Investors may be attracted to high-yield stocks, but it is actually dividend growth that really generates increasing long-term returns and personal wealth.
There are several things that smart investors look for when considering a stock for their long-term portfolio.
First, the company should be steadily increasing dividends. How much have dividends grown over the past five and ten years?
Second, does the company have a record of paying special dividends? These are great one-off income boosts.
Third, does the company return capital to shareholders through share buybacks? When a company buys its own shares back, dividends per share payments will increase proportionately.
Here are three stocks with good track records for paying stable and steadily growing dividends that income investors may want to own.
Macquarie Group Ltd (ASX: MQG)
The investment bank has been a wealth creator for many investors over the past several years. Working on a global scale, it can take advantage of financial growth in various markets. For example, the US stock market, where the bank gets a proportion of its revenue, is seeing new all-time highs and an economic recovery is occurring.
Higher investment returns mean strong performance fees along with its annuity-like fee income generated by its management services. That helps keep dividend growth smooth and steady.
Currently, the stock pays an attractive 4.8% yield partially franked.
Telstra Corporation Ltd (ASX: TLS)
The telecom giant is moving into the next phase of its business development as a regional telecommunications and data management leader in South East Asia. During this time, it is investing in cloud network infrastructure to offer business enterprise services. Also, it is working together with local telecom companies in a number of Asian countries to help them develop and upgrade their phone and data networks.
Telstra has adequate funds to finance these initiatives. In addition, the handover of its phone copper line infrastructure for the national broadband network will help bankroll further growth in the future. The company has the reputation of being a solid dividend payer and even conducted a $1 billion share buyback recently. The stock's yield is a hefty 5.2% fully franked.
Suncorp Group Ltd (ASX: SUN)
A leading general insurance company and the fifth-largest bank in Australia, Suncorp has beefed up its financial strength by restructuring its insurance business and improving its bank's loan books through more conservative lending.
Shareholders have enjoyed three straight years of special dividends recently along with steady dividend growth. There may be more of that to come as its cost-cutting program is expected to produce annual savings of $225 million and $265 million in FY 2015 and FY 2016, respectively. Paying a high 5.8% yield fully franked, Suncorp could be a steady income stock for years to come.
