Clearly, all income-seeking investors love a high yield. After all, it means that as soon as shares are purchased you can look forward to a top notch income within months of handing over your hard-earned cash.
However, over the medium term, the rate of dividend increases can prove to be just as important as a high initial yield. Not only can a rapid rate of dividend increases improve your income, they can increase demand for the shares and push the share price higher.
With this in mind, here are three companies that are expected to increase dividends at a very impressive pace moving forward and appear to be worth buying right now.
Santos Ltd
Despite yielding just 2.6% right now, Santos Ltd (ASX: STO) has huge potential when it comes to being an income stock. That's because it is forecast to increase earnings at an annualised rate of 39.2% over the next two financial years, as the company is forecasting a step-up in profit due to further LNG projects coming on line.
This should allow it to increase dividends at a similar rate of 39.5% per annum over the same period. So, by the end of 2015, this means that Santos could be yielding as much as 4.3%, which could give your income a significant boost.
QBE Insurance Group Ltd
The current year is something of a turnaround for QBE Insurance Group Ltd (ASX: QBE), since it is forecast to return to profitability after making a loss last year. This should allow it to increase dividends per share at a rapid rate of 20.2% per annum over the next two financial years.
With shares in QBE currently offering a very respectable, fully franked yield of 3.1%, this means that they could be yielding as much as 4.4% next year. Furthermore, with dividends due to be twice covered by profit, there could be scope for a higher dividend payout ratio, too.
CSL Limited
Although a yield of 1.8% sounds pretty unappealing, CSL Limited (ASX: CSL) has vast income potential. Indeed, the pharmaceutical major has a payout ratio of just 42%, which means that there is scope for dividend increases even if the bottom line stagnates over the medium term.
However, CSL's earnings are forecast to rise at an annualised rate of 15.3% over the next couple of years, which should allow the company to increase dividends per share by 14.2% per annum over the same time period. This means that shares in CSL could be yielding 2.1% in FY 2016, with the payout ratio still having huge scope to increase over the medium term.
