Dividend investors would be wise to focus not just on a stock's current yield, but also on the long-term growth potential of its dividends. That's because strong businesses that consistently raise their dividend payouts reward shareholders with a steadily rising income stream that essentially equates to a raise every year. And, well, who doesn't like a raise?
A study by C. Thomas Howard published in Advisor Perspectives in 2011 found that for every percentage point a stock's yield rises, its annual return increases by 0.22 percentage points if it's a large-cap, 0.25 if it's a mid-cap, and 0.46 if it's a small-cap. Even better, Howard found that dividend-growing stocks outperformed dividend cutters by 10 percentage points per year from 1973 to 2010 and beat both flat- and no-dividend stocks. With that in mind, here are two outstanding businesses that are likely to grow their dividends substantially in the years ahead: Texas Roadhouse (NASDAQ:TXRH) and Casey's General Stores (NASDAQ:CASY).
Source: Motley Fool
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