2 income stocks that keep growing dividends

There are few things more satisfying about being an ASX investor than seeing a dividend hit your bank account every six months (or even every three months).

Everyone hopes that the dividend is at least as much as the year before. It’s even better if the dividend is bigger than last year.

There aren’t too many businesses that have been growing their dividend every year for five years or more on the ASX. Dividends have hit the brakes with profit growth becoming an issue.

Here are two shares on my watchlist that manage to increase their dividend every year whilst having seemingly good long-term futures.

Washington H. Soul Pattinson and Co. Ltd (ASX: SOL)

There is only one other share with a dividend record like Soul Patts on the ASX. It has increased its annual ordinary dividend every year since 2000.

I believe the dividend growth could continue for many years because it is an investment conglomerate. This means it can buy (and sell) shares in whatever businesses it wants to – it can adapt its holdings to the changing times. It has done very well out of the continued strength of Brickworks Limited (ASX: BKW) and the recovery of TPG Telecom Ltd (ASX: TPM).

The Soul Patts share price has done really well over the past year, matching the growth of the underlying value of the business’ assets. However, the grossed-up dividend yield has fallen to 2.9%, still better than most bank accounts.

Paragon Care Ltd (ASX: PGC)

The number of elderly people is expected to become an avalanche over the next decade or two. Sadly, as we get older the more likely it is we need some sort of medical intervention. The number of over-65s is expected to grow by 70% over the next 20 years.

Paragon could be set to benefit from that trend because it supplies healthcare equipment for hospitals and aged care facilities.

It has increased its dividend each year since 2013 and there could be more growth to come with all the earnings per share (EPS) accretive acquisitions it has made, as well as the 10% organic growth that management are hoping for this year.

It currently has a grossed-up dividend yield of 6.2%.

Foolish takeaway

Out of all of the shares on the ASX, these are two of the ones with grossed-up yields above 2.75% that I think are most likely to keep increasing their dividends over the next five years. I’d pick Paragon out of the two at today’s price for income, simply because it looks so cheap and has a much bigger yield. Soul Patts is probably one of the best buy-and-hold ideas on the ASX.

Another share that has been increasing its dividend ever since it started paying one is this top-quality share that grew its dividend by 20% in FY18.

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Motley Fool contributor Tristan Harrison owns shares of Paragon Care Limited and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia owns shares of and has recommended Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia has recommended Brickworks, Paragon Care Limited, and TPG Telecom Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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