I’ve been using the dividend growth investing strategy for more than a decade now. It has treated me exceptionally well.
This strategy is all about investing in world-class businesses that pay reliable, rising dividends to their shareholders. These are the companies that make the world go round. And in doing so, they make a lot of money.
A lot of money which they share directly with their shareholders. Shareholders like us. While they make ever-more profit from selling what the world wants and needs, shareholders collect ever-more dividends.
All you have to do in order to collect those growing dividends is continue to hold stock. It’s that simple.
Whereas getting a pay raise from a job requires action on your part, getting pay raises as a shareholder requires inaction. You just don’t sell stock. It’s so easy, even I can do it.
Today, I want to tell you about five 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 AbbVie (ABBV).
AbbVie just increased their dividend by 8.5%.
Like I said earlier, what’s so beautiful about dividend growth investing is the fact that you get rewarded with more income through inaction rather than action. All AbbVie shareholders had to do in order to get an 8.5% boost in their passive dividend income is sit on their hands and not sell their shares.
The biopharmaceutical giant has now increased their dividend for 10 consecutive years.
That’s as long as the track record could possibly be, as AbbVie was spun off from former parent company Abbott Laboratories in 2013. The five-year DGR is 18.5%, so maybe this most recent dividend increase looks a bit shabby in comparison. However, I don’t think investors should expect that kind of double-digit dividend growth to persist. Even this 8.5% dividend bump is, in my view, very impressive, bordering on aggressive. Along with this kind of growth comes the stock’s yield of 4.9%. That’s a massive combination of yield and growth. And the payout ratio is 44.9%, based on midpoint guidance for this fiscal year’s adjusted EPS.
I love the business and the stock, and the valuation here is actually reasonable.
I highlighted this stock as an undervalued long-term idea for dividend growth investors back in late September when the stock was trading hands for about $107/each. In that video, I estimated fair value at about $123/share. The stock has gone on a bit of a run since that video came out, but it’s still priced under my estimation of fair value. If your portfolio doesn’t already have AbbVie in it, now would be a good time to question why.
The second dividend increase we have to talk about came in from Black Hills (BKH).
Black Hills just increased their dividend 5.3%.
Shareholders in Black Hills are now getting 5.3% more income than they were getting before. Don’t you just love that? Everything is getting more expensive. We know this. But long-term dividend growth investors are prepared for inflation when their dividend income is shooting up every single year like clockwork.
This is the 51st consecutive year of dividend increases for the electric and gas utility.
That makes them a Dividend King, which is a special status reserved for stocks with at least 50 consecutive years of dividend increases. Talk about reliable. I mean, how much more evidence of reliability do you need than that? With a 3.7% yield and a ten-year DGR of 4.2%, it’s a solid mix of yield and growth here on a stodgy, boring, necessary, highly reliable business model. Not much to complain about. And the payout ratio is a comfortable 61.5%.
This stock has been a bit of a laggard, up only 8% this year. And I think it’s a long-term opportunity.
Every basic valuation metric indicates undervaluation on this Dividend King. For instance, the 3.7% yield is 70 basis points higher than its own five-year average. The current P/E ratio of 16.7 is also well off of the stock’s five-year average P/E ratio of 23.9. This under-the-radar utility business offers a lot to like here. Take a look at it.
Another dividend increase I want to share with you is the one that came from Fidelity National Financial (FNF).
Fidelity National just increased their dividend by 10%.
This isn’t just a pay raise for doing nothing other than holding shares. It’s a double-digit pay raise. I don’t know if I ever got a double-digit pay raise from my day job, back when I still had it. But if I did, I had to do a lot of hard work to get it. Let me just say, being a shareholder is so much easier.
This marks the 10th consecutive year of dividend increases for the title insurance company.
If you think a 10% dividend increase is great, get ready to be really impressed. This 10% dividend increase follows up on the 11.1% dividend increase that was announced only last quarter. That’s two double-digit dividend increases in a row. The five-year DGR is 16.5%, so they’re keeping up appearances with this kind of activity. And the stock also yields a very appealing 3.5%. It’s very rare to see this kind of yield and this kind of growth. Even after all of these dividend raises, the payout ratio is only 18.8% because of incredibly strong earnings growth.
The stock is up 32% YTD, but the valuation still looks attractive.
I highlighted this stock back in April as a stock that I was personally buying for my own portfolio. I initiated my position in late March back when the stock was still around $40/share. It’s now blowing past $50/share. Even so, a lot of metrics indicate cheapness. I’ll give you an example. The P/CF ratio of 4.6 is less than half that of its own five-year average of 10.8. I’m a very happy shareholder. You might want to consider joining me.
Next up, let’s talk about the dividend increase that came from Main Street Capital (MAIN).
Main Street Capital just increased their dividend by 2.4%.
Main Street? Or Dividend Street? I can’t tell the difference. Because this company is lining a street straight from its coffers to shareholders’ pockets. Gotta’ love it, right?
The business development company has increased their dividend for 11 consecutive years.
As with Fidelity National, this is the second dividend increase this year for Main Street Capital. This follows up another 2.4% dividend increase announced in August. And the stock yields a market-smashing 5.5%. Oh, and this dividend is paid monthly. Wait, there’s more. Main Street Capital also declared a special dividend of 10 cents per share to go along with this most recent dividend increase. It’s almost too good. And DNII/share is easily covering the monthly dividend, with room to spare.
This is a high-yield, monthly-paying dividend growth stock that is perfect for many long-term dividend growth investors.
I’ve highlighted this stock so many times on the channel, I’ve lost count. In fact, I just included it in a video from last month in which I talked about three of the best monthly dividend growth stocks out there. That video goes over the valuation and why long-term dividend growth investors should own a slice of this BDC. The stock is up 46% this year, so it’s had a nice run. But if you get a pullback, make sure it’s on your radar.
Last but not least, let’s have a conversation about the dividend increase that was announced by Visa (V).
Visa just increased their dividend by 17.2%.
Sheesh. How can you not love that? Visa’s tagline is “Everywhere you want to be”, as in its credit card. Well, this stock is everywhere I want to be, I can tell you that. And so is the dividend.
This is the 14th consecutive year in which the financial services company has increased its dividend.
Visa has been blowing the doors off with dividend growth since they first initiated their dividend. The 10-year DGR is an astounding 25%. Now, this is a long-term compounder, not an income play. That’s why it’s not surprising to see the yield at only 0.7%. But that’s pretty much where the yield has been for as long as I’ve been watching Visa. And that goes back many years. Meantime, with a payout ratio of only 30.3%, you already know this dividend is headed higher over the coming years.
This long-term compounder is up more than 800% over the last decade!
It’s the kind of stock you buy with the intention of basically holding forever. You put it in a drawer, forget about it, and let is slowly make you incredibly wealthy while you go about your life. It’s that easy. With a P/E ratio of over 40, nothing about this stock is cheap. But you could have said the same thing at pretty much any point over the last decade. And why would it be cheap? It’s a phenomenal business. You don’t get a diamond for the price of a cubic zirconia. It has pulled back of late, though. So if it’s not already on your radar, or in your portfolio, take a good look at 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.
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.