Dividend Growers-Over 2.5% yield


Looking for companies that have a track record of growing their dividend? Here you go!

In this blog, I’m looking at Dividend Growers. These are companies who may not provide the absolute highest yield; however, they increase their dividends on a regular basis and reward shareholders. I chose a custom set of parameters to find these companies on my screener.

Here are the parameters:

Yield over 2.5%

I chose this parameter because most people can get around a 2% on a high yield checking or savings account. My credit union for instance pays 2%; this is basically riskfree. So, when choosing a dividend stock it needs to pay more for me. I also chose stocks whose yields were lower than 5%. I believe this is the sweet spot for my goals, which is a combination of income and total return.

1yr Dividend growth over 5%

This is because we want the dividend growth to be more than inflation. They tell you inflation runs around 2% but really when you look at all the price increases you deal with on a daily basis it’s more like 5-6%.

5yr dividend growth over 9%

Once again, we want a company with a proven track record of growing it’s dividends over long periods of time. Some of the companies on this list have paid dividends for 30 years and always increase their dividends.

Payout ratio less than 70%

We want a company that is paying out less than 70% of earnings because we want it to have the ability to increase its dividend for a long time. You can find companies paying out 100% or even 200% of their earnings. These companies are in serious danger of cutting their dividends because they can’t “afford” to pay it basically. This, of course, doesn’t apply to REITS. For REITS, we use a metric called Funds From Operation. This is a more accurate judge of REIT’s ability to pay the dividend. Hence, why for one REIT on my list you’ll see over 100% payout ratio.

Cash Flow Payout of less than 50%

I prefer to use the Cash flow payout to screen companies; it’s a better representation of how much the company is paying out than the Payout Ratio. The Payout Ratio is calculated with Earnings. Cash is less susceptible to accounting errors and mishandling. I want a company paying out less than half of its cash flow.

I will end by saying this is part by saying this is definitely not a comprehensive list, there are more that meet these standards. However, I narrowed it down to ones I felt were somewhat promising, especially if you bring in other metrics like P/E or P/B values and more. I also wanted to mention those I haven’t heard mentioned elsewhere. Some of these I own, some of them I don’t. There are also a few on my watch list. As always, do your own investigation and research before making any investment decisions. Keep in mind-numbers are not the entire story!

Here’s the Dividend Growers:



Here is the video above containing my play by play analysis.

A few notes about each company

Eastman-This is a company I do own and plan on holding long-term. It’s currently paying out only around 30% of its cash flow. 3.42% is a very respectable yield. I consider this one in my top 5 favorite stocks. At the same, keep in mind my investment horizon is over 10yrs.

Kroger– I own this in my IRA. Payout is very low. However, please be warned that if you remove the last quarter of Kroger’s earnings you see a negative Cash Flow Payout Ratio. The dividend has grown considerably but do keep an eye on that cash flow. Kroger just recently increased their dividend so I don’t believe it’s an issue short-term. Pay attention here.

Footlocker– Great cash flow plus a very low payout ratio. At the moment, the yield is somewhat attributed to the falling price over the last few months. I’m personally overweight retail so Footlocker doesn’t interest me. However, I must say it looks EXTREMELY promising at these price levels. If I wasn’t overweight retail I might start a position.

CAT– Here is another company whose stock has been trading at lower valuations. Earnings reports have not been great. However, for the dividend investor the growth rate looks fabulous. The payout ratio is low; however, the Cash Flow payout is near the end of my cut-off. I don’t own this one.

Best Buy- Look at the growth on this one. Cash Flow Payout is only 36.6% so plenty of room to keep growing it. It’s another one to watch, I’m once again overweight in the retail sector; therefore, I’m not interested at the moment. Best Buy is a turn around story, hopefully they can keep things going.

MGA– This has the lowest Cash Flow Payout percentage of any stock on the list. The payout is super low as well. So, it has a lot of ability to keep growing the dividend. This stock is currently beaten down very badly. Given the economic cycle, it’s something I can only recommend long-term. However, from an income perspective it looks very safe. I don’t own this one at the moment.

Kaiser– I did a video on Kaiser here, I am long on Kaiser

Cracker Barrel I’m including this one even though it doesn’t meet all of my criteria. I chose to do this because it’s one I don’t hear talked about much. The dividend growth rate passes but is on the low side. It’s the Cash Flow Payout that exceeds my parameters. On the other hand, it has a decent yield of 3% and the Payout ratio is fine. While I don’t own the stock, I do enjoy eating there. If the cash flow continues to grow it could present a nice addition as a Dividend stock.

PKG– The books look good with PKG, the growth has been incredible. With that said, you can see there’s still lots of room to grow the dividend with such low payout numbers. This has been on my watch list at times. At the moment, their exposure to office depot has me not buying. Who knows though, perhaps that’s not an issue?

Extra space Storage– This is the first REIT of the bunch. Therefore, pay more attention to the FFO number. 68% is really not bad for a REIT. This company just had an earnings report and it looked great. It is on my watch list, hoping for cheaper prices.

MMM-3M is on the high end when it comes to payout ratio. It also slightly breaks my paramets with a Cash Flow Ratio of 56%. However, it has a decent dividend yield and growth over the long-term. Currently, they are dealing with lawsuits. I don’t own this stock.

Eaton Vance– I personally just opened up a position in Eaton Vance last month. Eaton Vance is a Dividend Aristocrat, it has increased its dividend for over 34 years. Growth is good and the payout ratio is pretty low. Cash Flow payout is right at the upper limit. I won’t say this company looks flawless to me; however, it met my needs (I needed exposure to the sector that paid a dividend on a specific month!). Most importantly, EV did not cut it’s dividend during the great recession and bounced back extremely fast.

Darden Restaurants– Another one I just purchased. Darden owns Olive Garden, Longhorn Steakhouse and Cheddars. Dividend Growth is great and the yield is respectable. The payout ratio is getting up there but as you can see the Cash Flow payout is fine. I love me some Longhorn Steakhouse.

Ryman Hospitality Properties– I hold this in my IRA, it’s a smallcap REIT. RHP owns Gaylord Hotels around the country that caters towards corporate meetings and upscale clients. They also own the Grand Ole Opry and the Ryman Auditorium. This one caught my eye due to the Dividend growth and very low FFO number. I believe it may present a tremendous opportunity for returns.


Lastly, I am NOT a professional financial advisor, nor is this intended as advice. I am simply presenting data and potential options given that data. This is for entertainment purposes only. Each investor should hire a professional and do their own due diligence before making any investment. All investments contain risks.

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