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5 Dividend Doublers That Run Laps Around the Market


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By Brett Owens

If you want to figure out how long it will take to double your money in an investment, you use the aEURoeRule of 72.aEUR But income investors can put this rule to work, too, to figure out just how quickly their dividends will pile up.

IaEURtmll show you how aEUR" and IaEURtmll show you five dividend stocks that are on pace to double their dividends in just seven years.

The Rule of 72 is just a simple equation you can use to project the amount of time it would take to double your investment money. The equation:

72 / compound annual interest rate = # of years to double your investment.

So letaEURtms say the S&P 500 returns an average of 8% a year. 72 / 8 = 9. That means it should take about nine years for someone holding a market fund such as the SPDR S&P 500 ETF ( SPY ) or Vanguard S&P 500 ETF ( VOO ) to double their money.

Obviously, I aim to do better .

But you can also use this equation to figure out how quickly your dividends should grow over time, which will help you figure out your eventual yield on cost.

For instance, say a stock yields just 3% now, but is on pace to double its dividend in just five years, you can essentially plan for a much healthier 6% yield on cost in a short amount of time. That would be an income play you and I could get behind!

LetaEURtms use the S&P 500 as an example again. The index has grown its dividend at an average of 8.2% per year over the past five years. The math isnaEURtmt much different aEUR" itaEURtmll take just under a decade for the S&P 500 to double the dividends it pays out.

ThataEURtms a little sluggish for my tastes, especially considering there are numerous dividend payers that are acting with a lot more urgency. Today, IaEURtmm going to point you in the direction of five stocks whose payouts are booming. These firms have been boosting their payouts by an average of at least 10% every single year (and in many cases more) aEUR" putting them on pace to double their dividends in just seven years or less!

Booz Allen Hamilton ( BAH )

Dividend Yield: 1.4%

5-Year Average Dividend Growth: 13.7%

American information technology and management firm Booz Allen Hamilton ( BAH ) isnaEURtmt the first, second or hundredth stock on most investorsaEURtm lists. But itaEURtms worth a look, both for its array of business arms and the stellar results theyaEURtmre driving.

Booz Allen Hamilton is perhaps best known for its consulting business, which has been used historically for tasks ranging from World War II preparations to the merger of the National Football League with the AFL. BAH also deals in analytics, digital solutions, cybersecurity and even engineering.

All told, Booz Allen has more than 25,000 employees working across 400-plus locations in more than 20 countries. Nearly 70% of which hold security clearances, which speaks to its heavy ties to the government aEUR" in fact, the federal government was responsible for 97% of the companyaEURtms $6.2 billion in fiscal 2018 revenues.

This has fueled a general uptrend in both revenues and net income since its 2010 IPO, which in turn have powered a very consistently growing dividend.

Booz Allen Hamilton ( BAH ): An Unheralded Growth-and-Dividend-Growth Play


The company improved its payout by a pair of pennies to 19 cents quarterly this year aEUR" a 12% improvement thataEURtms not far off its five-year average dividend growth of roughly 14%. And that dividend isnaEURtmt even 30% of this yearaEURtms projected $2.64 in profits, which means the company has oodles of room to write larger checks for years to come.

MasterCard ( MA )

Dividend Yield: 0.5%

5-Year Average Dividend Growth: 17.8%

Credit card use isnaEURtmt new to you and me. In fact, plastic has been around so long that you probably think almost everyone uses a credit or debit card and that thereaEURtms not much market left to grow into.

Wrong. Strategic research and consulting firm RBRaEURtms aEURoeGlobal Payment Cards Data and Forecasts to 2022aEUR report shows that global payment-card use grew 8% worldwide to 14 billion in 2016, and that number is expected to balloon by 22% to 17 billion by the year 2022.

ThataEURtms fantastic news for MasterCard ( MA ) aEUR" the No. 2 player not just in the U.S., but in Europe, in Africa and in Latin America.

The important thing to remember about Mastercard and rival Visa ( V ) is that while they seem like financial stocks, theyaEURtmre really closer to being technology stocks aEUR" theyaEURtmre not lenders, just payment processors. That means they need to constantly innovate to stay ahead of the game, which Mastercard has been doing via its recently announced Digital Commerce Solutions, which includes a plan to make all its cards support token authentication within two years, and a partnership with Southeast AsiaaEURtms Grab to offer virtual prepaid solutions for the ride-hailing companyaEURtms 110 million customers.

