These 6 Dividend Growth Stocks Are The Gifts That Keep On Giving

High-quality dividend growth stocks are like the gifts that keep on giving. Actually, it’s better than that. They’re the gifts that keep on giving… ever-more gifts.

This happens through dividend increases. That’s right. High-quality dividend growth stocks pay reliable, rising cash dividends.

I’m not talking about just passive dividend income here. I’m talking about passive dividend income that’s growing… all by itself.

And if you can reinvest growing dividends back into stocks paying more growing dividends?

That’s the secret sauce of dividend growth investing. And it can create a snowball of wealth and passive income. A snowball that grows ever-larger and rolls ever-faster.

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

The first dividend increase I have to highlight is the one that came from Archer Daniels Midland (ADM).

Archer-Daniels-Midland just increased their dividend by 8.1%.

Just think about that. Archer Daniels Midland shareholders get an 8.1% increase in their passive dividend income. And what did they have to do in order to get this sweet “pay raise”? Absolutely nothing, other than sit on their hands and not sell the shares they already had. That sounds like a fair deal to me.

This is the 47th consecutive year of dividend increases for the food processing company.

This Dividend Aristocrat keeps on delivering the goods. It’s the gift that’s been giving ever-more gifts for almost 50 straight years. Gotta love it. This most recent dividend increase was right in line with their 10-year dividend growth rate of 8.5%. And you even get a market-beating yield of 2.1%. With the payout ratio at only 33.4%, even after this sizable dividend increase, the dividend is positioned really well for many, many more increases.

This under-the-radar stock is up 50% over the last year, but operational results have justified a lot of the move.

Revenue for FY 2021 is up more than 30% YOY. EPS for FY 2021 increased by more than 50% YOY, which matches right up against the big move in the stock. They’re putting up record numbers across the business. Even after going on a run, the P/E ratio is only at 15.9. It’s not an excessive valuation. That said, their results can oscillate. And so if there’s any kind of stumble in the business, which could take the stock down, that would be a good time to consider striking.

Next up, let’s talk about the dividend increase that was announced by Comcast (CMCSA).

Comcast just increased their dividend by 8%.

We keep hearing about inflation, right? How do you protect yourself against inflation, making sure your purchasing power can keep up with, or even exceed, the inflation rate? The million-dollar question. Well, let’s see. Comcast just increased their payments to shareholders by 8%. Hint, hint. Dividend growth investing might be the answer to that question.

The media and entertainment conglomerate has now increased its dividend for 15 consecutive years.

Investors who don’t follow Comcast might be surprised to see the great dividend metrics here. The 10-year dividend growth rate is 12.4%. The yield is 2.2%. And the payout ratio is just 35.5%, even after this 8% dividend increase. I mean, there’s very little to complain about here. You’re getting a yield that beats the market and dividend growth that beats inflation. Slaying two dragons simultaneously puts you in a great spot.

I think this stock is materially undervalued.

Not to pat myself on the back or anything, but this 8% dividend increase is exactly what I was expecting from the company. In fact, it’s the same dividend growth number I used to recently value shares in the business. We shared that analysis and valuation in our recent video coverage of Comcast, which went live in late January. In that video, I estimated intrinsic value for the business at $58/share. With the stock still below the $50 mark, I see the valuation as very appealing.

I now have to tell you about the dividend increase that came in from Chevron (CVX).

Chevron just increased their dividend by 6%.

The oil supermajors like Chevron are more disciplined than ever before. Instead of chasing down supply and growth, they’re content to sit on the supply they’ve got and return a lot of cash flow back to shareholders in the form of buybacks and dividends. Music to my ears.

The multinational energy company has now increased its dividend for 35 consecutive years.

It’s been a long, tough decade for oil companies. But the empire is striking back. This 6% dividend increase looks really good up against the 10-year dividend growth rate of 5.6%. It looks even better against the five-year dividend growth rate of 4.4%. So we’ve gone from dividend growth deceleration to dividend growth acceleration. That’s what every shareholder wants to see. And along with this dividend growth comes a market-smashing yield of 4.4%. That big dividend from the Dividend Aristocrat looks very safe. Chevron produced a record $21.1 billion in free cash flow for 2021, yet only spent $11.6 billion on dividends and share repurchases.

Want to invest like Warren Buffett? Then consider owning Chevron shares.

