5 Stocks With Rapidly Rising Dividends

When a company decides to increase its dividend rather than just buy back stock or sit on the cash, it’s a signal to investors that management is confident in the outlook of the business. The reason for this is that dividends represent more of a long-term commitment because companies can usually decide to simply stop buying back stock at any time without any major repercussions. On the other hand, if a company decides to stop paying its dividend, investors will flee the stock. New York University finance professor Aswath Damodaran put it this way: “Dividends are like getting married; stock buybacks are like hooking up.”

Clearly, a company’s dividend growth potential is very important for long-term investors. But for a company to consistently raise its dividend at such a high rate over a long period of time, it needs to generate solid, steady free cash flow, have a solid balance sheet, and more than likely raise its payout ratio. Listed below are five stocks with great potential for big dividend increases over the next several years. They each have strong cash flow, solid balance sheets, a history of healthy dividend increases and a relatively low payout ratio: Accenture (ACN), Quest Diagnostics (DGX), Dr Pepper Snapple (DPS), Gentex (GNTX) and Target (TGT).

Source: InvestorPlace

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