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:
1-Year Dividend Growth Rate
Source: S&P Capital IQ
Kinder Morgan is the largest midstream energy company in North America, with approximately 80,000 miles of pipelines that transport natural gas, refined petroleum products, crude oil, carbon dioxide, and other products. Most of Kinder Morgan's businesses are able to avoid commodity price risk by operating like a giant toll roads that receive a fee for their transportation services. That consistent cash flow is then passed on to shareholders in the form of a 4.5% dividend, helping Kinder Morgan earn a top tier five-star rating in CAPS.
Accenture is a top tier management consulting, technology services, and outsourcing organization. Its areas of specialization include finance, enterprise performance, systems integration, risk management, sales, and talent management, as well as industry-specific consulting services. Accenture currently sports a four-star rating in CAPS and is yielding 2.5%.
Goldcorp is engaged in the acquisition, exploration, development, and operation of precious metal properties, including gold, silver, copper, lead, and zinc . Goldcorp currently has a three-star ranking on CAPS and offers investors a 2.3% yield.
As a major integrated energy company, Chevron is involved in many aspects of the energy production spectrum, from the exploration and production of oil and natural gas, to the refining of crude oil and the manufacture of petrochemicals, to coal mining operations and alternative fuel sources. This energy titan currently sports a four-star rating in CAPS and is yielding 3.3%.
United Technologies 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 a four-star rating in CAPS and its stock is yielding 2%.
The Foolish bottom line
Had you invested in these companies a year ago, you would have enjoyed total dividend increases ranging from 11% to 18%. That level of growth would provide a substantial boost to just about any investor's dividend income. But more important to investors today is to identify the companies that will grow their dividends substantially in the years ahead. If you're interested in hearing about some excellent companies that are likely to boost their dividends from this point forward, I'd like to offer you a brand-new free report from The Motley Fool's expert analysts called "Secure Your Future With 9 Rock-Solid Dividend Stocks." Today I invite you to download it at no cost to you. To discover the identities of these companies before the rest of the market catches on, you can access this valuable free report by simply clicking here now.
The article 5 Stocks Growing Their Dividends by 10% Per Year originally appeared on Fool.com.
Joe Tenebrusomanages a Real-Money Portfoliofor The Motley Fool and is an analyst on the Fool's Stock AdvisorandSupernovapremium service teams. You can connect with him on Twitter: @Tier1Investor. Joe has no position in any stocks mentioned. The Motley Fool recommends Accenture, Chevron, and Kinder Morgan and owns shares of Kinder Morgan. 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.