These 20 dividend stocks have been the best income growers in the S&P 500

By Philip van Doorn

Rather than focusing on high current dividend yields, you might build an income stream for retirement by holding stocks over the long term as payouts increase

In the comment section of a recent MarketWatch article listing stocks with high dividend yields that were expected to be well supported by the companies' cash flow, a reader suggested that it would have been useful to look at the stocks' performance as well. After all, if you begin with a high dividend yield but watch share price decline over the years, your overall return might be lousy.

So today, instead of a screen designed to highlight stocks with high current dividend yields, we look at the compounding of dividend payouts over time. A long-term investor building a nest egg with a plan to eventually draw income from it may be well served on a total-return basis if the payouts increase significantly over time.

Here's an example:

For a new screen of dividend compounders, we began with the S&P 500. And for a reasonable starting point, we narrowed the group to 268 stocks whose dividend yields were at least 1.5% as of Aug. 14, 2018.

Among those 268 companies, the following 20 have had the highest dividend CAGR over the past five years. See the note below the table for important information.

Company                    Ticker  Five-year dividend CAGR  Dividend yield on shares purchased five years ago  Dividend yield five years ago  Current dividend yield  Five-year price change  Five-year total return 
Tractor Supply Co.          TSCO                    27.14%                                              5.06%                          1.52%                   1.85%                    173%                    193% 
Newmont Corp.               NEM                     23.36%                                              4.71%                          1.65%                   4.05%                     16%                     37% 
Morgan Stanley               MS                     23.16%                                              7.10%                          2.51%                   3.89%                     82%                    111% 
Broadcom Inc.               AVGO                    21.32%                                              8.88%                          3.38%                   2.15%                    312%                    390% 
Invitation Homes Inc.       INVH                    18.77%                                              4.59%                          1.94%                   3.02%                     52%                     71% 
Lowe's Cos.                 LOW                     18.04%                                              4.47%                          1.95%                   1.95%                    130%                    151% 
Steel Dynamics Inc.         STLD                    17.78%                                              3.90%                          1.72%                   1.58%                    147%                    178% 
Microchip Technology Inc.   MCHP                    17.64%                                              3.90%                          1.73%                   1.97%                     98%                    113% 
Oracle Corp.                ORCL                    16.05%                                              3.32%                          1.58%                   1.38%                    140%                    160% 
Kroger Co.                   KR                     15.68%                                              3.81%                          1.84%                   2.39%                     59%                     77% 
Best Buy Co.                BBY                     15.38%                                              4.69%                          2.29%                   4.65%                      1%                     19% 
American Tower Corp.        AMT                     15.31%                                              4.21%                          2.07%                   3.36%                     26%                     40% 
Home Depot Inc.              HD                     15.20%                                              4.33%                          2.13%                   2.53%                     71%                     93% 
Eli Lilly & Co.             LLY                     14.97%                                              4.41%                          2.20%                   0.84%                    425%                    471% 
Texas Instruments Inc.      TXN                     14.87%                                              4.50%                          2.25%                   2.91%                     55%                     77% 
Snap-on Inc.                SNA                     14.59%                                              3.77%                          1.91%                   2.39%                     57%                     79% 
Parker-Hannifin Corp.        PH                     14.26%                                              3.56%                          1.83%                   1.43%                    149%                    171% 
Allstate Corp.              ALL                     14.11%                                              3.62%                          1.87%                   3.33%                      9%                     22% 
HP Inc.                     HPQ                     13.52%                                              4.35%                          2.31%                   3.27%                     33%                     56% 
VICI Properties Inc.        VICI                    13.05%                                              7.76%                          4.20%                   5.09%                     52%                     98% 
                                                                                                                                                                                                     Source: FactSet 

Click on the tickers for more about each company.

Click here for Tomi Kilgore's detailed guide to the wealth of information available for free on the MarketWatch quote page

Most of the dividends paid by these companies are regular quarterly dividends. But for Newmont Corp. (NEM), the quarterly payout is based on spot prices for gold and on the company's financial results. The company expects to pay an "annual base dividend" of a dollar a share on its "reserves gold pricing assumption" of $1,400 for 2023. Based on continuous front-month contracts on the New York Mercantile Exchange , gold has fluctuated between $1,621.10 and $2,085.40 this year and traded for $1,934.10 early Monday. On top of the base quarterly payout of 25 cents a share, the company has most recently paid an additional 15 cents for a quarterly dividend of 40 cents over the past two quarters and for an annual dividend rate of $1.60 on the table above. But in 2022, the quarterly dividend rate was 55 cents and the annual rate was $2.20.

Fourteen of these 20 companies have beaten the S&P 500's 74% total return over the past five years.

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-Philip van Doorn

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08-22-23 0946ET

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