It’s no secret that investors love their dividends. