Dividend yield is a key indicator for assessing a stock’s performance, but focusing solely on this metric might lead investors to miss out on promising opportunities. Stocks with lower yields but high dividend growth potential can offer significant long-term returns. In this analysis, we explore three dividend growth stocks—UnitedHealth Group, Broadcom, and Dick’s Sporting Goods—that have substantially increased their dividends over the past decade. Understanding these stocks’ potential can provide valuable insights for investors looking to maximize their returns.
1. UnitedHealth Group
Consistent Growth and Expansion
UnitedHealth Group stands out for its consistent ability to expand and grow its business. By leveraging opportunities in areas like analytics and home health, the company positions itself well to benefit from the evolving healthcare landscape and increasing health insurance needs driven by population growth.
Impressive Dividend Performance
Currently, UnitedHealth pays a quarterly dividend of $2.10 per share, resulting in a yield of 1.4%, slightly above the S&P 500 average of 1.3%. Over the past decade, the dividend has risen from $0.375 per share, reflecting a remarkable 460% increase. This translates to a compound annual growth rate (CAGR) of 18.8%. With a strong growth outlook and a manageable payout ratio of 51%, UnitedHealth remains a top choice for dividend investors.
2. Broadcom
Attractive for AI and Growth Investors
Broadcom is a favorite among artificial intelligence (AI) investors due to its potential for substantial growth in the semiconductor sector. The company has demonstrated robust sales growth, with a year-over-year increase of approximately 50%. Alongside its growth potential, Broadcom is also recognized for its solid dividend performance.
Significant Dividend Increase
Broadcom currently offers a quarterly dividend of $0.53 per share, yielding 1.36%. In 2014, the dividend was $0.32 per share, but adjusted for a recent 10-for-1 stock split, this would be equivalent to $0.032 today. This adjustment reveals an extraordinary 1,556% increase in dividends, with an average CAGR of 32.4%. Broadcom is an appealing option for investors seeking a blend of dividend growth and future growth potential.
3. Dick’s Sporting Goods
Stable Business Model
Dick’s Sporting Goods, the highest-yielding stock on this list, offers a dividend yield of 2%. The company’s stable business model, which includes fitness equipment, footwear, and apparel, supports its strong dividend performance. The recent quarter’s solid results led management to raise its fiscal year guidance, reflecting the company’s resilience in a challenging economic environment.
Remarkable Dividend Growth
Over the past decade, Dick’s Sporting Goods has increased its quarterly dividend from $0.125 to $1.10 per share, marking a 780% growth with an average CAGR of 24.3%. This high growth rate and the company’s solid performance make it a strong candidate for long-term income investment.
Conclusion
In evaluating dividend stocks, it’s essential to look beyond the yield and consider the growth potential of dividends. UnitedHealth Group, Broadcom, and Dick’s Sporting Goods have demonstrated impressive dividend growth over the past decade, making them compelling investment choices. However, before investing in UnitedHealth Group or any other stock, it is prudent to explore other options and consider their potential returns. For instance, The Motley Fool Stock Advisor has identified top stocks that might offer significant future gains. Investors should use comprehensive strategies and stay informed to build a successful investment portfolio.
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