Intel Corporation (INTC): The Beauty of Dividend Growth, And 4 Stocks to Prove it

Speaking of Intel Corporation (NASDAQ:INTC), even though the stock has yielded nearly 4.2% recently, the company’s dividend growth is more indicative of a low-yielding, high-growth stock. Intel Corporation (NASDAQ:INTC) has raised its dividend by 12% compounded annually over the past five years. The only reason a stock with this kind of dividend growth profile yields so much is that Intel Corporation (NASDAQ:INTC) shares have been punished severely over the past year, and now trade for a measly price-to-earnings ratio of just 10 times.

McDonald’s and Chevron have business models with nothing in common, yet the stocks share similar dividend profiles. Each stock pays slightly more than 3% and have raised their dividends every year for many years. McDonald’s and Chevron have increased their shareholder payouts by 15% and 9%, respectively, over the past five years.

One stock that gives investors the best of both worlds, namely high dividend growth in addition to a high yield far above 3%, is Altria Group Inc (NYSE:MO). The tobacco giant has a five-year compound annual dividend growth rate of 9%, and a huge current dividend yield in excess of 5%. This unbeatable combination is what made Altria the best-performing stock from 1925 to 2003, according to noted Wharton economist Jeremy Siegel.

It sure adds up

Plainly stated, the concept of yield on cost provides clarity into the true value of dividend growth over time. Investors may grasp the notion of the benefits of owning stocks that raise their dividends regularly, but showing it as a percentage really brings home the point. With time and patience, an investor can derive huge income from their stocks.  Keep in mind that if you’re willing to reinvest those quarterly dividends into more shares of these stocks, your yield on cost will rise even faster, and you’ll meet the target even quicker.

Investors who benefit the most from this concept are those with longer time horizons, who have more time to let their dividends compound. These stocks have demonstrated clear intentions of rewarding shareholders with rising dividends, proven by their extremely long track records of doing just that. If you’re an individual who still has a ways to go before retirement, these stocks can do wonders to secure your financial future.

The article The Beauty of Dividend Growth, And 4 Stocks to Prove it originally appeared on Fool.com and is written by Robert Ciura.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.