14 dividend stocks that rose 100% or more in 5 years as the payouts doubled

Investors use dividend stocks to pursue various strategies. Here’s a summary of three of them:

• An investor might select a stock with a high dividend yield because they need to maximize income right now. A secondary long-term object is growth as the share price hopefully rises. A very high current dividend yield could be a red flag that professional investors expect the payout to be cut. The share price may already have fallen to push the yield up.

• An investor might prefer a long-term growth strategy that focuses on companies that have raised dividend payouts steadily over the years. This means the stocks might have low dividend yields based on current share prices. But income isn’t the objective. An example of a fund following this type of strategy is the ProShares Dividend Aristocrats ETF
  NOBL,
  +0.01%,
  which tracks an index of 66 stocks in the S&P 500 that have increased regular dividends for at least 25 straight years. That is the only requirement — it makes no difference how high the current dividend yield is and it doesn’t matter if the dividends have increased by relatively small amounts.

• Another strategy that may be overlooked is growing an income stream over the long term. This means holding stocks for years as dividends increase, so that eventually the yields are significant relative to the price you paid for the shares. This might be a “growth, then income” strategy, as you reinvest for some time, before switching over to income by receiving the dividend payouts rather than buying more shares with them.

To select individual stocks while pursuing any long-term strategy, you need to look ahead and consider companies’ strategies and how likely they are to remain competitive over the coming decades. You might also read companies’ earnings announcements, quarterly and annual reports and look ahead at consensus estimates for earnings, sales and cash flow, to see if there are any signs of decay.

But sometimes looking back can be a real eye-opener. Here’s an example:

• If you had purchased shares of UnitedHealth Group Inc.
  UNH,
  +0.12%
  five years ago (that is, at the close on Feb. 15, 2018), you would have paid $226.02 for your shares. The annual dividend rate at that time was three dollars a share, so your dividend yield would have been 1.33%.

• Over the next five years, the company’s annual dividend payout rate increased by 120% to $6.60 a share, while its share price increased by 117% to $491.25. That compares to a five-year gain (excluding dividends) of 52% for the S&P 500 through Feb. 15, 2023.

• For a new investor going in at the close on Feb. 15, 2023, UnitedHealth’s stock’s dividend yield was 1.34% — pretty much the same as it was five years ago. But the yield on your five-year-old shares would now be 2.92%.

This example of growing your own yield to 2.92% may not seem so impressive at first, but UnitedHealth’s shareholders have been on an excellent ride over the past five years. And this stock ranks last by five-year price increase on the following list.

A double-double dividend-stock screen

Starting with the S&P 500, we looked back five years to narrow the list to 319 stocks with dividend yields of at least 1.00% as of the close on Feb. 15, 2023, according to FactSet. A 1% dividend yield might seem modest, but as you can see from the UnitedHealth example above, it is a reasonable floor for this screen.

Then we narrowed further to companies that had at least doubled their annual regular dividend payout rates over the past five years, while their share prices had increased at least 100% through the close on Feb. 15, 2023. This brought the list down to 14 companies. Here they are, sorted by how much their share prices increased:

Click on the ticker for more about each company or exchange-traded fund.

Click here for Tomi Kilgore’s detailed guide to the wealth of information available for free on the MarketWatch quote page.

Starting from the left, the table has five-year price increases, then total returns with dividends reinvested. Then you can see that some of these stocks have current yields below 1.00%. But moving to the right-most column, you can see what the yields would be on shares purchased five years ago. The yields that have grown to the highest levels by this measure have been those for Broadcom Inc.
AVGO,
-0.19%,
at 7.31%; Tractor Supply Co.
TSCO,
-0.98%,
at 5.96%; and Elli Lilly and Co.
LLY,
-2.06%,
at 5.79%.

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