These 3 Dividend Growth Stocks Keep Raising Their Dividends: Federal Realty Investment Trust (FRT), Illinois Tool Works (ITW) and Fidelity National Financial (FNF)

There are a lot of forms of passive income out there. And I’ve dabbled in quite a few myself. But my favorite?

Dividend income, hands down. But not just dividend income. Growing dividend income. As great as dividends are, growing dividends are so much better and so much more important.

Because the costs of life are rising, and you have to make sure your income is also rising. Investing in high-quality dividend growth stocks sets you up to collect safe, growing dividends like clockwork.

That’s because these stocks represent equity in some of the world’s best businesses. And what do these amazing businesses tend do?

They rack up ever-more profit year in and year out, which funds those ever-larger dividends to shareholders. Today, I want to tell you about three dividend growth stocks that just increased their dividends. Ready? Let’s dig in.

The first dividend increase I want to tell you about came courtesy of Federal Realty Investment Trust (FRT).

Federal Realty just increased their dividend by 0.9%.

I know. 0.9% isn’t huge. But it is more income. More income for doing absolutely nothing other than simply holding stock, so it’s a nice reward for no work. And it’s certainly better than no dividend raise, or, worse yet, a dividend cut. No worries about a dividend cut here, though, because Federal Realty has one of the most reliable dividends you could possibly find.

This real estate investment trust has now increased its dividend for 54 consecutive years.

That makes them a Dividend Aristocrat more than twice over. They’re a Dividend King, which is special status reserved for stocks with 50 or more consecutive years of dividend increases. While this sub-1% dividend raise trails the stock’s 10-year DGR of 4.7%, we’re still in the midst of a recovery. Meantime, the stock does yield an appealing 3.6%. And based on the midpoint of this fiscal year’s FFO/share guidance, the payout ratio is 83.9%.

The stock is up 45% YTD, but the valuation hasn’t become stretched.

I highlighted this stock as an undervalued opportunity last year when it was under $75/share. It’s now coming up on $120/share. Even after a big run, though, I don’t see the stock as all that expensive. The P/CF ratio of 20.9 isn’t extreme, even though cash flow is still somewhat depressed from the pandemic shock. And the stock’s yield is actually 10 basis points higher than its own five-year average. If you’re looking for a Dividend King REIT for your portfolio, this one should be on your radar.

The second dividend increase you should know about came from Illinois Tool Works (ITW).

Illinois Tool Works just increased their dividend by 7%.

7% more money. For sitting on your hands. How awesome does it get? I still remember working my butt off to get a 5% pay raise back when I still had a day job. Getting a 7% pay raise in totally passive income for just holding stock? You really have to love it.

This marks the 47th consecutive year of dividend increases for the manufacturer.

Another dividend increase from another Dividend Aristocrat. What’s new? This stuff is truly like clockwork. With a 2.2% yield and a 10-year DGR of 13.1%, this stock sports some really appealing numbers, despite the fact that it kind of flies under the radar. And this is a very safe dividend. Based on the midpoint of this year’s EPS guidance, we’re talking about a payout ratio of approximately 55%.

The stock isn’t cheap, but quality is worth paying up for.

As I’ve said so many times, you don’t get a diamond for the price of a cubic zirconia. If you want low-quality companies that do poorly over the long run, you’ll find the cheap deals. But if you want a high-quality Dividend Aristocrat like this one, you’ve gotta pay up. As with everything in life, you get what you pay for. With its P/E ratio of 27, it’s commanding a premium valuation for the premium business it is. But if there’s a dip, that could be just the window of opportunity you need to jump in.

Last but not least, let’s talk about the dividend increase that came in from Fidelity National Financial (FNF).

Fidelity National just increased their dividend by 11.1%.

How many double-digit pay raises have you received in your life at your job? Probably not too many. Now how many double-digit pay raises do dividend growth investors tend to get? Plenty. That, in a nutshell, sums up why I quit my job in my early 30s in favor of living off growing dividend income from high-quality dividend growth stocks.

This is the 10th consecutive year of dividend increases for the title insurance company.

And what’s super interesting about this name is the combination of yield and growth. Check it out. This 11.1% dividend increase is very close to their 10-year DGR of 11.7%. And that consistent double-digit dividend growth rate comes on top of the stock’s current yield of 3.4%. It’s not often you’ll find a yield this high along with a dividend growth rate this high. And their recently released Q2 report showed that EPS for the quarter was $1.92. That covers the quarterly dividend of $0.40, or $1.60/year, all by itself. So this is an extremely safe dividend, which is why it just got boosted.

Despite the 23% YTD run up, the stock continues to look cheap.

I highlighted this stock in a video back in April, where I revealed that I had initiated a position in the company at less than $41/share and shared that with my Patrons in real-time over at Patreon. The stock is now over $47/share, so it’s up quite a bit since I started my position. Still, with its single-digit P/E ratio, bigtime dividend raise, and blockbuster profit growth, this stock looks undervalued to me.

— 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.