Big Dividend Growers with yields over 3%
Today I’m going to share some Dividend Growers that have double digit dividend growth over the 1 year and 5 year marks. In addition, the majority of them have a payout ratio under 50%.
A low payout ratio allows companies to continue to grow their dividends at higher rates.
On the other hand, please keep in mind that a low payout ratio is no guarantee that a company won’t cut their dividend. For example, look at Disney during 2020. Delta was another example. I understand that 2020 was an out of the ordinary circumstance-simply keep this in mind going forward.
Lastly, I didn’t do any sort of competitor or balance sheet analysis on any of these companies. This data is based only on dividend growth rates and payout ratios. It is up to you to do a deeper dive and research to determine if you like any of these stocks. I limited the stocks to small to mega-cap stocks; no micro-cap stocks were included.
I post these sorts of articles because this is the exact process I go through when screening for stocks. I find possibilities and then I research further.
Disclaimer: I do own T Rowe and Best Buy on this list.
Best Dividend Growers with low Payout Ratios
- Best Buy
- Packaging Corp of America
- Cohen & Steers
- Regions
- Ally
- Fifth Third Bancorp
- JP Morgan
- Morgan Stanley
- T Rowe Price
- UPS
- Bank of Ozark
Dividend Growers Master TABLE
| Dividend Yield | 1 yr Dividend Growth | 5 yr Growth | Payout Ratio | |
| Best Buy | 4.65% | 25.71% | 21% | 39% |
| Packaging Corp | 3.63% | 25% | 14.7% | 42% |
| Cohen & Steers | 2.96% | 22.22% | 14.5% | 51.6% |
| T Rowe Price | 3.83% | 11.11% | 16.05% | 46.29% |
| UPS | 3.14% | 49% | 12.9% | 48.8% |
| Regions Bank | 3.78% | 29% | 23.4% | 36% |
| Ally | 3.64% | 20% | 20.11% | 17.24% |
| Fifth Third Bancorp | 3.50% | 11.11% | 16.5% | 36.25% |
| JPM | 3.52% | 11.11% | 14.9% | 32.10% |
| Morgan Stanley | 3.64% | 10.7% | 25.4% | 41.9% |
| Bank of the Ozark | 3.21% | 12.3% | 12.2% | 29.77% |
With the exception of Cohen & Steers, all of these companies have a payout ratio under 50%. Some have extremely low payout ratios; for instance, Ally and Bank of the Ozark.
Also, notice how many of these big dividend growers are banks. Regions Bank in particular increased its dividend at a large rate. Almost a 30% dividend increase this year alone and a 23% dividend growth rate over the last five years. With a payout ratio of only 36%, it seems like Regions is a good choice for safe cash flow.
–The only bank stock I personally own is Citizens Financial Group #CFG. It didn’t make the cut because its five year dividend growth is 8.5%.
Ally financial really stands out to me looking at only the dividend growth numbers. It’s paying out only 17% of its earnings and has a 20% dividend growth rate. Ally had a miss on its last earnings report, but one might want to investigate further? It’s currently trading at a P/E of 4.66, which is historically low for this stock.
Cohen & Steers and T Rowe Price are asset management companies. The price on TROW is repressed due to recession fears. I’m down about 14% in TROW. I was fortunate in that I sold the majority of my TROW position at a nice profit before the correction.
The stock price is back to 2018 levels and I think there is a good bit of safety here. With that said, I’m not adding to my own position. This isn’t because I am hesitant or don’t like the stock, but because I want to reduce the number of positions in my portfolio and TROW is one I decided to sell to reduce my positions.
Biggest Dividend Growers so far this year
UPS is the biggest dividend grower on this list. A whopping 49% increase in its dividend annually. There are companies that grew their dividend on a larger percentage basis than UPS; however, many of these companies cut their dividend during the pandemic. So, be careful when you see something like a 1000% dividend increase.
On the other hand, notice that the 5 year dividend growth for UPS is one of the weaker ones in the table. In addition, its payout ratio is gradually approaching the 50% mark. It’s a question of whether UPS can continue to increase it’s dividend at double digits for the next five years. We shall see.
Disclaimer-I am long Fedex in my brokerage portfolio. Even though Fedex has a large dividend growth rate, it missed the list because it pays under a 3% yield.
Largest Dividend Yield
Best Buy has the largest dividend yield on the list, a 4.65% yield. A few months ago, I picked up some shares for my IRA account. I sold some of my shares at a profit, but still have some that I’m currently down about 12%. With recession fears, retailers are being particularly hard hit. I personally have no plans to add more to my position even though current prices are back to 2018 levels. It has some impressive dividend growth stats-a 21% 5 year dividend growth rate!
Honorable Mentions
There are some companies that barely missed out on my list. Either due to a lower five year growth rate or a higher payout ratio.
Eastman Chemicals is a company that I’ve owned shares in for years. It pays a 3.24% dividend with a 10% annual growth rate. However, its 5 year dividend growth rate slightly missed the mark at only 8.31%, so I didn’t include it on the list.
Blackrock was another that missed being on the list because it pays a 2.8% dividend. It has double digit dividend growth on the 1 and 5 year marks.
Bristol Meyers almost made the list, but I felt it’s payout ratio of over 70% was too much to include.
Closing Thoughts:
Don’t get enticed by dividends alone. There could be a good reason the company is paying such a large dividend. Maybe the business is in trouble or isn’t growing? You are better off finding good businesses at a good price, considering dividends secondary. I do think the list has some good ideas for more research. Dividend growth is just one of the many things to consider when trying to find a good long-term dividend stock to hold.
Wish you the best on your INVESTMENT JOURNEY!
