Investing

3 Dividend Stocks Growing Payouts Over 30% A Year

The Gaming Dividend

Published: February 4, 2024 11:09 am

Last Updated: February 8, 2024 8:31 am

Dividend growth is arguably more important than the dividend yield. When a company grows the dividend on a consistent basis, then the income you collect from it grows as well. This can have a real snowball effect as the years start to accumulate. If a company raises the dividend by 10% every year, for example, that’s nothing to act nonchalant about. Imagine if your job gave you a raise of 10% every year. You’d be happy! In this particular case, we will review three separate stocks that have grown their dividend by a whopping 30% annually! This kind of growth means that the income you receive from these stocks doubles about every 3 years.

Voya Financial

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Voya Financial (VOYA) is a financial company that operates as a retirement, investment, and employee benefits advisor within the United States. The company is essentially in charge of managing, growing, and planning people’s retirement money. The dividend yield is quite average at only 2.2%. However, the gem here is the dividend growth. Over the last 5-year period, Voya Financial has grown their dividend by an average 97.4% per year! The company started by paying out a quarterly dividend of only 1 penny per share in 2019.

• 2020: dividend grew to $0.15 per share
• 2021: dividend grew to $0.17 per share
• 2022: dividend grew to $0.20 per share
• 2023: Now here’s where the real growth happened. The dividend was double to a payout of $0.40 per share.

When averaged out over the last 5 year period, the dividend growth comes out to an annual compound rate of 97.4%. The best part is that the dividend is ultra safe since the payout ratio sits at only 12.7%. The company is highly profitable with $1.5B in cash from operations and levered FCF (free cash flow) margin of 35%. (Click here to see 7 ‘Strong Buy’ Ultra Dividend Leaders To Grab Before It’s Too Late)

Dicks Sporting Goods

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Dicks Sporting Goods (DKS) remains a well-known brand across the US. What might not be well known, is that the company’s dividend growth is off the charts! First off, the dividend yield is about 2.7% and they’ve grown the dividend for 9 consecutive years. They are approaching the 10 year mark on annual dividend raises and this is a great achievement that reinforces how cash flow positive the company is. As a bonus, the dividend payout ratio is really safe at only 29%.

The best part about Dick’s dividend is the growth. Over the last 5-year period, the dividend has grown at an annual rate of 34.76%. Getting an annual raise of 34.7% is something that most people would dream of! Well, that was the reality for shareholders of Dick’s.  The company is able to achieve this type of growth due to its strong financial performance. For reference, Dick’s has a net income margin of 7.7% and a return on common equity of 41%.

The fact that Dick’s was able to still provide investors a strong dividend increase over the course of the pandemic, proves how resilient the company’s financials are. They managed to succeed during a period when most retail stores were forced to close. Their revenue has an average growth of only 3% but despite this, they operate at high levels of efficiency through all of their sale channels.

NXP Semiconductors

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NXP Semiconductors (NXPI) has a dividend yield of 2%. This low starting yield can quickly change when we look at how fast they’ve grown the dividend. The average compound annual growth rate of the dividend has been 52% over the last 5 years. Semiconductors are crucial electronic components made from materials like silicon. Although not common in most parts of the world, they are extremely valuable. This is because they are essential to powering a wide range of devices such as computers, phones, other consumer electronics, and automotive systems. This is one of those companies that deal with products we use on a daily basis but we just aren’t aware of.

The dividend has been increased for 5 consecutive years in a row and it’s strongly believed that these increases will continue. This is because of the safe payout ratio of 27% and the high levels of cash flow. The company has a EBITDA (earnings before interest, taxes, depreciation, and amortization) of 7.4% and a revenue growth of 7% annually. Not only is the dividend growth awesome, but the stock remains undervalued. The current P/E ratio sits at 15x but the sector median P/E ratio is 21.4x. Lastly, the company has a net income margin of 21%. (Click here to see 2 Ultra-Yield Dividend Stocks To Buy and 1 to Sell)

Summary

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While starting dividend yield is what most investors see at first glance, the dividend growth metrics is where the real value lies. All of these mentioned companies have grown their dividends by an annual rate between 30 – 97%. This kind of growth is only achieved by the highest of quality companies and is a milestone that is not commonly seen. As mentioned, the dividend on all of these companies also remain very safe and provide lots of potential for continued growth due to high levels of cash flow and the ultra-low payout ratios.