20 dividend growth stocks take off


This week, we give you a list of dividend ideas to explore. This list is based on quantitative selection criteria specific to dividends using the AAII Pro Equity Investor fundamental stock selection and research database.

Dividend paying stocks can meet investors’ needs for current income and capital growth, especially in volatile markets. One area to consider is that investors look to more stable stocks paying rising dividends. While much remains uncertain, the highest quality companies have proven their ability to increase their dividends over time, demonstrating their ability to survive in various market environments.

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

Dividends are a simple and effective tool for identifying high quality, well-run businesses. Dividends have the potential to increase corporate responsibility and can signal management confidence in current and future growth prospects.

Federal Reserve lifts restrictions on bank dividends

Income investors have traditionally looked to utilities and real estate investment trusts first (REIT) in search of income. However, banks, with a combination of relatively higher returns, earnings growth and the increase in payout ratios has created an attractive opportunity for income investors.

From the start of the third quarter of 2020, the major US banks were required by the Federal Reserve to preserve their capital by suspending share buybacks, capping dividend payments at their current level and allowing dividends only according to a formula based on recent earnings. The central bank has also asked major U.S. banks to reassess their long-term capital plans and resubmit them several times over the past year.

After the market closed on Thursday, June 25, 2020, the Federal Reserve announced the first results of its annual stress test of large banks which paved the way for changes in bank dividends. The Fed has imposed further restrictions on the U.S. banking sector based on the finding that several banks would approach minimum capital levels in scenarios related to the coronavirus pandemic. At the time, the board of directors said in a press release that it was taking “several steps following its stress tests to ensure that the big banks remain resilient despite the economic uncertainty associated with the ‘coronavirus event’.

In January 2021, the Fed released the results of its second round of stress tests showing banks remained resilient as the pandemic developed. The Fed has allowed banks to both pay dividends and buy back stocks, up to the average earnings of the previous four quarters.

After the completion of further stress tests, the Fed announced in March 2021 that it would end its temporary restrictions on most dividend-paying and stock repurchase banks after June 30, 2021. Banks with levels of capital are greater than those required by the stress test would only face the restrictions, while financial institutions with capital levels below the requirements would remain subject to the limitations. “The banking system continues to be a source of strength, and returning to our normal framework after this year’s stress test will preserve that strength,” Fed Vice Chairman of Supervision Randal Quarles said in a press release at the time.

Banks will start to regain some of the autonomy they lost during the pandemic. On June 24, 2021, the Fed released the results of its latest annual stress test and said the 23 financial institutions tested remained “well above” minimum capital requirements during a hypothetical economic downturn. Banks were allowed to disclose their capital distribution plans after the market closed on Monday, June 28, 2021. Wells Fargo analyst Mike Mayo noted that the big banks announced dividend increases of 23% on average on that date and have room for future increases. due to estimated revenue increases and payout ratios that remain at or below target levels.

After the market closes on June 28, Morgan stanley (MS) announced that it will double its quarterly dividend from $ 0.35 to $ 0.70 per share starting in the third quarter of 2021. In addition, the company announced a new, larger share buyback authorization that may reach $ 12 billion until June 30, 2022. Wells fargo (WFC) announced plans to double its quarterly dividend to $ 0.20 per share, subject to board approval, and announced an $ 18 billion share repurchase plan during next year from the third quarter of 2021. Bank of America (BAC), Goldman Sachs Group (GS) and JPMorgan Chase (JPM) also announced dividend increases. We are eagerly awaiting the opportunity for these big banks to start increasing their dividends again and repurchasing stocks, but in the meantime, several small banks are already continuing to increase their dividends.

Dividend growth galore

This week, we’ve created a list of dividend ideas showing 20 rising dividend-paying companies with the highest 12-month dividend growth rates. The universe was limited to publicly traded stocks with a price above $ 3. Closed-end funds, exchange-traded funds (ETFs) and investment holding companies were excluded. Foreign equities were also excluded due to the uniqueness of their financial statements.

A filter requiring annual dividend increases over the past five years has been specified. Dividend growth above 10% in the past 12 months was specified to find the biggest payers of rising dividends, and five-year annualized dividend growth above 3% was also required. Dividend growth rates give a sense of dividend sustainability. Positive earnings for the current year have been used as a minor measure of financial strength. The payout rate (dividends per share divided by earnings per share) indicates the percentage of earnings distributed as dividends. A company’s current dividend yield must be greater than its five-year average yield and greater than 1.3% to be comparable to the current market yield.

Some of the biggest rising dividend payers in the table below are Agnico Eagle Mines Ltd. (AEM), an international gold producer; Amdocs Ltd. (DOX), a software and service provider for communications, entertainment and media service providers; and Huntington Ingalls Industries (HII), the largest independent military shipbuilder in the United States Navy and Coast Guard. Several small specialist banks are also on the list.

Today’s Biggest Rising Dividend Stock Ideas

20 companies with rising dividends (ranked by 12-month dividend growth)


Stocks that meet the criteria for the approach do not represent a “recommended” or “buy” list. It is important to exercise due diligence.

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