Best stocks with growing dividends in August 2022     

“Be afraid when others are greedy and be greedy when others are afraid” – Warren Buffett.

Wise advice. But in real life, fear tends to take over when volatility spikes. And it’s hard to invest when “everyone is going crazy.”

But being an investor in dividend stocks that rise regularly is much easier. There is only one reason – price and income are inversely proportional. So, other things being equal, lower prices lead to higher returns.

It is more passive dividend income per dollar invested.

And while you wait for the price of these stocks to rise, dividends continue to rise.

However, as good as high-quality stocks are, you must be selective when allocating capital. Not every store is a good buy every time.

Five stocks with the best dividend growth in August 2022

Aflac (AFL)

Aflac is an American reinsurance insurance company.

Insurance has long been and remains one of the favourite business models of some professional investors. It is mainly due to floating capital accumulating due to the time delay between collecting premiums and paying claims. This “float” can bring big profits to the insurance company.

You can be hugely successful if you have a great insurance business with sound underwriting and manage extensive stocks. For example, with Aflac’s revenue almost nowhere to go for the last decade, earnings per share increased at an annualized rate of 8.6%. 

Unsurprisingly, a significant increase in earnings led to a large increase in dividends.

Aflac’s dividend has risen for 40 consecutive years, confirming its status as the chosen dividend aristocrat. The 10-year DGR is 7.9%, close to the EPS growth. With this single-digit dividend growth, you get a stock return of 2.9%. A yield of around 3% combined with a dividend growth rate of about 8% is excellent in our view. And with a payout ratio of 26.2%, these dividends are very reliable.

Best Buy (BBY)

Best Buy is a North American retailer of consumer electronics and appliances.

So how does an electronics retailer survive and thrive in an environment dominated by e-commerce? They are doing this by adapting, embracing e-retail and becoming multichannel retailers. At the same time, their Renew program Blue, launched in 2012, has improved the business across the board. Rather than doubling on tradition, the penchant for change has served them well. Over the past decade, revenue has grown at an annualized rate of 2.5%, and the CAGR of earnings per share was 25.9%.

Their dividend record is better than many of the more established companies. For example, they have increased their dividends for 19 consecutive years. It’s quite a long track record. The ten-year DGR is 15.8% which is excellent. And stocks give a “ juicy” 4.6%. You don’t often see such a high yield combined with a double-digit dividend growth rate.

We see that this is a well-covered dividend. Moreover, the payout ratio is just 40.5%, based on this fiscal year’s average adjusted EPS forecast.

Huntington Ingalls Industries (HII)

Huntington Ingalls is a major American defence company.

Sovereign defence is a century of growth. So you have a built-in demand for sovereign defence products and services based on the inalienability of human nature. And as these defence products and services become more complex and expensive, you have a natural increase in value superimposed on embedded demand, which is a powerful double whammy. It is one reason why HII has increased its revenue by an average of 4% per year and earnings per share by 18.6% per year over the past decade.

The growth of sovereign defence provides a constant increase in dividends.

The company has been increasing dividends for ten consecutive years, the most extended period in its history.

The five-year DGR is 17% which is fantastic. And you even get a pretty good return here – the stock offers a 2.3% return. These dividends also look very safe based on a payout ratio of 35.4%.

Altria Group (MO)

MO is one of the most significant tobacco companies in the world.

These are actions of “sin”. Tobacco is not needed in any case, and its consumption is entirely at the discretion of the smoker. However, much of our society is discretionary. It can compare very little to mere existence and necessity in modern life. The rationale for this particular business is that it benefits from the impressive price power of selling addictive products with inelastic demand. Altria has posted a CAGR of 2.1% in revenue and 9.4% in earnings per share over the past decade despite the constant decline in its industry.

 Altria has increased its dividend during the last 52 years. The 10-year DGR is 8.4% and solid on its own. However, it’s reliable when stock returns hit a sky-high 8.2%. You will rarely see such high returns combined with high dividend growth rates.

However, we think Altria’s dividend growth will slow to single digits. But it’s not scary when you’re getting 8%+ returns. And while such high returns usually point to a volatile dividend, Altria ‘s 74.1% payout ratio, based on an average adjusted earnings per share forecast for this fiscal year, indicates that the tip is entirely sustainable.

Starbucks (SBUX)

Starbucks is one of the significant world retailers of high-quality coffee drinks.

We have several companies worldwide where, when you say their name, images of their products immediately appear in your mind. Starbucks is one such company. Similarly, when you come across one of these products, your thoughts instantly return to the company’s name. But it’s even better because Starbucks pulls off a clever trick that few other companies can do.

They provide both a high-quality product and experience – serving food and drinks in an experiential lounge setting (what brings people together – music, atmosphere, interior, and what indeed helps to take your mind off all the problems). In a world where companies try to deliver a product or experience successfully, Starbucks does both. That’s why over the past decade, the company has grown its revenue by 9.1% per year and earnings per share by 16.4% per year.

Impressive business growth paved the way for remarkable dividend growth.

Starbucks has increased its dividend for the past 12 years, with a 10-year DGR of 20.7%. A shareholder should love this double-digit dividend growth. And because stocks have been so weak lately, the yield has risen to 2.4%. It is 50 basis points higher than the five-year average. This factor seems like a safe dividend with a payout ratio of 52.4%. As long as Starbucks continues to sell more products at ever higher prices, it should be able to continue paying ever higher dividends.

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