Dividend growth investing is a fantastic long-term investment strategy. It gives you the opportunity to build a gaggle of golden geese who lay ever-more golden eggs.
The golden geese are world-class businesses that produce reliable, rising profits by selling the products and/or services the world demands. And the golden eggs are the reliable, rising dividends that are funded by those reliable, rising profits.
If you can set yourself up so that you live only off of the growing pile of golden eggs, that’s a path to nearly indestructible financial freedom and security. By letting the golden geese get bigger and bigger over time, you could end up in a situation where you’re overrun by golden eggs. And what a great situation that would be.
Indeed, many high-quality dividend growth stocks are increasing their dividends at rates that vastly exceed the rate of inflation.
So even while things continue to get more expensive every year, passive dividend income from high-quality dividend growth stocks often goes up even more.
Today, I want to tell you about three dividend growth stocks that just increased their dividends. Ready?
Let’s dig in.
#1 Stock Rewarding Shareholders: Medtronic (MDT)
Medtronic just increased their dividend by 8.6%.
This is one of the best and most reliable dividend growth stocks out there. Your bills are very reliable, right? Every month, the bills continue to roll in. Well, you want to make sure your passive dividend income is just as reliable.
The medical devices company has increased its dividend for 44 consecutive years.
That’s longer than I’ve been alive. I’ve only actually had bills as an adult for less than 20 years. Medtronic has been increasing its dividend for twice as long. That’s two of my adulthoods. Talk about reliable.
This dividend increase isn’t far off from the stock’s own 10-year dividend growth rate of 10%.
Again, reliable. Medtronic is super, super consistent. And this kind of dividend growth is very strong when you consider that the yield is at 2% now. The stock isn’t cheap, with a P/CF ratio of 27.5. But you really should have this stock on your radar. If it dips, that could be an opportunity to add one of the most golden geese out there to your gaggle.
#2 Stock Rewarding Shareholders: Flowers Foods (FLO)
Flowers Foods just increased their dividend by 5%.
Not a massive, double-digit dividend increase. But this stock has typically been a pretty stout income producer. Indeed, the stock yields 3.5% here. While recent dividend growth has slowed compared to the 10-year dividend growth rate of 8.7%, you’re still looking at a nice combination of yield and growth.
This marks the 20th consecutive year of dividend increases for the food company.
And since Flowers Foods specializes in basic food items like bread, we can be confident that there are more dividend increases where the last 20 came from. I don’t know what kind of social media we’ll be using 10 years from now. But I do know that we’ll be eating bread in some form or fashion.
This is an easy-to-understand business model, and the stock isn’t egregiously valued.
Most basic valuation metrics are in line with, or even slightly below, their respective recent historical averages. The P/CF ratio, for instance, is 11.5. That’s lower than its own five-year average of 12.9. This is a 3.5%-yielding dividend growth stock trading hands for a reasonable valuation.
#3 Stock Rewarding Shareholders: Lowe’s (LOW)
Lowe’s just increased their dividend by a jaw-dropping 33.3%.
Lowe’s stock ticker is LOW. But maybe it should be WOW – for Wow! 33.3%. The price of everything is always going up. Rent, food, energy. You name it. But when your dividend income is growing by more than 30% on a YOY basis, who cares? That’s the beauty of high-quality dividend growth stocks – they allow your passive dividend income to more than keep up with inflation.
This is the 59th consecutive year in which the home improvement retailer has increased its dividend.
Like a fine wine, Lowe’s gets better with time. Check this out. Their 10-year dividend growth rate is 18.9%, which is more than enough growth to go along with the current yield of 1.65%. If you thought that dividend growth was already impressive enough, here they come in with a dividend increase that’s more than 30%. Some investors seem to be under the incorrect assumption that a multi-decade track record of dividend growth must automatically mean a slowing of growth. That’s not true at all. And here’s your proof. Almost 60 years into it, Lowe’s is accelerating its dividend growth.
The stock’s valuation also appears to be reasonable.
We know the housing market is going gangbusters right now. And home improvement retailers are printing gaudy numbers. They’re absolutely killing it. Yet this stock’s valuation is quite reasonable. The P/E ratio is slightly over 21. That’s not only lower than the broader market but also notably lower than the stock’s own five-year average P/E ratio of 25.2. Of course, that’s on huge earnings. So you have to take it with a grain of salt. However, that big dividend increase doesn’t require any caveats. And this is a long-term winner that should be on your radar, if not in your portfolio.
— Jason Fieber
P.S. If you’d like access to my entire six-figure dividend growth stock portfolio, as well as stock trades I make with my own money, I’ve made all of that available exclusively through Patreon.
Source: DividendsAndIncome.comWe’re Putting $2,000 / Month into These Stocks
The goal? To build a reliable, growing income stream by making regular investments in high-quality dividend-paying companies. Click here to access our Income Builder Portfolio and see what we’re buying this month.