Best Performing Dividend Growth Stocks in 2021

We looked at the best performing dividend growth stocks in 2021. This list differs from the best performing stocks since it requires a company to be a dividend growth stock. Hence, stocks on the Dividend Challengers, Dividend Contenders, Dividend Champions, and Dividend Kings lists are eligible. Thus, volatile meme stocks like GameStop (GME), up about 800%, and vaccine stocks, like Moderna (MRNA), up almost 150%, are excluded. However, there are still hundreds of dividend growth stocks to choose from, and the ones on the list of best performing dividend growth stocks in 2021 are up more than 100%.

The stock market returns in 2021 were excellent. The S&P 500 Index was up 26.9%, the NASDAQ was up 21.4%, and the Dow 30 was up 19.7%. Some stocks performed far better than others. Reportedly mega-cap tech stocks like Apple (APPL), Microsoft (MSFT), Nvidia (NVDA), Tesla (TSLA), and Alphabet (GOOG) generated more than 32% of all the S&P 500 Index’s returns.

However, the best performing dividend growth stocks in 2021 were not mega-cap tech stocks. In addition, they were not riding a trend such as meme stocks, artificial intelligence (AI), or COVID-19 vaccines. Besides paying a growing dividend, the common factor was recovery from low demand and poor stock performance in 2020. Several of the stocks were real estate investment trusts (REITs). However, 2021 was a banner year for many of these companies, and the stock prices surged.

List of Best Performing Dividend Growth Stocks in 2021

Dillard’s

The number one stock on this list is Dillard’s (DDS). The company is a retailer, more specifically a department store. Dillard’s is a small chain operating in the southern and Midwest US with about 250 stores and 30 clearance centers in 29 states, and an e-commerce store. Dillard’s stock price peaked in April 2015 and started a downward trend until June 2020. Like most department stores, Dillard’s struggled with increasing competition from online stores and changing consumer buying habits.

However, the year 2021 was a good one for Dillard’s. The retailer saw double-digit sales and net income growth and will probably have a record year once full reported. In addition, federal stimulus combined with pent-up demand drove consumer spending. As a result, Dillard’s returned 306.4% in 2021, with dividends reinvested. This return was by far the best return of any dividend growth stock.

Dillard’s has raised the dividend for 11 consecutive years, making the stock a Dividend Challenger. The dividend growth rate is excellent at about 13.9% in the past decade, 20.1% in the last 5-years, and ~20.5% in the trailing 3-years. In addition, the dividend is very safe, with a payout ratio of approximately 2.3%. This percentage leaves room for many more increases. However, investors should be wary since the stock is heavily shorted, suggesting investors are not expecting 2022 to be as good as 2021.

Gladstone Land

The second stock on this list of best performing dividend growth stocks in 2021 is Gladstone Land, a REIT. The company was founded in 1997 and had an IPO in 2013. The REIT acquires and leases farmland to third-party farmers through a triple net lease structure. Gladstone owns approximately 159 farms comprising ~108,000 acres in 14 states worth ~$1.4 billion. The REIT mostly buys farmland suitable for fruits, vegetables, and nuts. Gladstone’s farmland is 100% leased.

Gladstone’s stock price went nowhere for years, as seen in a screenshot from  Stock Rover*. The prior all-time high was in December 2013, and this price was not surpassed until February 2020. Then, COVID-19 caused the stock price to plunge. However, since the recent bottom in late-March 2020, the stock price has surged higher as lease revenue increased. As a result, Gladstone’s stock price was up around 136.2% in 2021.

Gladstone’s dividend grows slowly. The 5-year growth rate is roughly 1.8%, and it has been only 0.54% in the past 3-years. The company has paid a monthly dividend for 96 consecutive months since its IPO. However, the payout ratio is elevated at about 82%, indicating that future dividend increases will likely be small. The REIT is trading at a premium, as seen in a screenshot from  Stock Rover*.

TFI International

TFI International is a large freight and logistics company headquartered in Québec, Canada. The stock trades on the NYSE after a US IPO in February 2020. The company serves Canada, the US, and Mexico through four operating segments: Package and Courier, Less-Than-Truckload, Truckload, and Logistics. TFI has about 7,867 tractors, 25,520 trailers, and 9,926 independent contractors. The company has snowballed through more than 180 acquisitions since 1996.

