10 Greatest Shares For Compounding Dividends

Article up to date on December nineteenth, 2024 by Bob CiuraSpreadsheet knowledge up to date each day

Earnings traders on the lookout for compounding dividends over time, ought to think about high-quality dividend development shares. These shares have the power to boost their dividends over time, thereby unleashing the ability of compounding dividends.

Because of this Certain Dividend typically recommends the Dividend Aristocrats, a choose group of 66 S&P 500 shares with 25+ years of consecutive dividend will increase.

They’re the ‘better of the perfect’ dividend development shares. The Dividend Aristocrats have an extended historical past of compounding dividends for shareholders.

There are at the moment 66 Dividend Aristocrats. You possibly can obtain an Excel spreadsheet of all 66 Dividend Aristocrats (with metrics that matter akin to dividend yields and price-to-earnings ratios) by clicking the hyperlink beneath:

Disclaimer: Certain Dividend will not be affiliated with S&P International in any approach. S&P International owns and maintains The Dividend Aristocrats Index. The knowledge on this article and downloadable spreadsheet relies on Certain Dividend’s personal evaluate, abstract, and evaluation of the S&P 500 Dividend Aristocrats ETF (NOBL) and different sources, and is supposed to assist particular person traders higher perceive this ETF and the index upon which it’s primarily based. Not one of the data on this article or spreadsheet is official knowledge from S&P International. Seek the advice of S&P International for official data.

Dividend Aristocrats should have 25+ years of rising dividends, be a member of the S&P 500 Index, and meet sure minimal dimension and liquidity necessities.

As a consequence of their sturdy dividend historical past and sturdy aggressive benefits, the Dividend Aristocrats are an important place to start out on the lookout for compounding dividends.

This text will clarify the idea of compounding dividends in larger element, in addition to a listing of the highest 10 shares for compounding dividends proper now.

Desk of Contents

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What Is Compounding Dividends?

Put merely, compounding is the act of incomes curiosity on previously-earned curiosity. On this approach, traders may consider compounding just like the snowball impact.

If you push a small snowball down a hill, it repeatedly picks up snow. When it reaches the underside of the hill it’s a big snow boulder.

The snowball compounds throughout its journey down the hill. The larger it will get, the extra snow it packs on with every revolution.

The snowball impact explains how small actions carried out over time can result in huge outcomes.

In the identical approach, investing in high-quality dividend development shares can generate massive quantities of dividend earnings over lengthy durations of time.

That’s as a result of dividend development shares are inclined to pay rising dividends yearly. After which you may reinvest these rising dividends to buy extra shares annually.

This ends in a rise within the complete variety of shares you personal, in addition to a rise within the dividend per share, for a robust compounding impact.

Right here’s the ability of compound curiosity:

Think about you invested $1 that compounded at 1% a day. In 5 years your $1 would develop to over $77 million. You’ll be the richest particular person on the planet by yr 7.

Remember the fact that compounding will not be a get wealthy fast scheme. It takes time – and plenty of it. There are not any investments that compound at 1% a day in the actual world.

The inventory market has compounded wealth (adjusting for inflation) at ~7% a yr over the long term. At this fee an funding within the inventory market has traditionally doubled each 10.4 years.

The ten Greatest Shares For Compounding Dividends

The next 10 shares are our top-ranked shares for compounding dividends, primarily based on a qualitative evaluation of dividend historical past, present yield, and payout ratios.

All of the shares within the listing beneath have present yields above 2%, at the least 25 consecutive years of dividend will increase, and payout ratios beneath 70%.

As well as, the ten finest shares for compounding dividends beneath have Dividend Danger Scores of A or B.

This mix is prone to lead to sustained dividend will increase over time, thereby compounding dividends to create long-term wealth.

The shares are ranked so as of their 5-year dividend development fee, from lowest to highest.

#10: Financial institution OZK (OZK)

Payout Ratio: 26.9%
Years of Dividend Will increase: 30
5-12 months Dividend Progress Fee: 7.0%

Financial institution OZK is a regional financial institution that gives providers akin to checking, enterprise banking, business loans and mortgages to its prospects in Arkansas, Florida, North Carolina, Texas, Alabama, South Carolina, New York and California.

