At the beginning of each year, I like to pull out a search from my stock screener using my favorite investing metrics. One of them is obviously to find stocks with aggressive dividend growth over the past five years. I revisited this list not so long ago and handpicked 10 high growth dividend stocks from the past five years. They may be of interest if you are looking for big dividend payment increases!
#10 KLA-Tencor Corp (KLAC) +23.24%
KLA-Tencor supplies process controls and yield management solutions for the semiconductor and microelectronic industries. It offers its clients solutions by understanding and resolving manufacturing problems. Starting in 2010, KLAC approved an aggressive dividend growth policy going from $0.15 to $0.40 per share in 2012.
After increasing its dividend by an annualized rate of 23.24% over the past five years, KLAC kept going in July 2013 with another increase of 12.50% from $0.40 to $.45. Unfortunately, earnings have slowed down since 2012. It will be important to see how the company will address this challenge in 2014. Since PC sales are not a hot market these days, it will be a good opportunity to prove they can weather the storm.
#9 Lockheed Martin Corp (LMT) +23.36%
Lockheed Martin is engaged in the research, design, manufacturing and integration of advanced-technology products. It operates through 4 segments; Aeronautics, Electronic systems, Information systems & Global solutions and Space systems. Showing stronger numbers than KLAC on both EPS and dividend growth, LMT shows an increasing payout ratio slightly under 50%:
Lockheed Martin reaffirmed its FY 2013 revenue guidance and expects to increase its earnings again. I guess we can expect more dividend growth towards the end of the year.
#8 Walgreen Co (WAG)
Walgreen operates a wide drugstore chain across America. It provides both prescription and non-prescription drugs along with consumer goods. WAG operations include over 8,385 stores in 50 states.
Walgreen increased its dividend a few weeks ago by another 14.50%. On the other hand, the EPS trend is quite erratic since 2009…
#7 Federated Investors (FII) +23.74%
Federated investors provides investment management products and related financial services. Its principle source of income is derived from its investment advisory fees along with mutual funds MERs. I’ve included this stock in my list to show you one of the flaws of looking at 5 year growth instead of looking at each year’s results. Here’s what happened with FII:
As you can see, FII is paying a special dividend each year. When I pulled out my research, the screener probably took the 2009 “ordinary dividend” and compared it to the “special dividend” at the end of 2012. So I have a “fake” dividend growth over 5 years as it stands at $0.24 per share since 2009…
#6 Guess? Inc (GES) +36.31%
Who would have thought that a clothing company would make a top 10 list of dividend growth stocks over the past five years? I was the first one surprised to see Guess? as a top dividend paying stock performer! Think again… here’s the graph showing dividend payout peaks!
#5 Houston Wire & Cable Co (HWCC) +36.85%
As the name suggest, Houston Wire & Cable provides… wire & cable services! It aims at offering its customers a single solution for wire and cable, hardware and related services. Its solutions are for repair and maintenance.
It shows a big increase of dividend payments in 2013 and the payout ratio seems relatively under control.
#4 CA Inc. (CA) +37.97%
CA develops and delivers software and services. Their core business is separated into three divisions: Mainframe solutions (their main software business), Enterprise solutions (such as security, portfolio management, automation, etc) and Services (implementation, consulting, training, etc.).
#3 CMS Energy Corp (CMS) +44.96%
CMS Energy is an electric and gas utility mainly operating in Michigan. It sells to both retail and industrial markets. It owns its power generation facilities which are mostly fueled by natural gas and biomass.
Latest financial restults were in line with financial analyst expectations and the company recently reaffirmed its long term revenues and EPS guidance.
#2 Cinemark Holdings (CNK) +45.23%
Cinemark Holdings is operating in the entertainment business. It owns 298 theatres and 3,916 screens in 39 states. The company also operates in international markets, mainly in South America.
This is another interesting graph showing how 1 big increase can lead you astray when looking at dividend growth stocks. These metrics lead us to think that the current dividend payout may be sustainable but I doubt the past dividend growth will occur again over the next five years.
#1 Western Union (WU) +106.99%
Western Union is the largest money transfer company in the world by transaction volume. The core business (consumer to consumer money transfers) represents 84% of WU profits. The company’s revenues are derived from transaction fees charged on money transfers.
It seems that money transfers won’t be slowing down in the upcoming year and WU may continue its aggressive dividend payout increase in the future.
Be Careful With 5 Yr Dividend Growth Metrics
I thought it was interesting to post 3 stocks in my top 10 showing occasional or erratic dividend growth. These numbers don’t appear when you look at a 5 year scope and you have to always dig a little further to make sure these stocks are truly what you think they are!
Disclaimer: I do not hold any positions in the above mentioned stocks at the moment of writing this article.
Nice list. I like WAG and FII. I’ll keep an eye on them. I like WU as well. It’s back up now and I’m glad I didn’t sell. Should have picked up a few extra shares earlier this year though.
Any thoughts on index funds? I own CDN stocks directly but I find the US market too vast so am sticking mainly to index funds.
I wonder whether these companies are sustainable in payout growth. As with dividends and overly high yield the high growth may not be sustainable either and can be influence by one term event, right? It makes me a bit scared, although I like those growths. I usually want to see what the history is. If the stock sports a long term dividend paying history then the growth may be legit. For example WU shows only 4 years of increases and all three averages I look at show high growth, so that may work, on the other hand CNK shows no history and 1 yr, 3yr and 5yr growth is not providing me much confidence investing in that stock and the growth may not be sustainable. Am I wrong?
Great list. A few of these are on my top 50 list.
@DI Martin – CNK dividend is unchanged since it was last increased at the end of 2010.
Interesting list. Of those listed I am long LMT and WAG.
I like my dividend stocks to grow their dividends on an annual basis rather than in spurts. KLAK is worth keeping an eye on.
Mike
As you may already know, for any growth measure and especially dividend growth, there are three basic things to know statistically about the growth: (1) the amount of growth, usually measured by a CAGR; (2) the regularity or consistency of that growth, usually measured with a standard deviation; and (3) any (recent) trends in the data, measured in various ways. All of these measures also need to extend over the longest time period possible, which in the case of companies would be about 20 years or so.
So, since you already know this to be so, why not just give values for the three measures over the last 20 years. The nature of the appropriate measures is also an interesting problem and is an issue that various writers have differed about, but everyone seems to agree on the three critical aspects of any “growth” measure.