Updated April 20, 2021 by Bob Ciura

Income investors may be tempted to buy stocks with the highest dividend yields. This is often a mistake, however, as extremely high yielding stocks are often in a dubious financial position. High yields are important, but we believe that focusing on quality is just as important.

One way to measure the quality of a dividend stock is through its dividend history. We believe stocks with an established history of dividend growth are more likely to continue to grow their dividends going forward. Because of this, we focus on groups of stocks with a long history of raising dividends, such as the Dividend Aristocrats.

In the meantime, investors should also look through the list of dividend contenders who have raised their dividends for at least 10 consecutive years.

With that in mind, we’ve created a list of more than 300 dividend candidates for download. You can download your free copy of the Dividend Competitor List along with relevant financial metrics such as price / earnings ratios, dividend yields and payout ratios by clicking the link below:

This article provides an overview of dividend competitors and why investors should consider quality dividend growth stocks. For more information on dividend stocks in our coverage universe, please refer to the Sure Analysis Research Database.

Table of Contents

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Dividend competitors overview

The requirement to become a dividend contender is pretty simple: at least 10 consecutive years of dividend growth. While 10 years might not seem like the longest track record, and there are indeed stocks with much longer streaks of annual dividend increases, it’s a positive indicator nonetheless. After all, there are a number of companies that have never paid a dividend. Or even among companies that pay dividends, many have not been able to consistently increase their dividends due to the lack of underlying business growth.

Many companies cannot pay dividends or increase dividend payouts from year to year because their business models do not generate enough profit or cash flow. Cyclical companies also struggle to join lists of long-term dividend growth stocks as their earnings collapse during recessions. Automakers and oil stocks are good examples of highly cyclical companies that often freeze or cut their dividends during recessions.

Corporate profits tend to decline during recessions, especially in industries that are closely related to consumer spending. Over the past year, companies from various industries suspended or canceled their dividend payouts due to the spread of the coronavirus pandemic and its impact on the global economy.

Even so, there have been plenty of companies that have maintained their dividends over the past year and even increased them despite the pandemic. The stocks with the highest dividend growth, which further increased their dividends in 2020, again demonstrated the staying power and lasting competitive advantages of their business models. For this reason, high-income investors looking for safe dividends and reliable dividend growth should focus on companies that are already successfully increasing their dividends during recessions.

Example of a high quality dividend competitor: Texas Instruments (TXN)

Texas Instruments is a dividend competitor and a prime example of a high quality dividend growth stock that has rewarded investors over the years. Texas Instruments is a semiconductor company with two businesses: analog and embedded processing. Products include semiconductors that measure sound, temperature and other physical data and convert them into digital signals, as well as semiconductors that are designed for specific tasks and applications.

Texas Instruments has a very shareholder-friendly management team that has been giving back excess cash to shareholders for many years. For example, from 2004 to 2019, the company increased its dividend by 27% per year.

Source: Investor Presentation

The company has a strong business model with lasting competitive advantages, which is why it continued to perform well in 2020 even in a very difficult operating environment.

In the fourth quarter of 2020, revenue grew 22% year over year from $ 4.1 billion. Analog and processing sales increased 25% and 14%, respectively.

Thanks to its strong cash generation, Texas Instruments returned $6th0 Billions to shareholders during the last 12 monthsin the form of share buybacks and dividends. Texas Instruments Guides To Income From $4.0 billion for the first quarter from 2021.

The company increased its dividend by 13% in September 2020, making it the 17th straight year that dividends have been increased for Texas Instruments. It has also returned a lot of cash in the form of share buybacks after reducing its outstanding shares by nearly 50% since late 2004.

Texas Instruments currently has a dividend yield of 2.2%. This isn’t the highest return, but it still outperforms the S&P 500 index average return, which is currently only 1.5%. In addition, Texas Instruments stock offers a very high level of dividend security and dividend growth that are equally important for high-income investors.

Final thoughts

Investors looking for stocks with a high chance of reliably increasing their dividends each year should focus on stocks with the longest history of dividend growth. In order for a company to be able to increase its dividend for at least 10 years, it must have lasting competitive advantages, stable profitability even in times of economic downturns and positive growth prospects for the future. This gives them the opportunity to increase their dividends going forward.

If you’re interested in finding quality dividend growth stocks that are suitable for long-term investing, the following Sure Dividend databases will help:

Thank you for reading this article. Please send feedback, corrections, or questions to [email protected]


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