Dividend-paying stocks can satisfy investors’ need for current income and capital growth, especially during volatile markets. One area of consideration is for investors to turn to the greater stability of rising dividend-paying stocks. While much remains uncertain, the highest-quality companies have proven their ability to grow their dividends over time, demonstrating an ability to survive through a range of market environments.

Rising dividend-paying stocks have historically provided higher cumulative returns with lower levels of volatility versus non-dividend-paying stocks over long-term holding periods. Cash dividends directly contribute to the total return and help to limit downside price risk, provided the market feels that the dividend is secure.

Dividends are a straightforward and effective tool to identify high-quality, well-run companies. Dividends have the potential to increase corporate accountability and can signal management’s confidence in current and future growth prospects.

This month’s First Cut shows 25 rising dividend payers with the highest 12-month dividend growth rates. The First Cut universe was limited to exchange-listed stocks with a share price above $3. The initial First Cut table was dominated by banks, so financials were excluded (with the exception of insurance companies) to provide a more diverse list of passing companies from different industries. Foreign stocks were excluded because of the uniqueness of their financial statements.

A filter requiring annual dividend increases over the last five years was specified. The five-year historical dividend growth rates provide a sense of dividend sustainability. Positive earnings for the current fiscal year were also specified as a minor financial strength screen. The payout ratio (dividends per share divided by earnings per share) shows the percentage of earnings paid out in dividends. The current dividend yield must be greater than 1.5% in order to be comparable to the market yield of 1.2%.

Biggest Rising Dividend Payers
(Ranked by 12-Month Dividend Growth Rate)

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