Make a play for high growth dividend stocks!
Hopefully, you have checked out the Dividends Diversify model portfolio.
It is called the Dividends Deluxe. And it holds some of my favorite dividend growth stocks.
Each stock in the portfolio is linked to my most recent dividend stock analysis for the company.
High Growth Dividend Stocks
Frequently, I like to highlight groups of stocks from the Dividends Deluxe with similar characteristics.
And, today’s focus is on 5 high growth dividend stocks. Each one has demonstrated high dividend growth rates during the past several years.
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Rather Than High Dividend Yields
Dividend stock investors, including me, can fall in love with stocks that have high dividend yields. Those high dividend yields are great for the passive income cash flow they provide.
That being dividends, my favorite kind of passive income.
However, high dividend yields usually come with slower dividend growth at best. Or perhaps, suspect dividend safety. And, in the worst case, the possibility of a future dividend reduction.
Chasing High Dividend Yields
In my younger years, I chased higher dividend yields. And, I still own a few dividend stocks with dividend yields greater than 5%.
But, I have found that high growth dividend stocks are my best performing investments over the long term. Usually, they come with lower dividend yields, but that is okay with me.
5 High Growth Dividend Stocks
So today, I’m going to highlight 5 excellent dividend stocks with high dividend growth. They are:
- Hormel Foods
- NextEra Energy
Hormel Foods (NYSE: HRL)
Hormel Foods is a Fortune 500 company. The company manufactures and markets high-quality, brand-name food and meat products.
Their brands number more than 50. Chances are you have consumed one or more of their products.
Hormel’s Brand Power
Here are just a few of those brand names you might recognize.
- Dinty Moore
- Lloyd’s Barbeque
- Staff Chili
- Wholly Guacamole
Hormel Food’s brands hold the number 1 or number 2 market share in more than 35 categories.
Furthermore, Hormel pepperoni is the leading brand of pepperoni in retail grocery. Finally, more than 90 million jars of Skippy peanut butter are produced annually.
Source: Hormel Foods Brands
Hormel Dividend Information
Hormel is a Dividend King having increased its dividend annually for 53 consecutive years.
Dividend Kings are those rare companies that have increased their dividend annually for at least 50 years.
Hormel High Growth Dividend Statistics
- Recent dividend yield – 2.0%
- 7-year dividend growth rate – 16.7%
- Dividend payout ratio – 44%
Hormel has a rich history of dividend growth and a dividend payout ratio below 50%. And, I expect Hormel to continue growing its dividend by 8% annually.
NextEra Energy (NYSE: NEE)
NextEra Energy is one of the largest electric power and energy infrastructure companies in North America. The company is also a leader in the renewable energy sector.
NextEra has two primary businesses, Florida Power & Light (FPL) and NextEra Energy Resources (NEER).
FPL is the largest electric utility in the state of Florida. It is also one of the largest electric utilities in the U.S.
While NEER is the world’s largest generator of renewable energy. The energy comes from the wind and sun.
Source: NextEra Energy Company Overview
NextEra Dividend Information
NextEra’s dividend is a bit unique in the utility industry. Normally, utilities have higher dividend yields. And, higher dividend payout ratios.
NextEra High Growth Dividend Statistics
- Recent dividend yield – 2.3%
- 7-year dividend growth rate – 10.6%
- Dividend payout ratio – 60%
With a modest payout ratio at 60%, expect the dividend increases to keep rolling from NextEra energy.
For my planning purposes, I am projecting 12% dividend growth in both 2020 and 2021. I expect a 7% annual dividend growth rate in subsequent years.
Paychex (Nasdaq: PAYX)
Paychex is a leading provider of integrated human capital management (HCM) solutions. They specialize in small to mid-sized businesses.
Their range of services includes:
- Payroll processing
- Human resources management & outsourcing services
- Business insurance
Source: Paychex business solutions
Paychex Dividend Information
Paychex has historically paid out 80% of earnings to investors in the form of dividends. So, as the company grows, your passive income from their dividend grows.
Paychex High Growth Dividend Statistics
- Recent dividend yield – 3.0%
- 7-year dividend growth rate – 8.9%
- Dividend payout ratio – 80%
I am looking for more 7-8% annual dividend increases in the coming years.
Related: Paychex stock and dividend analysis
Medtronic (NYSE: MDT)
Medtronic is a global healthcare solutions company. They are committed to improving people’s lives. And do this through medical technologies, services, and solutions.
The company produces and sells products in these areas:
- Cardiac and vascular
- Minimally invasive therapies
- Restorative therapies
- Diabetes services and solutions
Source: Medtronic products
Medtronic High Growth Dividend Statistics
- Recent dividend yield – 2.1%
- 7-year dividend growth rate – 10.7%
- Dividend payout ratio – 40%
Health Care Sector Exposure
As the population ages, health care spending is expected to increase. So, it’s always a good idea to have exposure to the health care industry in a dividend stock portfolio.