TFI is benefitting from rising freight costs during the COVID-19 pandemic. Revenue, operating income, and margins are increasing. The company also acquired UPS Freight in early 2021 for $800 million, which has been accretive. The stock price has been trending up after dropping in the early stage of the pandemic, as seen in a screenshot from  Stock Rover*. TFI’s stock price was up about 119.6% in 2021.

TFI is a dividend growth stock with six consecutive annual increases. The growth rate is about 12.6% in the past 5-years and about 13.4% in the trailing 3-years. The payout ratio is low at 20% leaving room for future increases and providing confidence about the dividend safety. In addition, this growing company is trading at a reasonable valuation, as seen in a screenshot from  Stock Rover*.

Nucor

Nucor is probably the most well-known stock on this list since the stock is a Dividend Champion and Dividend Aristocrat. The company produces steel and steel products through three segments: Steel Mills, Steel Products, and Raw Materials. In addition, by market capitalization, Nucor is the largest steel company in the US.

The steel company benefits from rising steel prices caused by higher demand, lower exports from China, tariffs, and positive expectations from the US Infrastructure and Investment Act. As a result, Nucor’s revenue and earnings are increasing, and it is returning cash to shareholders. The stock price was up roughly 118.4% in 2021.

Nucor is well-known as a dividend growth stock. The company has raised dividends for 48 consecutive annual years. The most recent quarterly dividend increase was 23.5% to $0.50 per share from $0.41 per share. Nucor added $4 billion to the share repurchase plan at the same time. However, before this increase, the dividend growth rates were low at ~1.7% in the past decade, 2.7% in the trailing 5-years, and 3.7% in the past 3-years. The payout ratio is low at ~9% leaving room for further increases. Nucor’s valuation is still low at a forward price-to-earnings (P/E) ratio of 5.2X.

DICK’S Sporting Goods

The fifth stock on this list is DICK’S Sporting Goods (DKS), the largest sporting goods retailer with about 7% market share. In addition to the ~734 DICK’S stores, the company also operates approximately 132 Golf Galaxy, Field & Stream, and Public Lands stores and an e-commerce site. The company partners with leading athletic and outdoor brands and targets athletes and young families.

DICK’S has benefitted from the COVID-19 pandemic. The company’s distribution channels and online presence allowed it to grow rapidly. In addition, consumers are increasingly working out at home and playing at home, driving sales. In fiscal 2020, net sales, same-store sales, profit margins, and EBITDA increased. As a result, the stock price briefly dipped at the pandemic’s start and then moved upward. DICK’s stock price rose 116.4% in 2021.

The company is returning cash to shareholders through dividends and share buybacks. The dividend has been increased seven years in a row and paid since 2011. The dividend growth rate is about 12.3% in the past decade, ~21.5% in the trailing 5-years, and 21.1% in the past 3-years. The Chowder Number (CDN) is high at 22.85%. The stock is trading at a low P/E ratio of ~7.2X, but sales growth may slow in 2022, and investors should be wary.

ServisFirst Bancshares

ServisFirst Bancshares (SFBS) is a small bank headquartered in Alabama. The bank has 23 branches in Alabama, Georgia, Florida, and Tennessee and two loan production offices in Florida. ServisFirst has approximately $14.6 billion in assets, $8.8 billion in loans, and $12.1 billion in deposits. The bank states its credit metric profile is better than its peers.

ServisFirst is benefitting from its geographic location. Georgia, Florida, and Tennessee have a growing population and rising wealth. As a result, this allows the bank to grow assets, loans, and deposits at a good clip, albeit off a small base. In addition, low-interest rates have been driving loans, mortgages, and mortgage refinancing in the US. Finally, ServisFirst’s small size permits it to grow by adding branches.

The bank is a dividend growth stock with seven years of dividend increases. The dividend growth rate is high at about 34.3% in the past 5-years and 20.0% in the trailing 3-years. The Chowder Seeking Alpha Rule gives 35.3%. The payout ratio is low at only 24%, leaving room for future increases. ServisFirst will likely benefit from rising interest rates as the net interest margin increases. The bank should be able to lend at higher interest rates while slowly increasing deposit interest rates.

NexPoint Residential

NexPoint Residential Trust (NXRT) is a REIT focusing on multi-family properties. The REIT’s properties are primarily in cities and suburbs in the Southeastern and Southwestern US. NexPoint owns 39 properties with 14,709 units in 10 markets. The properties are in Texas, Arizona, Georgia, Tennessee, Florida, Nevada, and North Carolina. The REIT has a ~95.3% occupancy rate and ~97.1% lease rate.

