7 Dividend Stocks with the Biggest Dividend Increases Ranked
These dividend stocks are the best for putting more cash in your pocket!
In this video, I’ll show you how to find the dividend paying stocks increasing payouts, three criteria to finding dividends that pay you more every year. I’ll then rank the best dividend stocks for more cash increases.
Stick around though because towards the end of the video, I’ll also share a warning you need to hear about these and really any dividend investment right now, three signals that those dividend increases could be coming to an end!
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Best Dividend Stocks for Increasing Payments
I want to get started on that list of top dividend stocks so I’m going to wait to show how I found these and those three warning signs later in the video.
First on our list with a 3.6% dividend yield, shares of Citigroup, doubling its dividend over the last five years.
And I know for you die-hard dividend investors out there, 3.6% might not be enough to trip your trigger but imagine investing in shares of Citigroup just six years ago in 2016 at $41 each and the shares paying a dividend of $0.20 a year. That dividend has now grown to $2.04 a year or nearly a 5% yield on your investment. That’s the power of these dividend growers. At the rate they’re growing their payouts, invest now and you’ll see that yield rise every year.
With Citigroup, not only do you get that strong dividend growth but it’s also one of the lowest valuation stocks in my favorite industry right now. Historically low interest rates meant weak net interest income last year for the banks but that should change this year. Interest rates on everything from consumer loans to mortgages have shot higher and that could mean a profit bonanza for the banks.
Citigroup is also the second-largest card issuer in the U.S. and could benefit on higher balances this year. With everyone locked-down and getting free stimulus money, people paid off their credit cards and the average balance on cards last year was still below 2019 levels.
So you’ve got two big catalysts for growing revenue at Citigroup and the shares trade at one of the lowest multiples among banks. The stock is trading for just 0.59-times on a price-to-book value, compared to a multiple of 1.10 for Wells Fargo and 1.4-times for Bank of America. Even if shares of Citigroup can get up to their longer-term average around 0.80-times book value, that would be a 35% return on top of the dividend.
Besides that upside potential on valuation, Citigroup has been the bank you look to for dividend increases, raising its payout from $0.16 to $0.51 per share over the last five years. That’s an increase of nearly 219% over the period.
Next is Medifast, ticker MED, a leader in health and personal coaching, with a 3.6% dividend yield.
A lot of these health and wellness companies have been under pressure over the last two years as people stay home and care less about their health but Medifast has still been able to grow its share price by 88% over the last two years.
The company is estimating a U.S. market of 95 million for its meal plans and coaching and books more than 90% of its revenue from subscriptions. I love that recurring revenue model because it leads to consistent growth and cash flow.
Revenue has grown by a 50% annual rate in the four years through 2021 with $120 million returned to investors through the dividend and share repurchase. Over the last six years, the company has returned 83% of cumulative cash flow to investors, nearly $330 million.
The company is expanding its coaching model aggressively into more states and even internationally, reaching Hong Kong and Singapore last year. That international growth opens up a lot of new markets and could keep revenue growing.
Healthcare is one of my favorite long-term industries and Medifast has proven it with a 343% increase in its dividend over the last five years. That’s from an already solid $0.32 dividend to paying $1.42 per share on a quarterly basis.
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How to Find Stocks with Increasing Dividends
We’ve still got five stocks for growing dividends to highlight but I wanted to take you through the screener I used to find these and how to build your own list of dividend stocks.
I’m using the stock screener on Morningstar but you can find similar criteria on most apps. I’ll start by screening for stocks that pay a dividend yield of 3% or more because honestly, if it’s not paying at least that much, it’s not much of a dividend stock. In fact, the lowest yield in our list is a 3.5% dividend.
I then used narrowed the list for five-year dividend growth and I used the longer-term here because I want to find companies consistently growing their dividend payment over time…not just a big increase over the last year or two.
So I set this for stocks that had grown their dividend by at least a 30% annualized rate over the period. Actually I started with 25% and then increased it when I saw there were still 156 companies that met the criteria. That’s something you’ll want to play around with, adding a few criteria to narrow your list down to maybe ten or 20 to start your research. I added this criteria for companies over $500 million market cap so I was only looking at larger companies instead of that volatility in penny stocks.
From this short list, you want to start your research. I removed any stocks that weren’t paying a dividend five years ago and any with volatile payments so we could focus on just those consistent dividend growth stocks.
Commodities Stocks Increasing Dividends
Southern Copper, ticker SCCO, pays a 5.38% dividend yield and is one we recently highlighted in the electric vehicle theme.
While most investors are busy watching shares of Tesla and Nio for the electric revolution, the real opportunity could be in copper. On 2040 projections, the International Energy Agency estimates supplies of lithium, copper and other minerals will need to jump 30-fold to meet demand. The average vehicle on the streets today holds just 51 pounds of copper, less than a third the amount needed for a battery electric vehicle and just two-thirds the need for a hybrid vehicle.
Southern Copper has the highest copper reserves in the industry at over 67 million metric tons and is the world’s fifth largest producer. In fact, on those reserves, the company has more than 50 years of production left in its mines.
It’s a focused producer with assets in Mexico and Peru and more of a pure-play on copper than other miners with 84% of its revenue from the metal.
With the rise in copper prices, I’d expect Southern Copper to keep increasing the dividend, already up 730% from $0.12 to $1 a share over the last five years.
