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Dividend Aristocrat stocks can help you keep ahead of inflation. These 15 take top prizes for raising payouts.

By Philip van Doorn

Companies that have raised dividends the most over the past 10 years have tended to outperform the broader market -- by a lot

Some investors are interested in stocks that pay high dividend yields for a source of income. Others believe it is better to focus on total returns over long periods. The Dividend Aristocrats are a group of stocks that appeal to both camps.

Below is a list of Dividend Aristocrats that have increased their payouts the most over the past 10 years. The group's performance has been, in a word, incredible.

Connection between dividends and inflation

MarketWatch's Mark Hulbert advises investors to pay attention to dividends when inflation is high. He points to data showing that companies in the benchmark S&P 500 Index tend to increase dividends at a higher rate than inflation.

Turning to the S&P 500 Dividend Aristocrats -- a group within the benchmark that has increased annual regular dividends for at least 25 years -- Hulbert makes the case that this group can be expected to pay dividends matching the yield on 10-year U.S. Treasury notes over the next decade. And that's on top of the potential for stock market gains when holding a group of blue-chip companies.

The Dividend Aristocrats don't necessarily provide high income -- many have low current dividend yields. The idea is that a commitment by management to increase payouts to owners over time might correlate with better long-term performance.

Best dividend compounders

We decided to highlight Dividend Aristocrats that have raised payouts the most over the past decade. To do this, we expanded our pool beyond those in the S&P 500.

S&P Global maintains a large number of Dividend Aristocrat indexes. You can see the full list here, and a shorter list of Aristocrat indexes tracked by exchange traded funds here.

We focused on the three broad groups of Dividend Aristocrats listed on U.S. exchanges:

Combining the three Dividend Aristocrat Indexes and removing duplicates gives us a pool of 136 companies.

From that group, here are the 15 companies that have shown the highest compound annual growth rates (CAGR) for regular dividend payouts over the past 10 years. It makes no difference what the current dividend yield may be or what it was 10 years ago:

Company                     Ticker  10-year dividend CAGR  Current dividend yield  Dividend yield -- 10 years ago  Dividend yield on shares purchased 10 years ago  Total Return -- 10 Years 
Cintas Corp.                 CTAS                  21.55%                   0.91%                          1.38%                                            9.69%                    1119% 
A. O. Smith Corp.            AOS                   21.48%                   1.71%                          1.44%                                           10.07%                     576% 
Lowe's Companies Inc.        LOW                   19.04%                   1.58%                          1.75%                                           10.00%                     657% 
Toro Co.                     TTC                   18.49%                   1.40%                          1.24%                                            6.77%                     448% 
Bank OZK                     OZK                   17.85%                   2.98%                          1.58%                                            8.14%                     241% 
Sherwin-Williams Co.         SHW                   16.53%                   0.95%                          1.34%                                            6.17%                     616% 
Roper Technologies Inc.      ROP                   16.25%                   0.54%                          0.57%                                            2.56%                     406% 
Nordson Corp.                NDSN                  15.10%                   0.91%                          0.95%                                            3.89%                     371% 
Fastenal Co.                 FAST                  13.81%                   2.19%                          1.43%                                            5.22%                     210% 
Williams-Sonoma Inc.         WSM                   13.49%                   2.12%                          2.31%                                            8.20%                     393% 
T. Rowe Price Group          TROW                  13.44%                   3.31%                          2.20%                                            7.77%                     221% 
Hormel Foods Corp.           HRL                   13.24%                   1.94%                          2.12%                                            7.34%                     358% 
L3Harris Technologies Inc.   LHX                   13.00%                   1.74%                          2.99%                                           10.13%                     625% 
Illinois Tool Works Inc.     ITW                   12.98%                   2.40%                          2.60%                                            8.81%                     362% 
Nike Inc. Class B           NKE                    12.98%                   0.89%                          1.31%                                            4.45%                     459% 
                                                                                                                                                                           Source: FactSet 

Click on the tickers for more about each company.

You should also read Tomi Kilgore's detailed guide to the wealth of information for free on the MarketWatch quote page.

Notes about the Dividend Aristocrats that have grown payouts the most over the past 10 years:

All in all, this group of 15 Dividend Aristocrats that have grown their dividends the most over the past 10 years has performed remarkably well. It made no difference how high or low the dividend was. A focus on generous increases of the payouts was correlated with high total returns eventually high income.

Don't miss: These 20 highly rated stocks are expected to rise at least 70% over the next year

-Philip van Doorn


(END) Dow Jones Newswires

04-25-22 1344ET

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