These 3 Stocks Keep Giving Their Investors More Money: Altria Group (MO), Lam Research (LRCX) and Williams-Sonoma (WSM)

Dividend growth investing is a fantastic long-term investment strategy. One of the most fantastic and powerful aspects of the strategy is right in its name.

Dividend growth. That’s right. This isn’t dividend investing. It’s dividend growth investing. Dividend increases that compound away into ever-higher dividends?

All while you do nothing other than hold stock? It’s like magic, guys.

So while high-yield stocks that don’t grow their dividends – or worse yet, cut their dividends – tend to do poorly over the long run, high-quality dividend growth stocks tend to perform incredibly well over the long run.

And the increase in your passive income allows you to keep up with, or even exceed, inflation. That’s the best of both worlds.

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 you should know about came courtesy of Altria Group (MO).

Altria just increased their dividend by 4.7%.

Stock ticker MO should stand for mo – as in, mo’ money. You’ve gotta love this. While this wasn’t a life-changing dividend increase or anything like that, it’s still nearly 5% more passive income for doing nothing other than continuing to hold shares. That’s so easy, even I can do it.

This marks the 52nd consecutive year of dividend increases for the tobacco company.

More than 50 straight years of not just paying a dividend but paying an ever-increasing dividend. It doesn’t get much more consistent than that. This dividend increase was off of the 10-year dividend growth rate of 9.1%, but consider that this stock yields 7.2%. You just don’t need huge dividend raises when you’re already getting that kind of yield. And with the dividend only accounting for 78.4% of this year’s midpoint guidance for adjusted EPS, this dividend is covered, which justifies the increase.

The stock has moved up more than 20% this year, but it still looks cheap to me.

Take that monstrous yield, for example. The stock’s five-year average yield is 5.6%. We’re 160 basis points over that. And based on the midpoint for this year’s adjusted EPS, the forward P/E ratio is under 11. There’s nothing expensive about this stock.

The next dividend increase I’ve gotta tell you about came from Lam Research (LRCX).

Lam Research just increased their dividend by 15.4%.

Isn’t it beautiful? Almost 16% more passive dividend income. Almost as easy as snapping your fingers. That’s how it is for shareholders. And this is a great example of why I love being a dividend growth investor.

The fabrication equipment company has increased its dividend for eight consecutive years.

Another double-digit dividend increase from Lam. What’s new? This follows up last year’s 13% dividend increase. Their five-year dividend growth rate is 37.7%. Really impressive stuff. And you want double-digit dividend growth here, because the stock yields only 1%. With a payout ratio of 22.3%, you can bet that plenty more of those double-digit dividend increases are coming.

The stock is up nearly 30% this year, and I’d argue the valuation has become stretched.

Pretty much every basic valuation metric is running ahead of its respective recent historical average. The P/CF ratio, for instance, at 24.6, is way over its five-year average of 17.1. Personally, I’d want to see a pullback in this name. But if you get a pullback, make sure to have it on your radar. This is a fantastic performer. The stock is up 550% over the last five years alone. That’s dividend growth investing for you.

Third up is the dividend increase that was announced by Williams-Sonoma (WSM).

Williams-Sonoma just increased their dividend by 20.3%.

Has your jaw dropped? Well, be prepared to be totally floored. As if this 20%+ dividend increase wasn’t impressive enough, this is their second dividend increase this year. This follows up an 11.3% dividend increase in March. Oh, and let’s not forget that they increased the dividend by 10.4% last October. All in, we’re talking about a dividend that’s currently 47.9% higher than it was this time last year.

This is the 16th consecutive year of dividend increases for the home products and furnishings retailer.

Williams-Sonoma might be known by consumers for their high-end home furnishings. But they should be known by dividend growth investors for their high-end dividend growth. Their 10-year dividend growth rate is 13.6%, which is already solid. However, there’s been a real acceleration in dividend growth of late. The stock only yields 1.5%, but investors only looking at yield are totally missing the forest for the trees. With a low payout ratio of 26.7%, I suspect this party is just getting started.

The stock is up 111% over the last year, but don’t let that scare you away.

The thing is, the business has performed so strongly, that it justifies a lot of the stock’s move. In my view, this is a case where the stock started off wildly undervalued. Then you combine that with a business that suddenly goes gangbusters. It’s like a coiled spring that suddenly and violently uncoils. The P/CF ratio is currently at 9.5. That’s only slightly ahead of its five-year average of 8.9. I wouldn’t say the stock is cheap, but it doesn’t look wildly overvalued, either. I’ve highlighted this stock here on the channel repeatedly over the last year, yet a lot of commenters have said the stock was overvalued. They were wrong then. And I’d say they’re wrong now. If this name isn’t already on your radar, I’d consider changing that.

— 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.