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You don’t hear much about the Chemours Company, ticker CC, but it’s one of the fastest dividend growers in the industrials sector.
The $4.9 billion company is a leader in specialty chemicals, mostly in industrial applications and manufacturing. Just over half of revenue comes from titanium dioxide which is used in everything from paints to food coloring and sunscreen…so pretty much everything. It’s really well diversified geographically with sales split globally.
Chemours is tapping into megatrends like climate impact and electrification with its Opteon refrigerants that could fuel sales growth beyond the 27% rate it posted last year.
This is another value play trading at a price of 0.7-times the company’s annual sales, that’s 38% below the five-year average multiple of 0.97 price-to-sales ratio. If the global economy doesn’t fall apart, those stocks in the industrials sector should do really well and this one will continue to boost that dividend.
Even against some weakness in the share price, The Chemours Company has kept that commitment to its dividend, increasing it from $0.03 to $0.25 a share over the last five years, an increase of 730% over the period.
Consumer Stocks Increasing Dividends
I had to look this next one up, Camping World Holdings, ticker CWH, is actually America’s largest retailer of RVs and related services and pays an 8% dividend yield.
The company has been serving RV consumers since 1966 through a network of dealers and services centers and has booked 14% annualized revenue growth since 2016. New vehicles make up about half of revenue but it’s also got a good source of recurring revenue here with the services, finance and insurance programs.
The company controls a 20% market share of the RV market, a commanding lead in a market that is growing at 10% a year. Between retirements in the Baby Boomer generation and the trend to RV living with younger generations, more than 11 million U.S. households now own an RV.
While the stock price has been volatile, dividend payments from CWH have increased steadily from just over $0.07 a share in 2017 to $0.62 each for a 756% increase over the five years.
Utilities Stocks Increasing Dividends
I’ve actually got a bone to pick with this next one because even though it’s a great company with a 3.8% dividend yield…whoever decided to call it NRG Energy needs to be shot.
Seriously, when you include the ticker symbol which is also NRG…you end up saying NRG Energy NRG…when I say it, I half expect the CEO to appear behind me with a hacksaw or something.
All that aside, the company is one of the largest energy producers in the U.S. with over six million residential customers and 14 gigawatts of generation across electricity and natural gas.
Even though its an independent provider, it still operates in that protected, regulated market of electric and natural gas so cash flows are extremely consistent. That’s helped management commit to a constant dividend growth while still being able to grow the company and share price as well.
The recent acquisition of Direct Energy is expected to produce over $300 million in savings and drive part of its strategic growth initiative, growing the dual fuel business and streamlining production. That should result in even stronger cash flow and higher dividends.
Shares of NRG were paying a dividend of $0.03 a share in 2017 but have increased that amount by more than ten-times, to $0.35 per share over the period…that’s an annualized 63% increase!
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Warning Signs of a Dividend Increase
We’re coming up on the top dividend stock for growing payments, one that has increased its payout almost 1600% in the past five years but there is a huge warning here you need to understand when looking at dividend growth stocks.
Those prior increases don’t guarantee a stock will keep raising its dividend so there are three signals you need to watch for to make sure the checks keep getting bigger!
First is really assess why the dividend has increased so much in the past. A lot of times these might be on big-picture, macroeconomic events that might not be repeatable in the future. If the price of oil surging to $100 a barrel is what drove that increase in dividends, how likely is another increase if oil prices stay at that point?
You’ve also got one-off events like spinoffs and asset sales that can artificially boost stock dividends. This would be like when a company sells or issues shares for a part of the business, gets a big cash payment and then distributes some of that in a special dividend or just increases the regular dividend. Again, it’s not something that’s going to be repeatable. I’ve avoided this by screening for only companies with those long-term, consistent dividends but be on the watch for it.
Something else to watch for is what’s called the Payout Ratio and this is one of the most important measures for dividend investors. The payout ratio is the amount paid to cover the dividend on a quarterly or annual basis divided by the total earnings. So what percentage of profits are going to cover the dividend each year?
The payout ratio is important because it can tell you one of two things about the stock, that dividends might be in danger or that the company has room to growth those payouts. For that, you need to compare the payout ratio with similar companies, those in the same industry. Stocks with low payout ratios might be able to increase the amount of profits they pay out, increasing the dividend, or are holding more back for growth to boost that share price. Stocks with very high payout ratios though could be in trouble. If earnings fall in a recession or even if profits flatline, you could be facing a slower growing dividend or even one in danger of being cut!
Our next dividend growth stock posted the highest return in the S&P 500 last year, Devon Energy, ticker DVN.
Devon is a leading oil producer in three states; North Dakota, Texas and Delaware. With oil spiking over the last two years, these assets have become cash flow machines and like most oil companies, Devon is choosing to return that cash to shareholders rather than acquiring assets at higher prices.
Free cash flow quadrupled since its merger with WPX last year and is forecasting even stronger cash flow this year. At $95 per barrel oil, well under the recent price, the company will grow free cash flow by 17% this year and prices could fall to $30 a barrel before the company is operating at a loss.
This all helped Devon increase its share buyback program recently to $1.6 billion, nearly triple what it bought back last year, and continue its history of dividend growth.
Not only does Devon Energy pay a strong 6.9% dividend yield but it’s increased it from $0.06 to $1 a share in the last five years, and increase of nearly 1600%!
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