These 3 Dividend Stocks Just Gave Their Shareholders Pay Raises: 1st Source (SRCE), McKesson (MCK) and Stanley Black & Decker (SWK)

Dividend growth investing. It’s the gift that keeps on giving. Actually, it’s better than that. Because the gifts – the dividends – get bigger and bigger, year in and year out. That’s right.

The growth in dividend growth investing is all about growing dividends. Dividends are, by themselves, fantastic. I mean, who doesn’t want to wake up to fresh, new money they didn’t go to sleep with?

But because inflation causes the costs of life to rise over time, you have to make sure your passive income can keep up. That’s where dividend increases come in.

Many high-quality dividend growth stocks are increasing their dividends at rates that exceed inflation. Which means your purchasing power expands over time.

Today, I want to tell you about three dividend growth stocks that just increased their dividends. Ready? Let’s dig in.

#1 Dividend Stock Giving Shareholders a Pay Raise: 1st Source (SRCE)

1st Source just increased their dividend by 3.3%.

3.3% doesn’t sound like much. But check this out. This is the third time they’ve increased their dividend this year. That’s right. Three dividend declarations in 2021. Three dividend increases. How can you not love that?

This is the 34th consecutive year of dividend increases for the regional bank.

1st Source is a very small bank in the Midwestern USA, with a market cap of right about $1 billion. But don’t let its size fool you. Their 10-year dividend growth rate is a very strong 10.3%. And that comes on top of the stock’s market-beating yield of 2.8%. This is a nice combination of yield and growth.

Like many banks, this stock’s valuation is very reasonable.

Despite the consistent business growth and 34 consecutive years of dividend raises, the stock looks pretty cheap. The P/E ratio is under 11, which is obviously well below the broader market’s earnings multiple. And the P/B ratio, at 1.2, is well below its five-year average of 1.5. If your portfolio has room for a small regional bank, this name is interesting.

#2 Dividend Stock Giving Shareholders a Pay Raise: McKesson (MCK)

McKesson just increased their dividend by 11.9%.

Yeah, the prices of goods and services are up in 2021. What’s new? That’s inflation. But when you have dividend growth stocks like McKesson handing out near-12% increases in your income, who cares? This is the beauty of dividend growth investing. Inflation causes a licking, but you keep on ticking.

This marks the 15th consecutive year of dividend increases for the pharmaceutical distributor.

This near-12% dividend increase matches up very nicely with their 10-year dividend growth rate, which is 11%. Of course, with the stock’s yield of 0.8%, you need some serious dividend growth to rationalize the investment. Shareholders have gotta be happy with that kind of boost in their dividend income.

The stock is up 16% YTD, but the valuation remains undemanding.

The P/CF ratio, at 7.2, is below its own five-year average of 7.5. And the stock’s current yield, while low, is not far off from its own recent historical average. I wouldn’t say the stock is an absolute steal or anything, but it’s not exactly expensive, either.

#3 Dividend Stock Giving Shareholders a Pay Raise: Stanley Black & Decker (SWK)

Stanley Black & Decker just increased their dividend by a whopping 12.9%.

Boy, this kind of stuff just gives me those warm and fuzzy feelings. Passive income is awesome. But a near-13% bump in passive income, for doing nothing other than holding stock? That’s phenomenal. Being a dividend growth investor is the best, easiest, most rewarding, and most enjoyable job I’ve ever had.

The tool manufacturer has now increased its dividend for 55 consecutive years.

This isn’t just a Dividend Aristocrat. It’s a Dividend King, which is a title conferred to those stocks with 50 or more consecutive years of dividend increases. Think about everything that’s happened over the last 55 years. Wars, recessions, massive disruptions, even a global pandemic. Yet this company kept on pumping out a bigger dividend, year in and year out. This latest dividend increase actually shows a very nice dividend growth acceleration off of the 10-year dividend growth rate of 6.5%. And the stock even yields a pretty decent 1.5%.

This stock is up 22% YTD, but the valuation hasn’t become extreme at all.

The valuation here looks neither particularly low nor particularly high to me. Basically, I think you’re paying a fair price for a great business. As Warren Buffett has rightfully noted, it’s better to pay a fair price for a wonderful business than a wonderful price for a fair business. The P/E ratio, at 21, is lower than its five-year average of 23.8. Other metrics, like the P/S ratio, show some slight overvaluation. And the 1.5% yield is 20 basis points lower than the stock’s five-year average. Overall, this is a Dividend King that should continue to perform very well for many years to come.

— 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.