On October 1st, 2024, Financial institution OZK introduced a $0.41 quarterly dividend, representing a 2.5% increase during the last quarter’s cost and a ten.8% increase year-over-year. This marks the corporate’s 57th consecutive quarter of elevating its dividend.

In mid-October, Financial institution OZK reported (10/17/24) outcomes for the third quarter of 2024. Whole loans and deposits grew 15% and 20%, respectively, over final yr’s quarter. Web curiosity earnings grew 6% over the prior yr’s quarter, regardless of greater deposit prices.

Earnings-per-share grew 4%, from $1.49 to a brand new all-time excessive of $1.55, and exceeded the analysts’ consensus by $0.01. Financial institution OZK has exceeded the analysts’ consensus in 16 of the final 18 quarters.

Click on right here to obtain our most up-to-date Certain Evaluation report on OZK (preview of web page 1 of three proven beneath):

#9: Real Elements Firm (GPC)

Payout Ratio: 49.7%
Years of Dividend Will increase: 68
5-12 months Dividend Progress Fee: 7.0%

Real Elements has the world’s largest world auto components community, with greater than 10,800 places worldwide. As a serious distributor of automotive and industrial components, Real Elements generates annual income of practically $23 billion.

Supply: Investor Presentation

It operates two segments, that are automotive (consists of the NAPA model) and the commercial components group which sells industrial substitute components to MRO (upkeep, restore, and operations) and OEM (unique gear producer) prospects.

Clients are derived from a variety of segments, together with meals and beverage, metals and mining, oil and gasoline, and well being care.

The corporate reported its third-quarter 2024 outcomes, with gross sales reaching $6.0 billion, a 2.5% improve from the earlier yr.

Web earnings fell to $227 million, or $1.62 per diluted share, down from $351 million in Q3 2023. Adjusted diluted earnings per share (EPS) additionally decreased to $1.88 in comparison with $2.49 final yr.

Click on right here to obtain our most up-to-date Certain Evaluation report on GPC (preview of web page 1 of three proven beneath):

#8: Air Merchandise & Chemical compounds (APD)

Payout Ratio: 55.1%
Years of Dividend Will increase: 42
5-12 months Dividend Progress Fee: 7.0%

Air Merchandise & Chemical compounds is likely one of the world’s largest producers and distributors of atmospheric and course of gases, serving different companies within the industrial, know-how, vitality, and supplies sectors.

Air Merchandise & Chemical compounds operates by means of three major enterprise models: Industrial Gases – Americas, Industrial Gases EMEA, and Industrial Gases – Asia.

Air Merchandise & Chemical compounds reported monetary outcomes for the fourth quarter of fiscal 2024 on November 7. The corporate generated revenues of $3.19 billion in the course of the quarter, which was up 0.3% year-over-year, lacking the analyst consensus estimate by $30 million.

Air Merchandise & Chemical compounds was capable of generate earnings-per-share of $3.56 in the course of the fourth quarter, which was up 13% in comparison with the earlier yr’s interval.

Click on right here to obtain our most up-to-date Certain Evaluation report on APD (preview of web page 1 of three proven beneath):

#7: Illinois Device Works (ITW)

Payout Ratio: 57.6%
Years of Dividend Will increase: 61
5-12 months Dividend Progress Fee: 7.0%

Illinois Device Works is a diversified multi-industrial producer with seven distinctive working segments: Automotive, Meals Gear, Take a look at & Measurement, Welding, Polymers & Fluids, Building Merchandise and Specialty Merchandise.

Final yr the corporate generated $16.1 billion in income.

On October thirtieth, 2024, Illinois Device Works reported third quarter 2024 outcomes for the interval ending September thirtieth, 2024. For the quarter, income got here in at $4.0 billion, shrinking 1.6% year-over-year. Gross sales declined 3.3% within the Automotive OEM phase, the biggest out of the corporate’s seven segments.

The Specialty Merchandise phase grew revenues by 5.7%. In the meantime, Meals Gear, Take a look at & Measurement and Electronics, Welding, Polymers & Fluids andConstruction Merchandise noticed income decline -0.2%, -0.2%, -1.3%, -1.9%, and -8.1%, respectively.

