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 significantly above the rate of inflation in the last year:
| Company | 1-Year Dividend Growth Rate |
|---|---|
| General Mills, Inc. (NYSE:GIS) | 8.2% |
| Intel Corporation (NASDAQ:INTC) | 7.1% |
| Enterprise Products Partners L.P. (NYSE:EPD) | 6.6% |
| Flowers Foods, Inc. (NYSE:FLO) | 6.3% |
| Activision Blizzard, Inc. (NASDAQ:ATVI) | 5.6% |
Source: S&P Capital IQ.
General Mills, Inc. (NYSE:GIS)’ valuable collection of brands includes popular breakfast cereals (Cheerios, Chex, and Wheaties), Betty Crocker desert mixes, Green Giant vegetables, and Yoplait yogurt, along with a host of other valuable properties. This consumer-goods titan currently sports a four-star rating in CAPS and is yielding 3.1%.
Intel Corporation (NASDAQ:INTC) designs, manufactures, and sells integrated digital technology platforms worldwide. Its microprocessors and chipsets power millions of PCs and servers around the world. Intel Corporation (NASDAQ:INTC) is also attempting to establish a beachhead in the massive smartphone and tablet markets, which could drive revenue growth for the chip giant in the years ahead. Fools have given Intel a four-star rating in CAPS, and its stock is yielding a sizable 4%.
Enterprise Products Partners L.P. (NYSE:EPD) is a midstream energy company providing a range of services to producers and consumers of natural gas, natural gas liquids, crude oil, and certain petrochemicals. Its pipelines help to provide the needed infrastructure to support growing energy production in the U.S., and its stock offers investors a hefty 4.6% dividend. CAPS participants no doubt appreciate all of this and have awarded Enterprise Products Partners L.P. (NYSE:EPD) with the highest five-star rating.
Activision Blizzard, Inc. (NASDAQ:ATVI) is a leading publisher of video games, including valuable franchises such as World of Warcraft, Call of Duty, StarCraft, and Diablo. This Fool favorite has a four-star ranking on CAPS, and its strong free cash flow generation has allowed Activision Blizzard, Inc. (NASDAQ:ATVI) to return cash to shareholders in the form of share buybacks and rising dividend payouts, with shares currently yielding 1.1%.
The article 5 Rock-Solid Stocks Growing Their Dividends Well Above Inflation originally appeared on Fool.com is written by Joe Tenebruso.
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 Activision Blizzard, Enterprise Products Partners, Flowers Foods, and Intel and owns shares of Activision Blizzard and Intel.
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