Dividends4Life: Five Stocks With Fast Track Dividend Growth

Five Stocks With Fast Track Dividend Growth

Posted by D4L | Wednesday, January 29, 2014 | | 0 comments »

Companies in the S&P 500 Index paid a combined $311.77 billion in dividends in 2013, up 11% from 2012. That is below the three-year annualized growth of 15%, though that 15% is the best three-year rate in at least 25 years and reflects the restoration of some of the dividend cuts of 2009 and early 2010. Will the robust growth continue? A look at historical precedents provides some clues. Last year, the S&P 500 Index paid out an estimated 32.6% of its earnings in dividends. The current payout ratio (dividends as a percentage of earnings) is higher than that seen during most of the 2003 to 2007 bull market but lower than the average of 39% over the last 25 years and 44% over the last 50 years. Lower payout ratios reflect greater flexibility to boost dividends going forward.

Many companies have cash to spend and a commitment to raising the payout. In 2014, dividend growth of 9% to 15% seems likely. However, the index’s dividend growth has averaged 6% annually since 1988, and growth seems likely to revert toward that long-run pace over the next few years. Below are five stocks that have raised their dividends aggressively over the last year but still have the flexibility to fund more growth: Fifth Third Bancorp (FITB), Kroger (KR), Magna International (MGA), Schlumberger (SLB) and Wells Fargo (WFC).

Source: Forbes

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