MasterCard pulls in roughly $12.5 billion annually across its worldwide payments network. The company did nearly $1.5 trillion in gross dollar volume around the globe in the third quarter alone, across some 2.5 billion cards aEUR" up 4% year-over-year. MA has produced steady growth for years, which has translated into explosive growth in the dividend aEUR" to the tune of roughly 18% annually over the past half-decade.

And its 25-cent quarterly dividend? That comes out to a mere 15% of this yearaEURtms projected earnings, which means MasterCard could triple its payout overnight and still have more payout headroom than most established dividend-paying blue chips.

MasterCardaEURtms ( MA ) Dividend Is Charging Ahead


Better still: Shares have a lot of aEURoecatching upaEUR to do with the payout.

Vail Resorts (MTN)

Dividend Yield: 2.2%

5-Year Average Dividend Growth: 48.0%

Vail Resorts (MTN) aEUR" a play on the aEURoeexperience economyaEUR aEUR" is essentially the future of ski lodges. Vail, as well as a few other groups, are buying up ski resorts, lodges and other operations across the U.S. and around the world, and bringing them under one brand to better serve wealthy customers whose particular destination tastes may change from time to time.

Vail is split into three divisions:

Mountain: This entails the companyaEURtms premier mountain resorts, including the namesake Vail, as well as Breckenridge (Colorado), Northstar (Lake Tahoe, California), Perisher (Australia) and Whistler Blackcomb (Canada), among others.


Source: Vail ResortsaEURtm 2018 Investors Conference Presentation

Lodging: Vail Resorts Hospitality owns several properties around its various resorts, including five RockResorts luxury hotels, as well as a National Park contract at Grand Teton National Park and an airport-to-resort transportation company, Colorado Mountain Express.

Real Estate Development: Lastly, Vail Resorts Development Company helps plan, market and otherwise develop property around the resorts, including communities and private clubs.

One of VailaEURtms biggest sources of growth is its aEURoeSeason Pass,aEUR which allows guests to use its various resorts, rather than tethering customers to one particular resort. Pass sales have grown at 13% annually on average since fiscal 2012, to more than 78,000 in FY2018.

The result has been steady growth pretty much across the board, including free cash flow, which has improved every year since 2012 aEUR" from $57.1 million then to $338.6 million in FY2017.

Vail has been generous with that cash, too, growing its dividend by nearly half every year on average over the past five years. Its current $1.47 quarterly dividend comes out to 75% of this yearaEURtms profits, but just 65% of next yearaEURtms. DonaEURtmt expect nearly 50% dividend expansion going forward, but as long as MTNaEURtms earnings swell like theyaEURtmre expected to, Vail Resorts should be a dividend growth machine.

Southwest Airlines (LUV)

Dividend Yield: 1.2%

5-Year Average Dividend Growth: 74.1%

Southwest Airlines (LUV) is, as IaEURtmve said before, a aEURoebreath of fresh airaEUR in the airline industry. In a business that seems to pride itself on kicking puppies and pushing down old ladies, Southwest has set itself apart on the most bizarre of concepts: Treating humans like humans .

This year alone, Southwest has topped J.D. PoweraEURtms study for customer service among low-cost airlines in North America, took home four TripAdvisor TravelersaEURtm Choice awards and was No. 2 on IndeedaEURtms top-rated workplaces.

Of course, being nice isnaEURtmt everything. You have to make money. And Southwest makes money. The airline has been profitable for 45 consecutive years despite its strong price-competitiveness. In the third quarter, LUV brought in $615 million in earnings aEUR" its best Q3 in company history.

That same quarter, the company returned $591 million to shareholders via share repurchases and buybacks. The majority of that ($500 million) was repurchases, but LUV is far, far, far from a distribution slouch. Southwest has pumped up its payout from a mere penny per share at the beginning of 2013 to 16 cents as of this yearaEURtms distribution aEUR" itself a hefty 28% improvement.

And at a mere 15% of this yearaEURtms projected profits, the skyaEURtms the limit on future payout hikes.

SouthwestaEURtms (LUV) Dividend Takes Flight


Vulcan Materials (VMC)

Dividend Yield: 1.1%

5-Year Average Dividend Growth: 94.7%

IaEURtmm not sure what you think of when you think about a company that has been able to nearly double its dividend every year on average for a half-decade aEUR

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.



This article appears in: Investing , Options
Referenced Symbols: SPY , VOO , BAH , MA , V



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