Web earnings equaled $1,160 million or $3.91 per share in comparison with $772 million or $2.55 per share in Q3 2023. Within the third quarter, ITW repurchased $375 million of its shares. It additionally raised its dividend by 7% to $6.00 yearly, marking its 61st consecutive annual dividend improve.

Click on right here to obtain our most up-to-date Certain Evaluation report on ITW (preview of web page 1 of three proven beneath):

#6: Canadian Nationwide Railway (CNI)

Payout Ratio: 46.2%
Years of Dividend Will increase: 29
5-12 months Dividend Progress Fee: 7.0%

Canadian Nationwide Railway is the biggest railway operator in Canada. The corporate has a community of roughly 20,000 route miles and connects three coasts: the Atlantic, the Pacific and the Gulf of Mexico.

It handles over $200 billion price of products yearly and carries over 300 million tons of cargo.

On January twenty fourth, 2024, Canadian Nationwide Railway elevated its dividend 7% for the March twenty eighth, 2024 cost date.

Within the 2024 third quarter, income grew 2.4% to $2.97 billion, which beat estimates by $11 million. Adjusted earnings-per-share of $1.24 match final yr’s end result in comparison with $1.23 within the prior yr and was $0.01 forward of expectations.

For the quarter, Canadian Nationwide Railway’s working ratio elevated 110 foundation factors to 63.1%. Income ton miles (RTM) grew 2% from the prior yr whereas carloads had been decrease by 2%.

Click on right here to obtain our most up-to-date Certain Evaluation report on CNI (preview of web page 1 of three proven beneath):

#5: Medtronic plc (MDT)

Payout Ratio: 51.2%
Years of Dividend Will increase: 47
5-12 months Dividend Progress Fee: 7.4%

Medtronic is the biggest producer of biomedical gadgets and implantable applied sciences on the planet. It serves physicians, hospitals, and sufferers in additional than 150 international locations and has over 90,000 staff.

Medtronic has 4 working segments: Cardiovascular, Medical Surgical, Neuroscience and Diabetes. Medtronic has raised its dividend for 46 consecutive years.

In mid-November, Medtronic reported (11/19/24) outcomes for the second quarter of fiscal 2025. Natural income grew 5% over the prior yr’s quarter because of broad-based development in all of the 4 segments. Earnings-per-share grew 1%, from $1.25 to $1.26, and exceeded the analysts’ consensus by $0.01.

As Medtronic carried out barely higher than anticipated within the second quarter, it marginally raised its steering for fiscal 2025. It expects 4.75%-5.0% natural income development and raised its steering for earnings-per-share from $5.42-$5.50 to $5.44-$5.50.

Click on right here to obtain our most up-to-date Certain Evaluation report on MDT (preview of web page 1 of three proven beneath):

#4: NextEra Vitality (NEE)

Payout Ratio: 61.9%
Years of Dividend Will increase: 29
5-12 months Dividend Progress Fee: 7.5%

NextEra Vitality is an electrical utility with two working segments, Florida Energy & Gentle (“FPL”) and NextEra Vitality Assets (“NEER”). FPL is the biggest U.S. electrical utility by retail megawatt hour gross sales and buyer numbers.

The speed-regulated electrical utility serves about 5.9 million buyer accounts in Florida. NEER is the biggest generator of wind and photo voltaic vitality on the planet. NEE was based in 1925. NEE generates roughly 80% of its revenues from FPL.

NextEra Vitality reported its Q3 2024 monetary outcomes on 10/23/24. For the quarter, the corporate reported revenues of $7.6 billion (up 5.5% yr over yr), translating to adjusted earnings of $2.1 billion (up 11% yr over yr). On a per share foundation, adjusted earnings climbed 10% to $1.03.

The utility added ~3 GW of latest renewables and storage tasks to its backlog, together with ~1.4 GW of photo voltaic and ~1.4 GW of battery storage, bringing its backlog to over 24 GW.

12 months so far, it generated working income of $19.4 billion (down 8.8% yr over yr), adjusted earnings of $6.0 billion (up 11%), and adjusted earnings per share (“EPS”) of $2.90 (up 9%).

