Dividends may not be the most exciting of investment vehicles, but they outperform nearly everything else over the long haul, which makes them very desirable.
Dividends may not be the most exciting of investment vehicles, but they can be incredibly useful and they have outperformed nearly everything else for the long haul. For many investors, dividends represent income (especially with interest rates as low as they are). For others, dividends simply showcase how well the company is doing.
As Tracey Ryniec with Zacks.com points out, “It's not that easy to pay a dividend every quarter, year after year, for decades. Things happen. There are recessions, bad product decisions, cycles in an industry, black swan financial events and management hijinks.”
Dividends are real cash being paid out to shareholders, and a company that can continually do so is more impressive. Some companies have been able to pay out dividends as far back as 1904. Others are more ambitious — they’ve raised dividends for 50 years.
So you want to get in on the dividend game? Bloomberg has ranked S&P 500 companies based on their three-year projected dividend growth. Just 130 companies were expected to increase dividends over the next three years, and these 10 have the largest forecasted growth.
Industry: Specialty chemicals
Three-year dividend growth: 19.35%
Current yield: 1.10%
Last divided paid: $0.50
All the way back in 1885 the paint company paid its first dividend to shareholders. Sherwin Williams is considered a dividend aristocrat because not only does the company continuously pay out dividends, but in 2013 the company announced its 35th consecutive dividend increase.
Owning a piece of this stock isn’t exactly cheap, though, as it is currently trading at $183.97 a share (up 16% over a year ago).
9. Ross Stores
Industry: Specialty apparel stores
Three-year dividend growth: 19.49%
Current yield: 0.92%
Last divided paid: $0.17
Over the past year Ross’ stock price is up 30%. In 2013 the company paid a dividend yield of $0.17, which was an increase from the previous year’s $0.14. However, back in 2011 Ross Stores paid out $0.22.
8. International Game Technology
Industry: Casinos and gaming
Three-year dividend growth: 19.59%
Current yield: 2.46%
Last divided paid: $0.11
Although IGT is expected to see strong dividend growth over the next three years, the company is coming off a five-year dividend growth of -7.8%. IGT’s stock price is currently trading at $17.65, which is down 62% from its highs back in 2006.
7. American Tower
Industry: Specialty and other REITs
Three-year dividend growth: 19.67%
Current yield: 1.46%
Last divided paid: $0.29
If you regularly read PMD, then you’ll likely recognize American Tower. The telecom services company was named a long-term stock pick at the beginning of 2013 when the stock market was really on a tear. Marshall H. Dean, JD, MBA, from the Alliance Affiliated Equities Corporation named American Tower as one example of how to invest in multiple cell towers.
While AMT’s stock hasn’t moved up much in the last year, analysts still place the company’s one-year target estimate at $95.05, which would be growth of 19.2%.
Industry: Oil and gas
Three-year dividend growth: 20.35%
Current yield: 2.48%
Last divided paid: $0.38
Oil and gas companies in general are expected to see huge growth and over the last six months alone Oneok’s stock price has increased by more than 50%. The stock recently hit its 52-week high. The company’s dividend payout has steadily increased for the last seven quarters, according to StreetInsider.com.
5. Zimmer Holdings
Industry: Orthopedic devices
Three-year dividend growth: 20.51%
Current yield: 0.86%
Last divided paid: $0.20
Zimmer Holdings, like many health care companies, has seen good growth. Currently, its stock is at $93.70, which is a 23% increase over just six months ago. Zimmer’s dividend in 2013 was a slight increase over the previous year’s dividend.
4. Discover Financial Services
Industry: Consumer finance
Three-year dividend growth: 21.28%
Current yield: 1.45%
Last divided paid: $0.20
Not only is Discover expected to have strong dividend growth over the next three years, but the company is having a great run after the recession. While Discover had negative returns from 2007 to 2009, from March 2009 to September 2013, the company’s returns were up 906.3%.
Discover has significantly raised its dividend over the last few years from $0.10 at the end of 2011 to $0.20 at the end of 2013.
Industry: Property and casualty insurance
Three-year dividend growth: 21.63%
Current yield: 1.05%
Last divided paid: $1
Progressive’s last dividend was a special payout, which was in line with the $1 per share dividend it paid out in October 2012. Over the last year, Progressive’s stock price has increased 18.5%, although during that time the S&P 500 is up 25%.
2. Ford Motor
Industry: Auto manufacturer
Three-year dividend growth: 21.64%
Current yield: 2.61%
Last divided paid: $0.10
At $15.60, Ford’s stock is still nowhere near where it was in 1999 when the price topped $35. However, over the last year the stock has made a good comeback, increasing 16%.
The car company’s current dividend is up 100% from last year, when it paid out $0.05 throughout all of 2012.
1. SunTrust Banks
Three-year dividend growth: 31.73%
Current yield: 1.09%
Last divided paid: $0.10
During 2013, SunTrust’s dividend was $0.10 a quarter, which was an increase over the $0.05 that was paid out during 2012 and 2011. The bank recently hit its 52-week high despite the fact that it recently reported an EPS surprise of -52.2%.