Indeed, Warren Buffett has been loading up on Chevron within the $326 billion common stock portfolio he manages for his conglomerate, Berkshire Hathaway. Buffett’s Chevron position is worth nearly $4 billion, so he’s got some serious cash invested in the oil company. It’s tough to buy Chevron shares at all-time highs, but the business is also putting up records. Tough to say if that’ll persist, as the oil patch is so volatile. If there were one company I had to bet on in this space, though, it’d be Chevron.

Let’s now have a conversation about the dividend increase that was announced by Fastenal (FAST).

Fastenal just increased their dividend by 10.7%.

This is another under-the-radar gem. Almost nobody talks about Fastenal, yet the business quietly hums along and continues to grow like clockwork. And that clockwork-like growth in the business has led to clockwork-like growth in the dividend.

The industrial products distributor has now increased its dividend for 23 consecutive years.

This double-digit increase in the dividend is nothing new for Fastenal. It’s par for the course. Their 10-year dividend growth rate is 15.6%. Plus, the stock yields a respectable 2.2%. The only blemish here is the payout ratio. At 77.5%, it’s elevated. I’d like to see even more growth from the business once we fully get past the pandemic, which would bring that payout ratio down.

The stock has had a nice run, up about 20% over the last year, but the valuation looks stretched.

Most basic valuation metrics are running ahead of their respective recent historical averages. The P/E ratio of 35.9, for instance, is much higher than its own five-year average of 28.0. This is a great business. And I really like it. But it’s tough to justify buying it here. If a decent pullback from this level comes, though, it would definitely be a good name to have on your mind.

Next up, I’ve gotta tell you about the dividend increase that came from Norfolk Southern (NSC).

Norfolk Southern just increased its dividend by 13.8%.

You just have to love it. Inflation? What inflation? Inflation becomes a non-problem when your income is growing like a weed.

This is the sixth consecutive year in which the railroad company has increased its dividend.

You might think a near-14% dividend increase is pretty impressive. And it is. But it’s even better than it sounds. That’s because this is the second dividend increase in the last 12 months from Norfolk Southern. The dividend is up by a total of 25.3% compared to where it was a year ago. That’s massive, and it blows away the already-solid five-year dividend growth rate of 12.0%. This dividend increase brought the stock’s yield up to 1.8%, which is actually a bit higher than its own five-year average. And even after the supersized dividend growth over the last year, the payout ratio is a moderate 41%.

I love railroads. But has this train left the station?

As much as I love railroads, I must admit this stock looks just a tad richly valued. The P/E ratio of 22.5 isn’t exorbitant or anything like that. And I think the railroads are worth paying up for. But just know that the five-year average P/E ratio for the stock is 19.6. Norfolk Southern could be worth pulling the trigger on after this most recent dividend increase. But waiting for a slightly lower price doesn’t strike me as a terrible idea, either.

Let’s now have a quick talk about the dividend increase that came courtesy of Tractor Supply (TSCO).

Tractor Supply just increased their dividend by a whopping 76.9%.

Yes. That number is correct. 76.9%. Can you believe it? This is why dividend growth investing can be so rewarding. Maybe you get a 5% pay raise at work. Maybe you don’t. If you do, you’ve gotta work really hard for it. Meanwhile, Tractor Supply shareholders are looking at a near-77% pay raise for simply existing and holding their shares. That is awesome.

The farm supply retailer has now increased its dividend for 13 consecutive years.

And what a 13-year run it’s been. The 10-year dividend growth rate is 25.5%, so huge dividend increases are part of the company’s culture at this point. And even after all of that double-digit dividend growth, the payout ratio is only at 39.4% – based on their EPS guidance for this coming fiscal year. The only bummer here is the yield. At 1.7%, there’s a lot to be desired. However, this is really a long-term compounder.

The stock is up 54% over the last year, and it’s tough to chase it here.

The stock appears to be overvalued by just about every measure. No matter how I look at it, I see expensiveness. The P/CF ratio of 21.9 is running well ahead of its own five-year average of 15.3. With so many stocks out there being battered by recent market volatility and looking positively undervalued, it’s difficult to lean into something that appears to be overvalued. That said, the company is absolutely crushing it across the board. Their recent financial results have been nothing short of breathtaking. The massive dividend increase is pretty good evidence of that. And so if any stock were worth paying up for, it might be this one.

— 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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