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 by more than 10% over the past year.
| Company | 1-Year Dividend Growth Rate |
|---|---|
| El Paso Pipeline Partners, L.P. (NYSE:EPB) | 19% |
| Marathon Petroleum Corp (NYSE:MPC) | 13.1% |
| Lorillard Inc. (NYSE:LO) | 11.6% |
| United Technologies Corporation (NYSE:UTX) | 11.5% |
| Eaton Corporation, PLC Ordinary Shares (NYSE:ETN) | 11.1% |
Source: S&P Capital IQ.
El Paso Pipeline Partners, L.P. (NYSE:EPB) owns and operates interstate natural gas transportation and terminaling facilities with approximately 13,000 miles of pipeline serving the Rocky Mountain, Midwest, Southeast, and Gulf Coast regions of the United States. El Paso Pipeline Partners, L.P. (NYSE:EPB) currently sports a five-star rating in CAPS and is yielding a hefty 6%.
Marathon Petroleum Corp (NYSE:MPC) refines, transports, and markets petroleum products. The company owns and operates seven refineries in the Gulf Coast and Midwest regions of the U.S., as well as a network of more than 5,000 Marathon Petroleum Corp (NYSE:MPC) and approximately 1,470 Speedway gas stations. CAPS participants have awarded it with a five-star rating, and the company is paying out a 2.3% dividend yield.
Lorillard Inc. (NYSE:LO) manufactures and sells cigarettes in the United States, under brands such as Newport, Kent, True, Maverick, and Old Gold. Lorillard Inc. (NYSE:LO)’s strong free cash flow generation allows the company to pay a sizable 5.2% dividend, helping the company earn a four-star ranking on CAPS.
United Technologies Corporation (NYSE:UTX) provides technology products and services to the building systems and aerospace industries worldwide. This diversified conglomerate owns Carrier heating and air conditioning, Otis elevators, Pratt & Whitney aircraft engines, Sikorsky helicopters, and more. Fools have given United Technologies Corporation (NYSE:UTX) a four-star rating in CAPS, and its stock is yielding 2.1%.
Eaton Corporation, PLC Ordinary Shares (NYSE:ETN) is a diversified power management company providing energy-efficient solutions that help its customers effectively manage electrical, hydraulic, and mechanical power. This Fool favorite has a top five-star CAPS rating and offers investors a growing 2.6% dividend.
The article 5 Stocks Growing Their Dividends by More Than 10% Per Year originally appeared on Fool.com and 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 El Paso Pipeline Partners.
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