Pharmaceutical companies often show off high dividend yields. But, Medtronic really shines when it comes to dividend growth.
I am using an 8% annual dividend growth rate for my planning purposes.
Cummins (NYSE: CMI)
Cummins designs, manufactures, sells and services
- Diesel and alternative fuel engines
- Diesel and alternative-fueled electrical generator sets
- Related components and technology
Customers are serviced through a network of
- 500 company-owned and independent distributor facilities
- Nearly 8,000 dealer locations
Cummins operates in more than 190 countries and territories. They have almost 60,000 employees worldwide.
Source: Cummins company overview
Cummins Dividend Information
With a healthy 15% dividend increase already announced for this year, Cummins has increased its dividend for 14 consecutive years.
Cummins High Growth Dividend Statistics
- Recent dividend yield – 3.5%
- 7-year dividend growth rate – 18.8%
- Dividend payout ratio – 35%
Being in the industrial equipment sector, Cummins is vulnerable to economic recessions. The low payout ratio keeps the dividend safe during these difficult economic times.
The company may slow dividend growth during tough times. But once the economy and company sales rebound, attractive dividend growth normally follows.
Dividend Payout Ratio
The dividend payout ratio is an important metric.
A lower payout ratio helps a company maintain or even increase its dividend during difficult times.
A lower dividend payout ratio also provides a layer of dividend safety. It provides protection to dividend stock investors from a dividend reduction when profits fall.
Related: Cummins stock and dividend analysis
For The Beginning Investor
Are you new to investing and interested in getting started with dividend stocks? Experienced investors know what to do.
But new investors will often ask me: “How do I get started? “Can I get started without a lot of money?”
So, here is my answer to those two questions…
You Need A Brokerage Account
First off you need a brokerage account. It is the easiest and most convenient way to invest in stocks. An excellent option is Webull.
Webull is an app. You can set up an account right on your phone or tablet. It’s free to set up and once you are set up, you can buy or sell stocks for free.
I have researched and written a review about the Webull app.
You can read it here: Webull review – Free Online Stock Trading Platform.
Start With 1 Dividend Stock
Anyone that starts investing in dividend stocks, starts with 1. And then adds on from there.
For diversification, I believe it is best to build up to at least 5. A portfolio of 20 dividend stocks would be nearly optimal. But do not let that scare you away. You just need to start with 1 share of 1 stock.
We are talking long-term investing here. So you will have time to buy more as you have more money.
But What Stock Should You Buy?
So let’s say you have read this article and Hormel Foods popped out to you. After all, maybe you like Hormel chili or Wholly Guacamole.
Now here is an important investing rule. Invest in companies you know and understand.
Coke, Pepsi, McDonald’s, Target all come to my mind immediately. They are all members of my Dividends Deluxe model portfolio if you need more ideas.
You Do Not Need A Lot of Money
But, back to Hormel. You have just opened your Webull account and have funded it with $50. That’s right, just 50 bucks.
Now, place a market buy order to buy 1 share of Hormel Foods. Hormel trades under the ticker symbol HRL.
The ticker symbol is how you identify what stock you want to buy. An investment in 1 share of Hormel will take a little more than $40 right now.
That’s it. You have a brokerage account. You place a market order to buy 1 share of HRL. Boom, you are part owner in Hormel Foods. And officially a dividend stock investor.
Buy more shares of Hormel as you have more money. Or buy another stock that you are interested in. But for now, just get started with 1 share of 1 stock!
5 High Growth Dividend Stocks – Summary
These 5 companies have a solid track record of high dividend growth:
- Hormel Foods
- NextEra Energy
They operate in very different industries and sell a diverse range of products.
But they all have excellent dividend growth, healthy dividend payout ratios and a track record of sharing their profits with their investors.
5 High Growth Dividend Stocks – Final Thoughts
As a dividend stock investor, do not forget about dividend growth.
Often times a moderate dividend yield of 2-4% combined with 7-9% annual dividend growth can be a very potent combination for long term total returns.
And finally, for new investors. Remember, just 1 share of 1 stock for less than $50 to get started. Good luck and happy investing!
Disclosure & Disclaimer
This article, or any of the articles referenced here, is not intended to be investment advice specific to your personal situation. I am not a licensed investment adviser, and I am not providing you with individual investment advice. The only purpose of this site is information & entertainment. We are not liable for any losses suffered by any party because of information published on this blog. See this site’s Disclaimer and Privacy tab for more information.