Top Dividend Growth Stocks of the past decade

Dividend growth investing is sustainable when derived from consistent earnings growth. In its true form, successful dividend growth investing is characterized by instances where annual earnings and dividend growth are almost identical. In addition, companies that exhibit such traits tend to have their current yields being in the same range of 2% - 3% during prolonged periods of time. Ordinary yield chasing investors tend to ignore such companies, because they lack the patience or forward thinking to care for high future yields on cost or strong total returns. As a result, many of these companies offer low current yields, which tend to stay low for extended periods of time. The lucky investors who purchased such securities however are able to generate high yields on cost over time.

I selected the fifteen dividend champions which have achieved the highest ten year dividend growth rates:

Name	Ticker	Yrs Consecutive Div Increase	10 Year Annual Div Growth	P/E Ratio	Yield	Div Payout Ratio	Stock Analysis
AFLAC Inc.	AFL	31	16.8%	8.90	2.60%	23%	analysis of AFL
Becton Dickinson & Co.	BDX	42	17.6%	20.50	1.70%	35%	analysis of BDX
Computer Services Inc.	CSVI	43	17.0%	19.30	2.30%	44%
Donaldson Company	DCI	28	18.4%	21.70	1.70%	37%
Helmerich & Payne Inc.	HP	42	23.3%	13.10	3.10%	41%
Lowe's Companies	LOW	52	29.2%	22.40	1.70%	38%	analysis of LOW
McDonald's Corp.	MCD	39	22.8%	16.70	3.70%	62%	analysis of MCD
MSA Safety Inc.	MSA	43	16.5%	22	2.50%	55%
Nucor Corp.	NUE	41	22.1%	27.20	3.00%	82%
Raven Industries	RAVN	28	19.2%	21.10	2.20%	46%
T. Rowe Price Group	TROW	27	16.2%	17.40	2.30%	40%	analysis of TROW
Target Corp.	TGT	47	19.8%	19.00	3.30%	63%	analysis of TGT
W.W. Grainger Inc.	GWW	43	17.2%	21.60	1.70%	37%
Walgreen Company	WAG	39	22.0%	17.50	2.20%	39%	analysis of WAG
Wal-Mart Stores Inc.	WMT	41	18.0%	16.10	2.50%	40%	analysis of WMT

High dividend growth does not make companies automatic buys. Investors need to evaluate each company in detail, and understand where future growth will come from. A solid plan with concrete deliverables communicated from the company is just one instance of something that could propel solid dividend growth going forward. Other variables that could translate into high earnings and dividend growth include taking advantage of favorable demographic trends in healthcare, baby boomers needs for retirement saving, and the rise of the emerging markets middle class.

Investors should also take with a red flag companies whose dividend growth has been slowing down considerably in the past five years or less. Nucor (NUE) rode the boom in steel prices in the first half of the decade, only to reach a plateau at the onset of the financial crisis of 2007 – 2009. The dividend growth has been miniscule for the past five years.

Investors should also look into the valuation of each company, prior to investing. Purchasing even the best company in the world that is guaranteed to boost earnings and dividends for the next 10 years could still lead to losses, if investment is made at very high valuations. Investors in Wal-Mart Stores (WMT) in 1999 and Coca-Cola (KO) in 1998 can certainly attest to this fact.

However, a booming business can be rewarding eventually even for the most unlucky investors, provided they are true long-term investors. Great businesses like Wal-Mart and Coca-Cola are attractively priced today, and have managed to record better sales, profits and dividends since hitting all-time-highs at the end of the last millennium. If they can continue pushing forward, their investors will eventually make good profits.

Full Disclosure: Long WMT, KO, NUE, LOW, AFL, BDX, MCD, TGT, WAG

Relevant Articles:

- The Tradeoff between Dividend Yield and Dividend Growth
- Why Dividend Growth Stocks Rock?
- Four Characteristics of The Best Dividend Growth Stocks
- Living off dividends in retirement
- Four Percent Rule for Dividend Investing in Retirement