Being a dividend growth investor is like having a cheat code in life. I mean, what’s the holy grail in this life? To be able to do whatever you want, right? Without worrying about having to go out and work for money? Well, dividend growth investing can solve that for you.
Indeed, if you can build a diversified portfolio of high-quality dividend growth stocks, you’d be routinely waking up to new money you didn’t go to sleep with.
That happens through the dividend payments these companies send to their shareholders. Not only that, but these dividends are regularly getting increased. That’s right.
I’m not talking about just waking up to new money. I’m talking about waking up to more new money than you got before. Today, I want to tell you about three dividend growth stocks that just increased their dividends. Ready? Let’s dig in.
Dividend Growth Stock #1 Rewarding Shareholders: MGE Energy (MGEE)
MGE just increased their dividend by 4.7%.
A near-5% increase in your income is always nice, but it’s particularly nice when it comes about through no action of your own – other than simply holding stock in a company, which is about as easy as it gets.
This is the 46th consecutive year of dividend increases for the utility company.
And they celebrated 46 years nicely, as this dividend increase was actually an outsized one for the company. Their 10-year dividend growth rate is 3.9%, so shareholders are surely applauding this dividend boost. The stock only yields 1.9%, so you’ve really gotta see some solid dividend growth to make sense of it. But with a payout ratio of 53%, which is pretty moderate for a utility, you already know the dividend is going to continue moving higher over time.
This stock is up 21% YTD, and the valuation now looks a bit rich.
Unlike most utilities, this name usually trades at a pretty high earnings multiple and usually sports a low yield. For example, the stock’s five-year average yield is 2%. So the current 1.9% yield isn’t that far off. But most basic valuation metrics are slightly ahead of their respective recent historical averages. That includes the P/E ratio, which is currently at slightly over 28. But a 5% or 10% drop in this name would put most of its valuation metrics in line with where they often are.
Dividend Growth Stock #2 Rewarding Shareholders: Cboe Global Markets (CBOE)
CBOE just increased their dividend by 14.3%.
How about that? How can you not love something like this? Goods and services are slowly becoming more expensive over time through inflation, but double-digit dividend increases like this one keep you ahead of the game.
This marks the 12th consecutive year of dividend increases for the exchange operator.
The company continues to knock it out of the park, both at the underlying business level and at the dividend level – which, of course, go hand in hand. Their 10-year dividend growth rate is 22.8%, which means this increase came in lower. But it’s still a double-digit raise, so it’s hard to complain. And with a payout ratio of 47.1%, I suspect plenty more sizable dividend increases are coming. With a yield of 1.5%, there’s a compelling mix of yield and growth here.
The stock is up 36% YTD, but the valuation doesn’t look stretched at all.
Most basic valuation metrics are in line with, or lower than, their own recent historical averages. The P/E ratio of 31, for instance, is basically right there with the stock’s own five-year average P/E ratio of 31.6. I wouldn’t say the stock is cheap. But it doesn’t look expensive, either. And with a high-quality business, paying a fair price is never a bad idea.
Dividend Growth Stock #3 Rewarding Shareholders: Monro (MNRO)
Monro just increased their dividend by 18.2%.
Almost 20% more passive income than you had before. For doing nothing other than holding shares. Isn’t that awesome? What makes this even more awesome is the fact that this is the second dividend increase this year for Monro, after they increased their dividend by 9.1% in May.
The automotive service company has increased its dividend for 17 consecutive years.
Their 10-year dividend growth rate is 13.6%. That’s impressive enough. But 2021 has been especially impressive in the dividend growth department for this company. You also get a yield of 1.9% to go along with all of that dividend growth. The payout ratio, at 63.8%, looks slightly high. But when you compare the dividend against actual free cash flow, this is an easily-covered dividend.
The stock is nearly flat on the year, and it looks surprisingly cheap.
This one flies under the radar, which might be why the valuation looks so good. GAAP EPS can be kind of lumpy, as I just kind of alluded to with the payout ratio. But the P/CF ratio of 10.9 is well off of its own five-year average of 14.5. And the yield is 60 basis points ahead of its own five-year average. It’s definitely an interesting name to take a good look at and consider.
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.
My #1 fund for a rock-steady 7% dividend in 2022... paid monthly! [sponsor]It's the brainchild of one of the smartest investment managers alive and it pays you every single month. Even better, this fund trades at a discount to NAV, so there's near-certain price gains ahead! All the details are waiting for you, along with 2 other incredible picks from my full "7% Monthly Payer Portfolio."
