7 dividend stocks to buy with growing payouts

Income investors should look for growing payouts, not dividend yield alone.

  • By Jeff Reeves,
  • U.S. News & World Report
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When income investors are looking for stocks, it's important to not get hung up on dividend yield alone. After all, "yield" is calculated by dividing the annual dividend payout by share price – and some of these stocks have a high yield simply because they are stuck in a tailspin of falling share prices. Instead, investors should consider dividend growth over just raw yield. This proves a company is thriving and making bigger and bigger payouts. The following seven stocks all have dividend growth of 50% or more (and in some cases, much more) over the last five years and currently offer yields that are better than the roughly 1.6% of the typical stock in the S&P 500 (.SPX).

AbbVie

Pharmaceutical company AbbVie (ABBV) is relatively new compared with some older names on this list, as it was spun off of Abbott Laboratories (ABT) in 2013 to focus on branded drugs while its parent company offered a more diversified health care business. Like Abbott, ABBV has seen significant dividend growth over the last few years. Case in point: ABBV recently approved a dividend increase of more than 10% in October 2020, which will be payable at a rate of $1.30 in February 2021. This represents a 128% increase in payouts over the last five years.

Current yield: 4.2%

Altria Group

Tobacco giant Altria Group (MO) isn't exactly a growth stock when it comes to revenue and profits, given the long-term decline of cigarette use in the U.S. However, the company isn't stuck in the past as it continues to branch out into alcohol sales via its Chateau Ste. Michelle winery and a stake in megabrewer Anheuser-Busch InBev (BUD). The company is also exploring ventures in cannabis and vaping technologies to ensure its stock has a bright future. For today's investors, a generous dividend and consistent dividend growth makes MO worth a look if you're investing for income. MO's quarterly payout growth over the last five years, from 56.5 cents to 86 cents per share, represents a 52% increase.

Current yield: 8.3%

Comcast Corp.

Sure, TV and landline phones are on the way out. Telecommunications powerhouse Comcast (CMCSA), however, still has a wide moat that protects its business as putting down fiber-optic cables or offering internet access is not exactly cheap or easy for competitors to do. While the stock's dividend yield isn't tremendous, it's still above the average of the S&P 500 at present – and based on recent trends, investors may be able to expect it to move even higher in the coming years. CMCSA's quarterly payout over the last five years has grown from 12.5 cents to 23 cents per share, an 84% increase.

Current yield: 1.8%

Home Depot

Home Depot (HD) boosted its payout by 10% in 2020 even as many stocks were more conservative with their distributions amid the pandemic and its related challenges. The home improvement company also managed to log a very impressive run last year, with a more than 20% increase for share prices as people stuck at home began to consider acting on long-delayed projects around the house. Even more impressive if you're an income-oriented investor is the long-term dividend growth of this nearly $300 billion retailer. Over the past five years, Home Depot's quarterly payout has grown from 69 cents to $1.50 per share, an increase of 117%.

Current yield: 2.2%

Illinois Tool Works

With more than half a century of annual dividend increases, Illinois Tool Works (ITW) is one of the more reliable dividend stocks on Wall Street – even if this $65 billion company isn't quite a household name. The industrial company makes construction products, car parts, restaurant equipment and even appliance parts. This diversified but fairly consistent business model allows for reliable dividend growth, as evidenced by the fact dividends have more than doubled compared with payouts in 2016. The quarterly payout over the last five years has increased 107%, from 55 cents to $1.14.

Current yield: 2.1%

Kroger Co.

Grocery stores are very stable businesses, offering the staples that U.S. households always need even if the margins on their operations aren't particularly large. This allows $24 billion supermarket chain Kroger (KR) to operate very reliably and pay regular dividends that keep growing year after year. Though the track record of annual dividend increases isn't as long as some other stocks on this list, with Kroger only notching 14 consecutive years of dividend growth, the recent increases have been considerable. Quarterly payouts over the last five years have grown 71%, from 10.5 cents to 18 cents per share at present.

Current yield: 2.1%

Medtronic

A $160 billion medical device company based in Ireland, Medtronic (MDT) is one of those health care stocks that you can always depend on thanks to its massive scale and in-demand products. Offering everything from stents and heart valves to surgical supplies and wound care products, MDT will have plenty of customers across the globe for many years to come in the world of modern health care. That adds up to reliable revenue and dividend growth as a result. Over the last five years, MDT's quarterly dividend has grown from 38 cents to 58 cents per share, an increase of nearly 53%.

Current yield: 1.9%

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