3. The Western Union Company (NYSE:WU)
Western Union is the global leader of money transfers and payment services.
Investing thesis: The Western Union Company (NYSE:WU)’s dividend will grow as the company’s earnings steadily rise, and the company increases the payout ratio over time.
4. Intel Corporation (NASDAQ:INTC)
Intel is the leading manufacturer of microprocessors.
Investing thesis: With a 4% dividend yield and the potential to increase its dividend 8%-12% per year, Intel Corporation (NASDAQ:INTC)’s total return should outperform the market, even during tough industry conditions.
5. Apple Inc. (NASDAQ:AAPL)
Apple Inc. (NASDAQ:AAPL) creates mobile communication and media devices, personal computers, and portable digital music players. It also sells software, services, peripherals, networking solutions, and third- party digital content and applications that support its devices.
Investing thesis: Apple Inc. (NASDAQ:AAPL) began paying a dividend again in 2012 — the first in 17 years! With an incredible lineup of existing products, a rock-solid balance sheet, and tremendous growth possibilities, Apple Inc. (NASDAQ:AAPL) offers one of the best risk-adjusted total return opportunities in the market over the next five years.
The article 5 Top Dividend Stocks for the Long Term originally appeared on Fool.com and is written by John Reeves and David Meier.
David Meier owns shares of Apple. John Reeves owns shares of Apple. The Motley Fool recommends Apple, Coach, Intel, McDonald’s, and Western Union. The Motley Fool owns shares of Apple, Coach, Intel, and McDonald’s.
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