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3 Great Dividend Stocks With Growing Distributions

As a dividend investor, the best news is when a company I hold raises dividends, which serves as confirmation that my initial analysis was valid. Growing dividend stocks are important because they ensure that the purchasing power of my income is at the very least maintained if I were to drop out of the rat race and retire tomorrow.

dividend stocks to buy pm o yumWith dividend stocks, success is very tangible, one distribution at a time. Dividends represent money earned without having to be physically present at a location or answer to a boss. Thus, with each dividend check I am getting one step closer to retirement.

Here’s a look at dividend stocks that have increased in the past week:

Philip Morris (PM)

Philip Morris (PM) manufactures and sells cigarettes and other tobacco products. PM raised its quarterly dividend by 6.4% to $1 per share, which was the slowest dividend increase since PM broke off from Altria (MO) in 2008.

Philip Morris is facing some headwinds worldwide but despite those, is still able to generate strong cash flows to pay increasing dividends and repurchase shares. I would probably have to lower my earnings and dividend growth expectations to 6% – 7% per year for the foreseeable future. However, a 6% – 7% annual growth in dividends from a company yielding almost 4.8% is a pretty good achievement.

PM stock is still attractively valued at 16.3 times forward earnings. Check my analysis of PMI.

Realty Income (O)

Realty Income (O) is a publicly traded real estate investment trust. The REIT increased its monthly dividend slightly to 18.31 cents per share, which was less than a 1% increase year over year. Realty Income has managed to increase dividends by 6% per year over the past decade.

Realty Income has also managed to boost distributions to its patient long-term investors for 20 years in a row. A 20% increase in dividends in 2013 probably explains the low raise in 2014.

Going forward, I would expect Realty Income to manage to grow distributions to match or slightly exceed the rate of inflation. Since O stock is already a high portion of my income portfolio, I do not plan on adding any more funds there. Check my analysis of Realty Income.

Bonus: Yum (YUM)

Yum (YUM), which is not a high yield stock, can achieve the type of dividend growth to reach high yields on cost in the future. Yum operates quick service restaurants in the United States and internationally: YUM Restaurants China, YUM Restaurants International, Taco Bell U.S., KFC U.S., Pizza Hut U.S., and YUM Restaurants India.

Yum  raised its quarterly dividend by 11% to 41 cents per share, which marked the tenth consecutive annual dividend increase for this dividend achiever. YUM stock is overvalued at 21.3 times forward earnings, but it does have potential for a lot of international growth.

I hold a small position in Yum and would like to add some more at 2.5% entry yields. Check my analysis of Yum.

Full Disclosure: Long PM and O, YUM

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