Looking for dividend yield is a great passion among Australian investors. And rightly so. Part of your investing returns come from share price gains, but that can take time. As easily as stocks go up, they can also go sideways if a lot of other investors aren't bidding the stock up.
However, getting dividend income in your bank account like clockwork gives you extra money to reinvest. What's even better is when your companies raise dividends regularly. For example, Sydney Airport Limited (ASX: SYD), a sturdy infrastructure stock, has a 5.1% yield now, but over the past ten years it has increased its dividend payments an average 7.5% annually. If it repeated that over the next ten years, the annual dividend will have doubled in that time. Your 5.1% yield would be like 10.2% on your original investment in ten years' time.
The point here is don't just focus on the yield, but look for companies that have a good dividend growth record and active plans to return more capital to shareholders in the future.
Here are two more quality stocks with high yields that reward their shareholders with rising dividends.
JB Hi-Fi Limited (ASX: JBH), the electronics and white goods specialty retailer, might not be the first company to come to mind, but it has an impressive track record of raising dividends. Double-digit dividend growth over the past year, five, and ten years really makes it a standout income stock. It yields a great 5.3% fully franked.
Franchise store growth is stable and the company just surprised the market with a 10.3% earnings rise in FY 2014. Further growth could push up dividends as well.
If JB Hi-Fi can continue to make solid gains while the retail industry is still trying to find its feet, that's a good sign it could really excel when the economy picks up more.
Possibly even better is Woodside Petroleum Limited (ASX: WPL). The energy producer has steady cash flows from its producing LNG projects that it can use for acquisitions, but it hasn't forgotten its shareholders. It raised dividends on average almost 19% annually over the past ten years. It's paying a huge 5.7% dividend fully franked now.
For a long-term investment, this could be one of the best. Even if its dividend growth rate came down to an average 10% per annum, you still could see your dividend payment potentially double in about seven years. Over several decades, that could substantially add to your portfolio income.
