It’s easy to get distracted by the high, but usually stagnant, 6% dividend yielders. Yet, the stocks actually growing dividends in the current market could be more interesting.
Hence the reason the S&P 500 Dividend Aristocrats are so well-liked. Many of these stocks yield just 2% or 3%, but they have managed to outperform the market over the long term.
Since its inception, the ProShares S&P 500 Dividend Aristocrats ETF (NYSEArca: NOBL) has outperformed the S&P 500 index.
In a market where volatility is on the rise, stocks growing their dividends are a welcome sight. Plus, getting into dividend growers while they are underrated is another benefit. With that in mind, here are three underrated dividend growth stocks upping their payouts this week:
No.1 Underrated Dividend Growth Stock: Foot Locker (NYSE: FL)
First up is Foot Locker, which is upping its quarterly dividend by nearly 15% this week to 25 cents. The stock yields 1.6% and has four consecutive years of dividend increases under its belt. What’s more is that it’s paying out just 25% of its earnings via dividends.
This shoe retailer needs no introduction, operating some 3,500 stores. It has virtually no debt and still generates an impressive return on invested capital of 20%. It also has a new CEO in place, which is bringing about new capital allocation policies, hence the dividend increase.
With that, it’s also ramping up its buybacks. It put in place a $1 billion share buyback plan last month. That’s good enough to reduce its shares outstanding by more than 10%. Driving these dividends and buybacks is growth in Foot Locker’s success in private label products and direct-to-consumer business.
Shares trade ex-dividend April 15.
No. 2 Underrated Dividend Growth Stock: Oxford Industries (NYSE: OXM)
Oxford’s dividend yield of 1.4% might not seem like much, but the company is paying out just 28% of its earnings via dividends. It now has five years of consecutive dividend increases, but has actually been paying a dividend for 27 years.
The company is an underrated name in the apparel business. It’s a designer, manufacturer and retailer of various clothes. Nearly all its distribution facilities are located within the U.S., reducing the need to deal with overseas labor or currency fluctuations.
Over 90% of its sales are generated from its own brands, with the rest coming from licensed brands, such as Kenneth Cole and Dockers. Oxford’s major owned brands include Tommy Bahama, Arnold Brant, Ben Sherman and Lilly Pulitzer.
Shares trade ex-dividend April 15.
No. 3 Underrated Dividend Growth Stock: Costamare (NYSE: CMRE)
Costamare operates in the containership business, which has been volatile of late. Shares are down 23% after hitting a 52-week high back in mid-2014. Its business also involves providing shipping services between major ports, such as technical support and maintenance. And many of Costamare’s vessels are deployed on multi-year charters, which gives the company some stability.
Thus, Costamare has had no trouble upping its dividend since its 2010 IPO. The shipper has upped its annual dividend for four straight years now, and its dividend yield is a hefty 6.2%.
Going forward, the company is well-positioned to continue its dividend increases. Toward the end of last year, Costamare entered into an agreement to take delivery of more containerships expected to be put into use in 2016. In fact, they are already chartered by Evergreen Shipping with multi-year contracts.
Shares trade ex-dividend April 17.
In the end, growing dividends is key. The yields for our three dividend growth stocks vary, but investors shouldn’t overlook the consistent growth in their dividends. Investors should also be encouraged by the fact that all three are still relatively underrated, too.
Dividends for Every Month of the Year
If you’re looking for just one dividend stock to round out your income stream, consider a little-known company that pays out dividends 12 months of the year.
Click here to see the full details of this company in my Dividend Calendar…