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.
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-Philip van Doorn
(END) Dow Jones Newswires
04-25-22 1344ETCopyright (c) 2022 Dow Jones & Company, Inc.