5 stocks that can significantly increase their dividend
A dividend yield of 2.5% doesn't look like a lure. But if the dividend grows by 7% annually for ten years, the investor will receive almost double after ten years. For a group of five American companies, the pace of increases over the last decade ranged between 8.8% and 14% annually, but in recent years it has clearly slowed. The deciding factor is who has room to accelerate again.
Key points
These companies increased their dividends over the last decade at an annual pace of 8.8% to 14%, but the latest increases ranged from only 1.3% to 7%.
For four of the five companies, the ten-year dividend growth is 4 to 6 percentage points higher than the five-year growth, so the historical average significantly overstates the current pace.
A company with a payout ratio below 50% can increase its dividend faster than earnings; above this threshold, dividend growth is tied to earnings growth.
In a realistic model, three of the five companies would move from today's yield of 2.5% to 3.1% to a yield on original investment of 4.6% to 4.9% over ten years.
A stock with a 1.3% yield would need to increase its dividend by about 14% annually to catch up over ten years with a stock yielding 3.1% and growing at 4.5%.
Dividend income from a stock is determined not only by how much the company pays on the day of purchase, but mainly by what it does with the dividend in subsequent years. Lowe's, UnitedHealth, Texas Instruments, Stryker and Home Depot have not built their reputation as reliable payers through high yields, but through repeated increases. Together they have more than 150 years of uninterrupted increases. Each of them is currently undergoing a different type of test: a weak housing market, regulatory pressure, the end of an investment cycle, or production disruptions. For an investor with a ten-year horizon, it is therefore more important to estimate which of these tests will not stop dividend growth, than to compare today's yields.
A dividend doesn't have to be high today
Two hypothetical stocks
An investor puts $100 into stock A with a 5% yield and a dividend growing by 2% annually, and the same amount into stock B with a 1.5% yield and a dividend growing by 10% annually. In the first year, he receives $5 from stock A and $1.50 from stock B. After ten years of growth, stock A pays approximately $6.09 and stock B $3.89. Relative to the original investment, i.e., in the yield on cost metric, this corresponds to 6.1% and 3.9%.
So stock B still pays less after ten years. Annual income from it surpasses stock A roughly in the 17th year, and cumulatively paid dividends only around the 27th year. A rapidly growing dividend therefore pays off mainly over a very long horizon and only if the high pace actually holds. If stock B slowed to 5% after five years, no surpassing would occur.
The example does not imply that rapid dividend growth automatically means a better investment. But it shows why today's yield alone is not enough. Three things are decisive: the starting yield, the growth rate, and the probability that the rate will be maintained.
Methodology
Annual dividend is the current declared quarterly rate multiplied by four, not the sum of dividends actually paid over the last 12 months.
Five-year and ten-year growth (CAGR) is calculated from the quarterly rate effective after each annual increase: for LOW and UNH from the summer rate, for TXN from the September rate, for SYK from the December announcement, and for HD from the February one.
Payout ratio is the annual dividend divided by earnings per share. For companies that report adjusted earnings, the difference from GAAP is also shown.
Five different dividend stories
The selection was not made according to the highest yield. It is united by a long history of increases and double-digit ten-year dividend growth for four of the five companies. Behind the common framework, however, lie five different situations, which current data change in several points compared to usual perception.
Lowe's $LOW: the longest streak in the group and for a long time one of the fastest dividend growth rates among large retailers. After a jump of 31% in 2022, however, came four increases of only 4% to 5%.
UnitedHealth $UNH: the fastest ten-year growth of the five with a yield around 2.5%. The 2025 crisis slowed the pace of increases to 5% annually.
Texas Instruments $TXN: a classic dividend growth story, where the pace must be watched. After three years of increases of 4% to 5%, a 7% increase came in September 2026.
Stryker $SYK: the lowest yield and the lowest payout ratio. Current data show that it is more of a stable than a fast dividend grower, because the ten-year CAGR is the lowest of the five.
Home Depot $HD: the highest yield in the group, but also the slowest latest increase. The compromise between yield and growth has shifted toward yield in the last two years.
Lowe's
Six decades without interruption
Lowe's $LOW has paid a quarterly dividend continuously since its IPO in 1961 and increases it every year. Some databases show a streak of 62 to 63 years, while the company itself only mentions its Dividend Aristocrat status, i.e., more than 25 years. In both cases, it is the longest streak in the group and one of the longest on the US market.
Fast growth that stopped
At the end of May 2026, the company increased its quarterly dividend from $1.20 to $1.25, or 4.2%. The annual rate is thus $5.00 and at a price around $194 corresponds to a yield of approximately 2.6%. The absolute trend shows how significantly the pace has changed:
2016: $0.35 quarterly
2021: $0.80 (33% increase)
2022: $1.05 (31% increase)
2023 to 2026: $1.10, $1.15, $1.20 and $1.25 (4% to 5% annual increases)
The ten-year CAGR is thus 13.6% and the five-year 9.3%. But both figures are largely the work of 2017 to 2022. The current pace is roughly one-third of that.
Yield above historical average
As recently as January 2026, Lowe's yield was around 1.8% and in recent years it mostly stayed between 1.5% and 2%. Today's roughly 2.6% is the result of a drop in the stock price, not an acceleration of the dividend. The stock has fallen more than a quarter from its January high around $267 after the company lowered its outlook to the lower end of the original range in August and expects flat comparable sales for all of 2026.
Can the pace accelerate again?
With an adjusted earnings outlook of $12.25 per share, the dividend accounts for about 41% of earnings (about 43% under GAAP, i.e., after including acquisition costs). The payout ratio is thus only slowly approaching management's long-term target of around 35%, and room for larger increases exists. The slow pace of recent years, however, is not a coincidence: in 2025 the company bought distributors Foundation Building Materials and Artisan Design Group, which increased debt, and it is prioritizing funds for their integration. A realistic scenario therefore assumes a pace of around 6% annually, i.e., above the current 4%, but well below the historical average. A return to double-digit growth would require a housing market recovery.