I’m a huge advocate of dividend growth investing. This is a long-term strategy whereby you buy and hold shares in world-class businesses that are paying out safe, growing dividends to shareholders.
The strategy is awesome for many reasons. One of those reasons? You’re literally getting paid to invest. Not only that, you’re getting paid more and more money. That’s right.
High-quality dividend growth stocks are like the golden geese that lay ever-more golden eggs. These businesses continue to rack up higher profits, year in and year out.
And they continue to pay out higher dividends, year in and year out. Because what’s better than totally passive dividend income? Totally passive dividend income that’s growing!
This allows your purchasing power to keep up with, or even outpace, inflation. Which is important over the long run, as things do keep getting more expensive.
Today, I want to tell you about three dividend growth stocks that just increased their dividends. Ready? Let’s dig in.
The first dividend increase I have to tell you about came from Verizon Communications (VZ).
Verizon just increased their dividend by 2%.
I know. 2% isn’t much. But here’s the thing. It is more money. Not only is it more money; it’s more money for doing absolutely nothing other than continuing to hold stock. Tough to complain about that.
This is the 17th consecutive year of dividend increases for the telecom giant.
Verizon is nothing if not consistent. This 2% dividend increase is almost the same as last year’s dividend increase. And it’s right in line with their 10-year DGR of 2.6%. So it’s not a huge growth play. Instead, Verizon is more of an income play. The stock yields 4.6%. That’s more than three times higher than what the broader market yields. A big, dependable dividend like this in a low-yield environment is relatively appealing. Speaking of dependable, the payout ratio is only 53%. It’s been said the safest dividend is the one that just got raised. Verizon is in a great position to continue growing its dividend for years to come.
This stock has been an underperformer, down almost 6% on the year.
And that past underperformance could be your future opportunity. Most basic valuation metrics are below their respective recent historical averages. The 4.6% yield is 40 basis points higher than its five-year average. And the P/CF ratio of 5.9 is well below its five-year average of 7.2. Verizon won’t get you rich overnight. It’s not that kind of stock. But if you’re looking to safely boost the overall yield of your dividend growth stock portfolio, Verizon is worth a good look.
Next up? Let’s talk about the dividend increase that came courtesy of National Storage Affiliates Trust (NSA).
National Storage Affiliates just increased their dividend by 7.9%.
Almost 8% more money for sitting on your hands? Yeah, that’s pretty sweet. But check it out. It gets sweeter. This is the second time this year that this company has increased its dividend. This follows up on an 8.6% dividend increase last quarter. How’s that for a golden geese laying ever-more golden eggs?
This is the seventh consecutive year of dividend increases for the self-storage REIT.
The real estate investment trust continues to hand out generous dividend increases like clockwork. Their five-year DGR is 20.1%. That huge dividend growth comes on top of the stock’s yield of 2.8%. It’s an extremely compelling combination of yield and growth. And the payout ratio is 77.4%, based on midpoint core FFO/share guidance for this fiscal year. A touch high, but nothing crazy.
This stock has been a barnburner, up 70% this year!
The outstanding performance deserves to be commended. However, a lot of valuation metrics now look stretched, unfortunately. This is always the dilemma for investors. Investors want extraordinary performance from stocks, which can lead to high valuations, which then leads to lamenting. Shares are trading for a P/CF ratio of 22.2, which is high for a REIT in general. But that looks even more extreme when compared to its own five-year average of 12.8. There’s a lot to like about this stock, but the valuation is, unfortunately, not one of those things. Keep an eye out for a nice pullback here, though.
Last but not least, let’s talk about the dividend increase that came in from Eastgroup Properties (EGP).
Eastgroup Properties just increased their dividend by 13.9%.
Where else are you going to get nearly 14% more money for doing almost nothing at all? I don’t know if I ever got a 14% pay raise from my old day job, before I quit in my early 30s. And even if I would have received a 14% boost in my pay, it would have only come about because I was coming in early, staying late, and working as hard as possible. Shareholders get the same result without lifting a finger.
The industrial property REIT has now increased its dividend for 10 consecutive years.
And the real estate investment trust celebrated a decade of dividend growth in style, with an outsized dividend increase. Their 10-year DGR of 3.9% shows you just how outsized this increase was. And with the stock yielding just 2%, you really do want to see pretty strong dividend growth. It’s worth noting that the payout ratio is only 61.3%, based on this fiscal year’s midpoint guidance for FFO/share. That’s actually low for a REIT, which only increases the dividend’s safety profile.
This stock is up 40% YTD, and it looks pricey here.
Every basic valuation metric I know of is well above its respective recent historical average. The P/CF ratio, for example, is coming up on 34. That’s eye watering. Compare that to the stock’s five-year average P/CF ratio of 22.2. So this is a stock that’s typically commanded a premium valuation, but this current valuation has gone beyond premium and is now in stratospheric territory. That’s had the effect of lowering the yield, which is now 70 basis points lower than its five-year average. I’d be on the lookout for a sizable pullback in this name before investing. But if such a sizable pullback does come, make sure not to forget about this REIT.
— 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.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.