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10 Top Dividend-Growth Stocks: Morningstar

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Related: Top 10 Fund Families for 2021: Morningstar

Dividend-growth stocks, which have a history of increasing their payouts over time, are suitable for almost any type of investor, Susan Dziubinski, director of content for Morningstar, wrote in a blog post this week.

True, they may not be the highest-yield stocks, but they have a shareholder-friendly mindset. 

Consider that these companies’ management teams focus on delivering a growing cash stream to their shareholders, income being a key component of total return. In addition, companies that consistently increase their dividends are usually profitable and financially healthy.

And companies that grow dividends can provide some inflation protection — a plus for retirees at a moment when investors are starting to fret about renewed inflation. Christine Benz, director of personal finance for Morningstar, recently noted that fears of inflation are emerging on the heels of government fiscal stimulus and a resurgent economy. 

Meanwhile, the Biden administration has played down concerns that its stimulus plans will cause inflation.

To uncover a few dividend-growth stocks to investigate further, Morningstar looked to the top constituents in the firm’s US Dividend Growth Index, which focuses on companies with a history of dividend growth and an ability to sustain it. 

The index includes U.S.-based securities that pay qualified dividends and that have increased their dividend payments over the past five years. To gauge the sustainability of dividend growth into the future, researchers sought out constituents that display positive consensus earnings forecasts from the analyst community, and that pay out no more than 75% of their earnings in dividends. 

They weighted these in proportion to the total pool of dividends available to investors. 

Dziubinski said that given the index’s construction rules, its largest constituents are relatively stable mega-cap companies. Most are fairly valued as of this writing, she said, but are fine watchlist candidates.

See the gallery for 10 superior dividend stocks for investors looking for dividend growth, down-market defense or inflation protection, according to Morningstar.

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