5 High Growth Dividend Stocks For Increasing Passive Income

Make a play for high growth dividend stocks!

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.

Sure you can get dividend growth and high dividend yields from ETFs. But I enjoy picking stocks too.

High Growth Dividend Stocks

So, I like to highlight groups of stock investments that I have picked for the Dividends Deluxe that share 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.

Disclosure: At no cost to you, I may get commissions for purchases made through links in this post.

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.

Related: Dividends Still Don’t Lie – Book Review

Chasing High Dividend Yields

In my younger years, I chased higher dividend yields.  And, I still own a few dividend stocks with dividend yields more than 5%.

But, I have found that high growth dividend stocks are my best performing investments over the long term.  Usually, they are dividend stocks with dividend yields of less than 5%, but that is okay with me.

5 high growth dividend stocks

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
  • Paychex
  • Medtronic
  • Cummins

Hormel Foods (NYSE: HRL)

Hormel Foods - A high growth dividend stock

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.

  • Applegate
  • Chi-Chi’s
  • Dinty Moore
  • Jennie-O
  • Justin’s
  • Lloyd’s Barbeque
  • Skippy
  • Spam
  • 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.

Related:  Hormel Foods stock and dividend analysis

NextEra Energy (NYSE: NEE)

NextEra Energy Logo

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. They are solid choices for making money from dividends.

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.

Related:  NextEra Energy stock and dividend analysis

Paychex (Nasdaq: PAYX)

Paychex - One of the fastest growing dividend stock you can find

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 Logo

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.

Related: Medtronic stock and dividend analysis

Cummins (NYSE:  CMI)

Cummins Logo

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 Logo

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.

Or, just sign up now. For a limited time, Webull is offering new accounts free stock!

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.

Are you looking for more dividend stock ideas? I use the Simply Investing Report.

The SI report analyzes high yield blue chip dividend stocks
Click for more information from Simply Investing

The Simply Investing Report is full of high-quality dividend stock analysis and recommendations.

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!

Maybe you need to save up that $50 first to get started? Then, save on all your purchases with Rakuten. And get $10 cash just for making your first purchase.

Ebates logo
Ebates is now Rakuten: click to learn more

You buy a lot of things you need online anyway. Why not save a few bucks and get $10 cash just for doing so.

Another option to get some free money is to open your Webull account. For a limited time, Webull is offering free stock just for signing up.

5 High Growth Dividend Stocks – Summary

These 5 companies have a solid track record of high dividend growth:

  • Hormel Foods
  • NextEra Energy
  • Paychex
  • Medtronic
  • Cummins

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

This is 1 of my favorite tips for dividend portfolios. 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. Total returns are a combination of the recurring dividend payments you receive and share price appreciation.

And finally, for new investors. Remember, just 1 share of 1 stock for less than $50 to get started. Good luck and happy investing!

My Favorite Dividend Investing And Money Resources

Webull: Trade at no cost and get free stock for a limited time

Simply Investing: Dividend stock analysis and recommendations

Rakuten: Save on all your purchases and get $10 Cash

Disclosure & Disclaimer: I am not a licensed investment adviser, financial adviser, or tax professional. And I am not providing you with individual investment advice, financial guidance, or tax counsel. Furthermore, this website’s only purpose is information & entertainment. And we are not liable for any losses suffered by any party because of information published on this blog.

I own all of the high growth dividend stocks mentioned in this article: HRL, NEE, PAYX, MDT, CMI.

14 thoughts on “5 High Growth Dividend Stocks For Increasing Passive Income”

  1. Hi Tom,

    Of these, my favorite are NextEra (I’m a Florida Power & Light customer) and Medtronic. Electricity and healthcare will always be in demand. I’m thinking of buying some of these stocks with Webull, to complement my main M1 Finance portfolio.

    Cheers,
    Miguel

    • Good luck with the investments Miguel. You can’t go wrong with any of them in my opinion! And agree with your thoughts on essential service companies. They are a great way to build a solid stock portfolio. Tom

    • I am a rookie & we just lost $120,000 in 2019 Oklahoma Flood. NO HELP from any agencies. Facing foreclosure. Talk about disheartening…
      Have wanted to do this a L ON G time. How does a person get paid through investments? When,How, what method of payment, etc.
      Thank you

      • Hi Sandi. I’m very sorry for your financial loss. To directly answer your questions about getting paid through investments… 1) When? – Most of the investments I cover here at Dividends Diversify pay dividends on a quarterly basis. 2) How? – You buy and own dividend-paying stocks or dividend-paying exchange-traded funds in a brokerage account 3) What method of payment? Your dividends are paid in cash and deposited in that same brokerage account. Once the dividends are deposited in your account, that cash is yours to do with as you choose. However, realize the value of your original investment will fluctuate on a daily basis. Tom

  2. Thank you, very insightful list!
    Have to take a closer look to these companies..
    Dividends rock!

    – Financialnordic.com

  3. Great list! I wouldn’t have thought of Hormel, I’ll have to take a look at it again while I eat a can of Spam 🙂

  4. Hi Tom. I like to tilt toward dividend growth over dividend yield as you mentioned.
    It looks like a good group of stocks you’ve presented. I own Hormel already.
    CMI is one I’m looking to hold again. The recent market turmoil is bringing it closer to a price that makes me want to initiate a position.
    I’ve briefly looked at NEE recently as it’s one that DivvyDad brought to my attention, and I don’t currently hold any utilities.
    I haven’t looked too closely at MDT and PAYX, but am aware of them and will keep them in my thoughts should I look to grow my portfolio.
    2-4% yield coupled with 7-9% dividend growth over many years sounds like a wonderful combination to me.

    • Thanks for summarizing your thoughts on these stocks ED. And yes the recent market volatility may bring us some opportunities. Tom

    • Hi Susan, It’s never too late to start. The more important question is how long can you keep the money invested? You shouldn’t invest in the stock market unless you have at least a 3-5 year time horizon before selling. Stocks can go down in the short term. So, you don’t want to invest money in stocks you will need in the short term. Tom

  5. Hello Tom, I’m very new to buying dividends. You have piqued my interest in the Webull brokerage account. Can you explain Margin account and Cash account in basic terms? I’ve researched a bit and a Cash account seems like a smarter route to take but you seem like an expert so I want your advice.

    • Hello Ashley. Thanks for visiting and your question.

      I’ve been investing for 40 years (ouch, that sounds old), and have never had a margin account. Therefore, I invest with a cash account. Which just means you deposit cash in your brokerage account. And you can only buy/invest in stocks up to the amount of that cash. Once you own 1 or more stocks, you can sell some or all of them, and as long as you keep that cash from the sales in the account. It is also available to invest in new shares of stock.

      On the other hand, a margin account operates like a cash account but ALSO means you can borrow money from the broker to buy even more stock.

      Here is an analogy. You go to the store with cash. And the store will let you buy as much stuff as your cash will allow (like a cash brokerage account). Go to the store with a credit card and the store will allow you to buy much more. As much as the rules of your credit card will allow (like a margin account).

      Investing with a margin account is much riskier. If you borrow money, and your stocks go down. You are still on the hook to pay back what you borrowed. You can also make more money when your stocks go up. Because you have more money to invest when you borrow. With a cash account, you can’t lose more than the cash you put it. And you can only realize gains based on the cash you have to invest.

      If you are just starting out. I suggest you stick with a cash account. Which I can see you have already thought was best. And I agree. But ultimately, the decision is up to you.

      Good luck with your investments. Sometimes getting started is the hardest part. Tom

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