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While dividend growth sounds like a stodgy, old-fashioned approach to investing, the truth is that most dividend growth strategies have kept up with the stock market's advance over the past decade.
That's because they have one huge advantage...
Dividends cannot be taken back while price gains can disappear in the blink of an eye.
Take a look at the S&P 500 Dividend Aristocrats - companies that have increased their dividends every year for the last 25 years consecutively - for example...
They're up 178% over the last decade compared to 226% for the S&P 500.
But if you reinvested the dividends they paid out, you'd be looking at returns just north of 300%.
The idea of dividend growth stock investors may conjure up images of Grandpa shuffling out to the mailbox to see if his check from Big Boring Blue-Chip Incorporated has shown up yet.
But the truth is, we can focus on dividend growth and still own some of the companies that are making the world better every day.
Here are my top three dividend growth stocks to own today. All of them yield at least double the average S&P 500 company...
The Best Dividend Growth Stock in Tech
Without the breakthroughs in communication, bandwidth, and security developed in large part by networking leader Cisco Systems Inc. (NASDAQ: CSCO), the pandemic would have been a bigger disaster than we could imagine...
Just a decade ago, the speed and security that Cisco allows us to work, learn, communicate, and shop from home today did not exist.
Looking ahead, Cisco will be a player in all of the hottest tech trends. It is involved in the cloud, cybersecurity, artificial intelligence, 5G, driverless cars, and pretty much any other world-changing technology trend.
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Many of the hottest startups in these fields will end up being bought by and folded into Cisco to help the firm remain a leader in all lines of tech.
Cisco generates more than enough cash to fund the business. The company has more than $10 billion in cash on the books, and it generated more than $15 billion in cash flow over the past 12 months.
A lot of that cash has been returned to shareholders, with Cisco making $6 billion in dividend payments and buying back more than $3 billion of its own stock.
The payout has increased every year for the last decade at a double-digit rate.
Owning Cisco allows you to own a leading tech company and collect an above-average yield of 3.2%
(more than double the average S&P 500 company), with a high probability that the payout goes up every year for the next decade - if not longer.
The Best Dividend Growth Stock in Pet Care
Americans love their pets. The amount of cash we spend on our little furballs trends higher year after year.
In 2019, we saw over $90 billion spent on our pets in this country. And that number is projected to top $100 billion in 2020 as the pandemic forced people to stay at home with their pets longer and adopt more animals than ever before.
Founded in 1996, Petmed Express Inc. (NASDAQ: PETS) has grown into America's largest full-service pet pharmacy. The company sells its products via its "1-800-PetMeds" phone number and online. It offers convenience and, in many cases, substantial cost savings as well.
It is a good business, and it should keep growing as pet spending grows.
Petmed takes advantage of the fact that we love our pets and want them to love as long as possible... But in the busy world we live in today, stopping by the vet's office to pick up meds for Rover and Fluffy is an inconvenience. Pet Meds solves that problem by shipping our pet's medication directly to our door while saving a few bucks as well...
Petmed has over $100 million on the books and generated $33 million if free cash flow last year. That's more than it needs to run and grow the business - so $22 million found its way into shareholder pockets in the form of dividends in 2020.
The current yield of Pet Meds Express stock is 3.4%, and the payout has been raised every year for 12 years.
The Best Dividend Growth Stock to Buy Now
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SpartanNash Co. (NASDAQ: SPTN) is not so much a world-changing company as a world-sustaining company.
It is a food distributor that delivers a wide range of food products to local grocery stores and U.S. military bases.
SpartanNash also owns 156 supermarkets, primarily under the banners of Family Fare, Martin's Super Markets, D&W Fresh Market, VG's Grocery, and Dan's Supermarket.
Remember the empty supermarket shelves back in March?
Without the efficient supply chains put in place by companies like Spartan Nash, we could have faced a real food crisis in the United States.
The company has 18 distribution centers around the United States. More than 500 dry goods trailers and 1,250 refrigerated trailers carry food and other products from these centers to keep Spartan Nash's customer's shelves and our cupboards full.
It is a well-run company that produces a lot of cash...
Operating cash flows were $40 million last year, and about $14 million of that was sent back to shareholders as dividend payments. That left $26 million to grow the business along with the $24 million they already had on the books.
SpartanNash shares are yielding 4.3%, and the payout has been increased every year for the past 15 years.
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