Investors often put yields above all else when choosing the companies for their long-term or retirement portfolio. I don’t blame them! With a stock or fund paying double-digit dividend yields, it's only natural to do some quick math and figure out how much 10-11% would work out to. That is, until the company slashes its dividends, the fund explodes, and the investment goes to zero.
Blindingly high yields can be considered red flags, as the companies paying them may not be able to sustain it for an extended period. They’re certainly not secure enough for a retirement portfolio.
So, to fix this issue, why not pick and choose quality companies from the Dividend Kings list? These companies have paid increasing dividends for over 50 years, underlining their sustainable, reliable business practices that can see them through multiple recessions and economic turbulence.
To make things even more interesting, I'll pick buy-rated Dividend Kings with high dividend growth rates. Here’s how I came up with the list.
How I Came Up With The Following Stocks
To get my list, I accessed Barchart’s Stock Screener tool and used the following filters:
- 5-year Dividend Growth Rate: 50% or more. This filter compares what the company is paying today vs five years ago. I set it to 50% to comfortably exceed the typical inflation rate.
- Current Analyst Rating: 3.5 (Moderate Buy) to 5 (Strong Buy).
- Annual Dividend Yield: Left blank so I can see them on the results.
- Watchlists: Kings. I maintain several watchlists on Barchart, from which I can select which ones to analyze and apply filters. This makes it easier to sort through the thousands of stocks in the different exchanges I monitor.
With the filters set, I ran the scan and got the following results:
I arranged the companies based on the highest dividend growth, then took the top three to discuss. So, let’s get started with the top one.
Lowe's Companies (LOW)
Lowe’s Companies is one of the largest and most trusted home improvement retailers in the U.S., serving professionals and DIY enthusiasts. The company offers many products and services for projects of all sizes. Lowe’s serves about 16 million customers weekly across 1,700 locations.
Lowe’s boasts the highest dividend growth rate on this list at 135.14% over the last five years - easily covered by its income, which has grown 156.81% over the same period. As a result, it maintains a relatively sensible 37.91% dividend payout ratio, leaving more room for growth.
Its current annual rate is $4.60, translating to a 1.85% yield based on current prices. Meanwhile, analysts rate LOW stock a moderate buy with a high target price of $309 - a 24.28% upside.
Nordson Corporation (NDSN)
Nordson Corporation is a global leader in precision technology solutions, specializing in dispensing, coating, and fluid management systems across aerospace, automotive, medical, and electronics industries. The company operates in over 35 countries across three segments: Advanced Technology Solutions, Medical and Fluid Solutions, and Industrial Precision Solutions.
Nordson is paying nearly double its dividends from five years ago, registering a 97.20% dividend growth rate. The company has a 30.25% payout ratio, which is excellent news for people considering NDSN stock for long-term investments.
The company pays $3.12 annually, reflecting a 1.48% yield based on current prices, and NDSN stock is rated a moderate buy with a $285 high target price and a 35.53% potential upside.
Parker-Hannifin Corporation (PH)
Parker-Hannifin Corporation is a global industrial manufacturer specializing in motion and control technologies for various industries, including aerospace, digital, automotive, healthcare, oil and gas, and manufacturing. The company operates dozens of specialized divisions that cover fluid management, braking and hydraulics, filtration, pneumatics, and fluid connectors.
Parker-Hannifin pays $6.52 annually, though that’s expected to increase in the next quarterly payout. This represents a 0.97% yield based on current prices - the lowest on this list. However, it is also the only strong-buy-rated stock on this list. PH stock offers a potential 25.95% upside based on a $842 high target price.
If that’s not all, Parker-Hannifin has a 92.09% 5-year dividend growth rate, 114.68% 5-year dividend growth rate, and a relatively low 24.12% payout ratio, which gives me confidence that Parker-Hannifin has enough headroom to increase dividend payments over the long term.
Final Thoughts
Companies with reliable dividend payments and high growth rates can set you and your retirement portfolio up for success. However, as they say, nothing is sure other than death and taxes. So, keep an eye out on your investments, do your due diligence, and focus on sustainable growth over the long term.