NexPoint is benefitting from rising immigration to Sunbelt states and cities. Americans are moving to cities likes Dallas, Phoenix, Tampa, Atlanta, Charlotte, etc., for lower taxes and lower housing costs. The REIT buys properties and upgrades the units resulting in higher monthly leases. As a result, NexPoint’s stock price has been on an upward trend after dropping in the early stages of the pandemic. The stock price gained 102.9% in 2021.

The REIT is a dividend growth stock with six years of increases in a row. The growth rate is about 10.9% in the past 5-years and 11.1% in the trailing 3-years. The last quarterly dividend increase was 11.3% to $0.38 per share from $0.34 per share. Unfortunately, the rising stock price has simultaneously lowered the dividend yield to below 2%, a low value for a REIT. The payout ratio is conservative at 62%, leaving room for more increases.

Silicon Motion Technology

Silicon Motion Technology (SIMO) is a Hong Kong company with operations in Taiwan and the US. SIMO trades on the NASDAQ as an ADS. The company is the global leader in designing and supplying NAND flash controllers for solid-state storage (SSD) devices. The SSD devices are used in smartphones, IoT devices, and data centers. Major brands include SMI, Shannon, Ferri, and Ferri-eMMC. The company’s customers are NAND flash vendors and OEMs.

SIMO benefits from consecutive quarters of record sales to manufacturers of smartphones and smart devices. The company’s design win momentum results in rising market share and higher margins. The market has recognized recent success, and the stock price was up 101.8% in 2021.

SIMO has raised the dividend for seven consecutive years and has paid a dividend since 2013. The growth rate is about 19.0% in the trailing 5-years and 8.9% in the past 3-years. The stock yields about 2.2%, above the S&P 500 Index’s average dividend yield. The payout ratio is conservative at 33%, indicating the dividend is safe, and there is room for future increases. In addition, the stock is still reasonably valued, as seen in a screenshot from  Stock Rover*.

Shoe Carnival

Shoe Carnival (SCVL) is the third retailer on this list of best performing dividend growth stocks in 2021. The company sells women’s, men’s, and kid’s shoes and sneakers in about 377 stores in 35 US states and Puerto Rico and an e-commerce store. Shoe Carnival partners with leading brands like Nike, Adidas, Crocs, Skechers, Converse, Timberland, etc.

Shoe Carnival has successfully navigated a challenging retail environment for brick-and-mortar stores generating 11 successive years of same-store sales growth before the pandemic. The retailer has solid and popular brand partners, up-to-date store designs, and 27 million consumers in its loyalty program. The loyalty program generates 70% of sales. The stock price has been on an upward trend since the early stages of the pandemic and was up 101.2% in 2021.

Shoe Carnival has raised the dividend for nine years in a row. The growth rate is ~13.6% in the past 5-years and 18.1% in the trailing 3-years. The payout ratio is low at about 5.4% since the company focuses on share repurchases. However, the dividend was increased ~56% in April 2021. Notably, the company has no debt. The P/E ratio is low at 7.3X, but the stock is volatile and heavily shorted, and 2022 may not be as good as 2021.

Extra Space Storage

The tenth and last stock on this list of best performing dividend growth stocks in 2021 is another REIT, Extra Space Storage (EXR). The REIT owns or operates 2,054 self-storage stores in 41 States and Washington DC totaling ~1.5 million units and 159 million square feet. EXR states it is the second-largest owner and operator of self-storage stores and the largest management company in the US. Occupancy is about 95.4%.

EXR benefits from high occupancy levels in self-storage, permitting relatively high increases in rents. This point has allowed the REIT to beat revenue and Funds from Operations (FFO) estimates in five of the past six quarters. As a result, the stock price has moved consistently higher. The stock price was up 101.0% in 2021.

The REIT has raised the dividend for 12 years in a row. The growth rate is roughly 23.2% in the past decade, ~9.0% in the trailing 5-years, and ~10.2% in the past 3-years. The payout ratio is reasonably conservative for a REIT at about 73.1%. However, the rising stock price has lowered the dividend yield to well below its 5-year average. EXR is trading at a premium, though, as seen in a screenshot from  Stock Rover*, and investors may want to look elsewhere.

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