AAII Stock Ideas: Biggest Rising Dividend Payers

Today, we created a dividend ideas list for you to explore. This list is based on dividend-specific quantitative screening criteria using AAII’s Stock Investor Pro fundamental stock screening and research database.

Dividend-paying stocks can satisfy investors’ need for current income and capital growth, especially during volatile markets. One area of consideration is for investors to turn to the greater stability of rising dividend-paying stocks. While much remains uncertain, the highest-quality companies have proven their ability to grow their dividends over time, demonstrating an ability to survive through a range of market environments.

AAII is continuing to see reports suggesting that the disparity between growth and value has become too large. The latest was a note issued on Friday, February 19 by BlackRock. Two of the firm’s multi-asset fund managers pointed out what they described as a “dividend stock disparity.” In the note, they say high dividend stocks lagged the S&P 500 index by 30% last year. The last time this large of a difference occurred was in 1999. “Thereafter, dividend stocks outperformed equities for the next seven years,” write the fund managers.

The trend of high dividend stocks lagging the overall S&P 500 started before 2020. In 2016, the S&P 500’s forward price-earnings ratio was 17. The forward price-earnings ratio for the S&P 500 High Dividend Index was 16. (The forward price-earnings ratio is the current stock price divided by projected earnings for the next 12 months or for the next year.)

As of the end of last month, the forward price-earnings ratio for the S&P 500 was 21. The S&P 500 High Dividend Index’s forward price-earnings ratio was 14. Growth stocks got more expensive, while dividend stocks got cheaper.

Dividend yield is just one measure of valuation. While the BlackRock note focused on dividends, AAII has seen other analyses of valuation measures also showing a greater disparity between value and growth. The overriding message suggests that the spread between growth and value has become unusually large. With the caveat of the future potentially not reflecting the past, the odds are favoring the pendulum swinging back in favor of value.

Dividend Growth Galore

Rising dividend-paying stocks have historically provided higher cumulative returns with lower levels of volatility versus non-dividend-paying stocks over long-term holding periods. Cash dividends directly contribute to the total return and help to limit downside price risk, provided the market feels that the dividend is secure.

Dividends are a straightforward and effective tool to identify high-quality, well-run companies. Dividends have the potential to increase corporate accountability and can signal management’s confidence in current and future growth prospects.

This week, we created a dividend ideas list showing 13 rising dividend-paying companies with the highest 12-month dividend growth rates. The universe was limited to exchange-listed stocks with a share price above $3. Closed-end funds, exchange-traded fund (ETFs) and investment holding companies were excluded. Foreign stocks were also excluded because of the uniqueness of their financial statements.

A filter requiring annual dividend increases over the last five years was specified. Dividend growth over the last 12 months greater than 10% was specified to find the biggest rising dividend payers, and annualized five-year dividend growth greater than 3% was also required. The dividend growth rates provide a sense of dividend sustainability. Positive earnings for the current fiscal year was used as a minor financial strength screen. The payout ratio (dividends per share divided by earnings per share) shows the percentage of earnings paid out in dividends. A company’s current dividend yield must be greater than its five-year average yield and greater than 1.5% to be comparable to the current market yield.

The biggest rising dividend payers in the table above are Agnico Eagle Mines Ltd. (AEM), an international gold producer, Nexstar Media Group (NXST), a television broadcasting and digital media company and American Tower Corp. (AMT), a holding company that operates as a real estate investment trust (REIT), which owns, operates and develops multi-tenant communications real estate.


The stocks meeting the criteria of the approach do not represent a “recommended” or “buy” list. It is important to perform due diligence.

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American Association of Individual Investors

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