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Dividends First Cut Stocks Stock Strategies

Lift off With Rising Dividend-Paying Stocks

Rising dividend-paying stocks have historically provided higher cumulative returns with lower levels of volatility than non-dividend-paying stocks over long-term holding periods.

by Jack Gilleland | May 2023

We are updating this First Cut last published in June 2022 under the headline “Up, Up and Away: Biggest Rising Dividend Payers” as a tribute to AAII’s Derek Hageman, who passed away in April 2023. Derek was the editor of AAII Dividend Investing and frequently contributed stock investing articles to the AAII Journal. Rest in peace, Derek, we miss you.

The highest-quality companies prove their ability to grow their dividends over time, demonstrating that they can survive through a range of market environments. Rising dividend-paying stocks have historically provided higher cumulative returns with lower levels of volatility than 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.

This month’s First Cut shows 25 rising dividend-paying companies with the highest 12-month dividend growth rates. The First Cut universe was limited to exchange-listed stocks with a share price above $3. Financials were excluded (with the exception of insurance companies) to provide a 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 1.8% to be comparable to the average market yield of 1.6%.

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

Biggest Rising Dividend Payers

Discussion

DEWEY T from TX posted over 3 years ago:

An equal weight investment in these securities yields just 3.79% before tax. Surely there are lower risk alternatives that can deliver comparable results?


BARRY J from TX posted over 3 years ago:

Derek wrote well. He was interesting. He communicated to the needs of his audience. He was 1 of 3 AAII staffers that asked for my input when I commented on their work. He actually responded to my suggestions. I miss his missives. This reprise was an appropriate commemoration of his work and his legacy.


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