I’m a huge fan of dividend growth investing. Of course, it’s so easy to be a fan. What is there to not love about it? Dividend growth investing is all about investing in world-class enterprises.

These world-class enterprises are producing ever-higher profit from selling the products and/or services the world demands. It’s more stuff to more people at higher prices.

And they pass much of their ever-higher profit along to their shareholders, in the form of ever-higher dividends. Living off of dividends is great. But living off of growing dividends is so much better.

Since inflation is omnipresent and causing everything to get more expensive over time, you need a passive income source that can keep up with that if you want financial freedom that’s sustainable.

Well, high-quality dividend growth stocks have got you covered. Today, I want to tell you about three dividend growth stocks that just increased their dividends. Ready? Let’s dig in.

Stock #1 Now Paying Bigger Dividends: American States Water (AWR)

American States Water just increased their dividend by 9%.

This is a great example of why high-quality dividend growth stocks are such fantastic long-term investments, and why they’re great at fighting off inflation. The costs of goods and services are rising. But that also means higher revenue, profits, and dividends.

This marks the 68th consecutive year of dividend increases for the water utility.

68 consecutive years of higher dividends? Isn’t that just amazing? How many things in life are that consistent? Other than the sun rising and setting, not much. This stock has the longest dividend growth track record in the world. It truly is a marvel.

This increase is right in line with their 10-year DGR of 9.7%. And that growth is really quite necessary when you see that the stock yields only 1.6%. But with the payout ratio at right around 60%, investors should continue to expect this dividend growing for years to come just like they should expect the sun to continue rising and setting every day.

This stock isn’t cheap, but why should it be?

If this stock were cheap, I’d be wondering why? Look, you don’t get a diamond for the price of a cubic zirconia. And this is a diamond of a business. Most basic valuation metrics are slightly elevated relative to their own recent respective historical averages, including the P/E ratio – which is at nearly 36. But if there were a business worth paying up for, it’s this one.

Stock #2 Now Paying Bigger Dividends: Norfolk Southern (NSC)

Norfolk Southern just increased their dividend by 10.1%.

Love it, love it, love it. How can you not love waking up to 10.1% more passive income than you had the day before? For doing nothing other than simply holding stock? That’s the easiest “pay raise” you’ll ever get. I can promise you that.

This is the fifth consecutive year of dividend increases for the railroad.

If you thought a 10.1% dividend increase was cool, check this out. This is the second time this year that they’ve increased their dividend. If we compare the dividend today to what it was at the end of last year, the dividend is up a total of 16% this year. That’s running well ahead of their 10-year DGR of 9.8%. The stock also yields a market-beating 1.7% to go along with this huge growth. And the dividend remains very well protected by a payout ratio of 40.4%.

The stock isn’t cheap, but a pullback could be a great opportunity to get into this wonderful business.

The P/E ratio of nearly 24 leaves something to be desired when compared against the five-year average P/E ratio of 19.2. Still, Norfolk Southern, like most businesses, is just now recovering and bouncing back from a terrible 2020. So the future is very bright. If this name pulls back, even a little bit, that could be your opportunity to get into a stock that’s up nearly 200% over the last five years.

Stock #3 Now Paying Bigger Dividends: Hershey (HSY)

Hershey just increased their dividend by 12.1%.

That’s about as sweet as one of their candy bars. Maybe even sweeter. Halloween is coming up in a couple months. But there’s no tricks here with Hershey. Only treats. Dividend treats.

The candy and snack company has increased its dividend for 13 consecutive years.

This recent dividend increase was even nicer than it usually is. Their 10-year dividend growth rate is 9.2%. Now, that’s quite strong. But 12% is even better. And with a payout ratio of 52.4%, the dividend is in a great position to continue flowing and growing for years to come. Also, the stock yields a very respectable 2%. That’s not far off from the stock’s five-year average yield, and it certainly beats the market.

This stock actually looks reasonably valued.

Is it super cheap? No. But the valuation is quite acceptable. Most basic valuation metrics are pretty close to their respective recent historical averages. The P/E ratio, for example, is slightly under 26 right now. That might look high. Until you see that their five-year average P/E ratio is 26.7. This is a stock that typically commands a premium earnings multiple. And why wouldn’t it? It’s a world-class business with some of the best brands out there. Even after an 18% YTD runup, the stock could have a lot more sugar in it.

— 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.com

We’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.