There is a tendency for investors to perceive large-cap stocks as slow, lumbering giants that offer stodgy and uninspiring growth rates. However, in the case of a select few, that couldn’t be further from the truth. It’s possible for an investor to receive extremely high dividend growth without having to take excessive risk from their equity investments. Among such stocks are those presented here, which provide the stability of large-caps with dividend growth rates above 20% compounded annually over the past five years, and are derived from diverse industry groups.
Ring this retailer’s register
Walgreen Company (NYSE:WAG) operates drugstores across the United States and carries a market value of $40 billion. It provides consumer goods and services, pharmacy, and health and wellness services. Walgreen has been on quite a tear, as the stock has climbed more than 25% since the beginning of 2012. Last year, Walgreen Company (NYSE:WAG) provided investors with the company’s 37th consecutive annual dividend increase.
Furthermore, the dividend increase marked the largest increase in the company’s history. Walgreen has a great reputation for creating long-term shareholder wealth, largely through generous dividend growth. The stock has raised its shareholder distribution at a compound annual growth rate of 24% over the past five years. Walgreen Company (NYSE:WAG) is surely one of the most shareholder friendly retailer stocks, and offers investors a solid dividend yield of 2.6% at recent prices.
This dividend keeps on trucking
Cummins Inc. (NYSE:CMI) is a United States-based machinery company with a market value of $22 billion. Unfortunately, a difficult global economy took its toll on Cummins’ results last year. The company’s revenues decreased 4% in 2012 year over year. In addition, diluted earnings per share also fell, from $9.55 per share to $8.74 per share, representing a decline of almost 8.5% versus the prior year. Particular weakness was seen from the company’s operations in Europe, Brazil, and China, offsetting 9% sales growth in North America.
If Cummins Inc. (NYSE:CMI) struggled last year due to the lingering effects of the most recent recession, you wouldn’t be able to tell from the company’s dividend and stock price behavior. The company’s stock price surged from $91 to begin 2012 to its current level of higher than $115, a rise of more than 26%.
Moreover, Cummins raised its dividend by 25% last year. Over the last five years, in spite of the painfully slow global economic recovery, Cummins has increased its dividend by a compounded annual growth rate of almost 32%. Nevertheless, you’d be wise to pay close attention to Cummins Inc. (NYSE:CMI) going forward to ensure the company can get its international operations in order.
Ride the rails
When it comes to Union Pacific Corporation (NYSE:UNP) you don’t have much to worry about at all. Last year the company reported record results, with 2012 being the most profitable year in the company’s 150-year history. Union Pacific reported full-year diluted earnings per share of $8.27, an increase of 23% versus 2011. These strong earnings came on the back of a 7% increase in operating revenue. While Union Pacific Corporation (NYSE:UNP) did see weakness in its coal shipments, like the other railroads, it showed strength in the volumes of its chemicals, automotive, and intermodal shipments.
This kind of financial performance has allowed Union Pacific to handsomely reward its shareholders with generous dividend increases over the past several years. The stock raised its dividend 15% late last year, and has increased its distribution by almost 25% compounded annually over the past five years.
If you can’t beat ‘em, join ‘em
It’s entirely possible to find extremely high dividend growth rates among the market’s large-cap universe. These might be large companies, but each of these stocks effectively defies the notion that only small companies have the financial flexibility to raise their payouts at market-surpassing rates.
Walgreen Company (NYSE:WAG), Cummins Inc. (NYSE:CMI), and Union Pacific Corporation (NYSE:UNP) are poised to profit handsomely from the economic recoveries in the United States and abroad. Furthermore, none of these stocks are exorbitantly priced, considering the compelling dividend growth each has offered its investors over the past five years. Also, these stocks don’t offer pittances for yields like many other high dividend-growth stocks. Rather, each of these stocks offers solid current annualized yields between 2% and 3%.
These stocks are an interesting alternative to higher-yielding stocks that offer little dividend growth over time. If you’re an income investor in the pursuit of an ever-increasing stream of dividend income plowed into your portfolio year after year, this group of stocks is a great starting point for further research.
The article Three Large-Caps With 20% Dividend Growth originally appeared on Fool.com and is written by Robert Ciura.
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