The Dow's 4 Most Impressive Dividend Growth Stocks

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Many investors seek to buy the stocks in the Dow Jones Industrials because they represent the cream of the crop of the U.S. stock market. Yet all 30 stocks in the Dow also share an important trait: they all pay dividends to their shareholders.

Still, dividend investors have gotten increasingly picky about the stocks they choose to meet their income needs, and one important element of making choices for a dividend portfolio is finding stocks that don't only pay healthy dividends now but will also continue boost their payouts in future years. That's why this article highlights four stocks that have made massive increases in their dividend yields since the market last hit record highs back at the end of 2007. Let's look at those four stocks.

As of the end of 2007, HP stock had a dividend yield of just 0.6%, but in the years since then, the yield has more than tripled to its current level of 2.2%. What makes that yield all the more impressive is that the stock has bounced sharply this year, gaining more than 80% and therefore cutting the yield almost in half from the 3.7% level it boasted at the beginning of 2013. HP had paid the exact same quarterly dividend for more than a decade until it made a 50% boost in its payout in mid-2011, recognizing the value of returning more cash to shareholders. Even through tough times last year in the midst of multiple failures in past efforts at restructuring, HP kept paying dividends, and now that the stock appears firmly on the comeback trail, investors increasingly believe that focusing on more profitable business lines could produce even greater dividend growth.

Chip giant Intel has gone from a typical tech stock to a Dow dividend giant, with its yield having risen from 1.7% at the end of 2007 to 3.9% today. The company has doubled its dividend over that period of time, but the other part of the yield equation hasn't been as kind to investors, as Intel's share price has actually fallen over that period. Intel had the financial strength to withstand the market meltdown, but its ongoing struggles to adapt to the mobile revolution haven't resulted in the growth that investors would prefer to see. Until the company can capitalize more fully on newer technology, Intel's status as a mature tech company with more prospects for dividend income than future growth could hold the stock back.

The oil giant's dividend has risen from just 1.5% in 2007 to 2.7% today, with an 80% rise in per-share dividends accounting for pretty much the entire increase in its yield. Energy prices remain reasonably strong, with oil still trading at triple-digit levels despite huge production gains from unconventional drilling practices. Yet despite the powerful earnings that the favorable energy environment has produced, ExxonMobil still struggles with the need to replace declining production from older wells with new finds that are large enough to make a significant different in its total business. Combined with share buybacks, Exxon returns more capital to shareholders than any other company, and that's likely to continue as long as Exxon doesn't find the need to make a massive strategic acquisition that uses up its available ash.

Microsoft has boosted its dividend yield from 1.2% in 2007 to 2.9% today, with its quarterly dividend having more than doubled. Like Intel, Microsoft has seen struggles in producing sizable growth from its core business in a world in which PC demand has started to decline dramatically. Yet by returning more capital to shareholders, Microsoft reminds investors that its legacy businesses still generate huge amounts of cash, and even if they're in decline, they'll likely keep rewarding dividend recipients for years to come. If the company's planned restructuring can reinvigorate its product innovation, moreover, Microsoft could finally reawaken growth to go with its solid dividends.

Accept only the best
The best stocks offer not only good yields but improving payouts. By focusing on the stocks that will give you favorable dividend characteristics, you'll reduce your chances of being disappointed by the dividend stocks you own.

Dividend stocks can make you rich. It's as simple as that. With this in mind, our analysts sat down to identify the absolute best of the best when it comes to rock-solid dividend stocks, drawing up a list in this free report of the only nine that fit the bill. To discover the identities of these companies before the rest of the market catches on, you can download this valuable free report by simply clicking here now.

The article The Dow's 4 Most Impressive Dividend Growth Stocks originally appeared on

Fool contributor Dan Caplinger has no position in any stocks mentioned. You can follow him on Twitter: @DanCaplinger. The Motley Fool recommends Intel and owns shares of Intel and Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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