Click on right here to obtain our most up-to-date Certain Evaluation report on NEE (preview of web page 1 of three proven beneath):

#3: Stepan Firm (SCL)

Payout Ratio: 61.6%
Years of Dividend Will increase: 57
5-12 months Dividend Progress Fee: 8.0%

Stepan manufactures primary and intermediate chemical compounds, together with surfactants, specialty merchandise, germicidal and material softening quaternaries, phthalic anhydride, polyurethane polyols and particular substances for the meals, complement, and pharmaceutical markets.

It’s organized into three distinct enterprise strains: surfactants, polymers, and specialty merchandise. These companies serve all kinds of finish markets, which means that Stepan will not be beholden to only a handful of industries.

Supply: Investor presentation

The surfactants enterprise is Stepan’s largest by income, accounting for ~68% of complete gross sales in the newest quarter. A surfactant is an natural compound that accommodates each water-soluble and water-insoluble elements.

Stepan posted third quarter earnings on October thirtieth, 2024, and outcomes had been blended. Adjusted earnings-per-share got here in properly forward of expectations at $1.03, which was 38 cents higher than anticipated. Income, nonetheless, was off nearly 3% year-over-year to $547 million, and missed estimates by over $30 million.

International gross sales quantity fell 1% year-over-year, as double-digit development in a number of of the corporate’s Surfactant finish markets had been absolutely offset by demand weak point in Polymers.

Click on right here to obtain our most up-to-date Certain Evaluation report on SCL (preview of web page 1 of three proven beneath):

#2: Atmos Vitality (ATO)

Payout Ratio: 48.7%
Years of Dividend Will increase: 41
5-12 months Dividend Progress Fee: 8.0%

Atmos Vitality can hint its beginnings all the best way again to 1906 when it was shaped in Texas. Since that point, it has grown each organically and thru mergers.

The corporate distributes and shops pure gasoline in eight states, serves over 3 million prospects, and will generate about $5 billion in income this yr.

Supply: Investor Presentation

Atmos has a 41-year historical past of elevating dividends, placing it in uncommon firm amongst dividend shares.

Atmos posted fourth quarter and full-year earnings on November sixth, 2024, and outcomes had been largely consistent with expectations. The corporate noticed simply over a billion {dollars} in web earnings for the yr, and $134 million for the fourth quarter. On a per-share foundation, earnings got here to $6.83 and 86 cents, respectively.

For the quarter, distribution earnings got here to $41 million, which was up from $38 million a yr in the past. Pipeline and storage earnings had been $93 million, up from $81 million in final yr’s This autumn.

For the yr, distribution earnings rose from $580 million to $671 million. Pipeline and storage full-year earnings had been up sharply from $306 million to $372 million, serving to to drive one other yr of report earnings for Atmos.

Click on right here to obtain our most up-to-date Certain Evaluation report on ATO (preview of web page 1 of three proven beneath):

#1: PPG Industries (PPG)

Payout Ratio: 33.0%
Years of Dividend Will increase: 53
5-12 months Dividend Progress Fee: 8.0%

PPG Industries is the world’s largest paints and coatings firm. Its solely opponents of comparable dimension are Sherwin-Williams and Dutch paint firm Akzo Nobel.

On October sixteenth, 2024, PPG Industries reported third quarter outcomes for the interval ending September thirtieth, 2024. For the quarter, income fell 1.5% to $4.57 billion, which was $90 million lower than anticipated.

The corporate generates annual income of about $18.2 billion.

Supply: Investor Presentation

Adjusted web earnings of $500 million, or $2.13 per share, in contrast favorably to adjusted web earnings of $493 million, or $2.07 per share, within the prior yr. Adjusted earnings-per-share was $0.02 beneath estimates.

Third quarter natural income development was as soon as once more flat in comparison with the prior yr. Efficiency Coatings income of $2.921 billion was up 1% from the identical interval of 2023. Greater volumes (+2%) and promoting costs (+1%) had been partially offset by divestitures (-1%) and a headwind from overseas forex change (-1%).

Click on right here to obtain our most up-to-date Certain Evaluation report on PPG (preview of web page 1 of three proven beneath):

Closing Ideas

Excessive-quality dividend development shares can construct long-term wealth for shareholders. A significant cause for that is the mix of dividend development and dividend reinvestment.

The ten shares listed within the article characterize a few of the finest shares for dividend compounding.

Certain Dividend maintains comparable databases on the next helpful universes of shares: