Passive income is awesome. But not all passive income is created equal. Some forms of passive income are definitely better than other forms.
And I’d argue that dividend growth stocks provide the best form of passive income – growing dividend income.
First of all, there’s nothing out there that has the passivity of dividends. Wake up. Get paid. It really is that easy.
Second, passive income isn’t all that great if it isn’t growing and keeping up with inflation.
Dividend growth stocks have built-in inflation protection through dividend increases. Great businesses are producing reliable, rising profits.
And the best of the best return some of those reliable, rising profits back to their shareholders in the form of reliable, rising dividends.
If your passive dividend income is increasing even faster than inflation, your purchasing power is rising over time. That creates a growing gap between your passive income and expenses.
Today, I want to tell you about three different dividend growth stocks that just announced dividend increases. Ready?
Let’s dig in.
Recent Dividend Raiser #1: Leggett & Platt, Inc. (LEG)
Leggett & Platt just increased their dividend by 5%.
This manufacturing company has been one of the most consistent dividend payers and raisers out there. The dividend reliably rises like clockwork from this Dividend Aristocrat.
Leggett & Platt has increased their dividend for 50 consecutive years.
That puts them in vaunted Dividend King territory, which includes only stocks with 50 or more consecutive years of dividend increases. This 5% dividend increase is actually higher than their 10-year dividend growth rate of 4.3%. Love when that happens. And with the stock’s current yield of 2.9%, it’s not a bad current income play either.
This stock has been a monster, up almost 100% over the last year.
Dividend Aristocrats like this one are awesome. You get those capital gains to sleep on while you get the growing cash flow to go out and spend. It’s getting your cake and eating it, too. It’s not cheap after a ferocious run, now sporting a P/E ratio over 27, but this is the kind of stock you hold on to once you snag it on a dip.
Recent Dividend Raiser #2: UGI Corp. (UGI)
UGI increased their dividend by 4.5%.
That beats inflation. Better yet, it’s paired with the stock’s current yield of 3%. That’s not a bad combination of yield and growth. And growth you shall have, because the dividend increases continue to reliably stream in.
This marks the 34th consecutive year of dividend increases for UGI.
This gas and power distributor is the kind of stock that’s great to have in a diversified dividend growth stock portfolio. Your bills are reliable, right? And they’re going up all the time, right? Well, that’s why it’s so important to make sure your passive income is reliable and also going up. Speaking of going up, their 10-year dividend growth rate is 8.1%. So there could be even bigger dividend raises in store for UGI shareholders moving forward.
The stock’s up more than 30% YTD, but I actually think the valuation is reasonable.
It’s trading hands for a P/CF ratio of 8.2, which isn’t far off from its five-year average of 8. And the stock’s five-year average yield is only 2.5%, so investors buying in here are locking in a higher yield than the stock has typically, on average, offered over the last five years.
Recent Dividend Raiser #3: Pool Corporation (POOL)
Pool gave their shareholders a monstrous 37.9% “pay raise” with their recent dividend increase.
I don’t remember ever getting a 38% pay raise back when I still had a day job. No matter how early I came in or how late I stayed. Never happened. Yet POOL shareholders are getting an almost-38% boost in their pay for doing nothing other than hold shares. That’s the easiest and most rewarding job I’ve ever heard of.
This is the 11th consecutive year of dividend increases for the swimming pool products company.
I don’t know what’s more fun. Swimming in a pool or getting a 38% dividend increase. I’ll let you be the judge of that. While the dividend increase is nice, just be aware that the stock’s yield of 0.7% makes this more of a long-term compounder than an income play. And long-term compounders like this one tend to crush higher-yielding stocks over the long run in terms of total return.
Yet again, we have another stock that’s up almost 100% over the last year.
Who ever said dividend growth investing was boring? Certainly not me. Unless you consider compounding your wealth and passive income at stratospheric rates to be boring. This stock is anything but cheap now, though. The P/E ratio of almost 42 is up there with high-flying tech stocks. But if you can see a drop in this name, consider taking a deep dive into it.
— Jason Fieber
P.S. If you’d like access to my entire six-figure dividend growth stock portfolio, as well as stock trades I make with my own money, I’ve made all of that available exclusively through Patreon.
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