Dividends are nice. But growing dividends are even better. These three stocks are not only increasing their dividends every year, but their most recent increases were up double-digit percentage points over last year's dividends.
These three companies are analog chipmaker Texas Instruments (NASDAQ: TXN), home improvement retailer Home Depot (NYSE: HD), and ski resort company Vail Resorts (NYSE: MTN). Here's how each company's dividend is growing by double digits, and why strong dividend growth is likely to continue.
Continue Reading Below
Paying dividends since 1962, Texas Instruments has a rich dividend history. Even more, the company's dividend has been increasing particularly rapidly in the last few years. Announced last month, Texas Instruments just increased its dividend by 24%. This extended the company's trend of high double-digit dividend growth rates in recent years; the semiconductor company has increased its dividend at an average compound rate of 22% over the past three years.
Of course, there's no guarantee every year will bring such a sharp dividend increase. But Texas Instruments' payout ratio of 47% (relatively low for a company with a 2.3% dividend yield and such strong dividend growth), along with its recent strong earnings growth (second-quarter EPS was up 30% year over year), make a strong case for more dividend growth ahead.
Thanks to strong revenue, earnings per share, and comparable-store sales growth in 2016, Home Depot was able to serve investors an impressive 29% increase in its dividend earlier this year. This brought the company's 3-year average annual dividend growth to 24%.
Looking ahead, Home Depot looks poised for more meaningful growth, supported by management's recent commitment to paying out a larger portion of its earnings, targeting a 55% payout ratio instead of 50%. Not only is Home Depot's payout ratio today just 45%, but earnings have continued to rise rapidly. EPS in Home Depot's second quarter was up 14% year over year.
Vail has seen the strongest dividend growth of these three stocks. Vail announced a 30% hike to its dividend in March, bringing its 3-year average annual dividend growth to a whopping 37%. The higher dividend was achievable thanks to strong earnings growth recently. EPS in Vail's fiscal 2016 (ending July 31, 2016) was up 31% year over year. And EPS in Vail's fiscal 2017 (ending July 31, 2017), was up 30% year over year.
Like Texas Instruments and Home Depot, Vail looks poised for more dividend growth in the years ahead. In the company's just-released fourth-quarter results for fiscal 2017, Vail said its season pass sales through Sept. 24 for the 2017/2018 North American ski season were up 17% in units and 23% in dollars compared to the comparable year-ago period.
All three of these dividend stocks look enticing -- Texas Instruments, Home Depot, and Vail Resorts. With meaningful dividends, strong dividend growth, and likely more meaningful dividend growth ahead, dividend stocks don't get much better than this.
10 stocks we like better than Home DepotWhen investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*
David and Tom just revealed what they believe are the 10 best stocks for investors to buy right now... and Home Depot wasn't one of them! That's right -- they think these 10 stocks are even better buys.
Click here to learn about these picks!
*Stock Advisor returns as of September 5, 2017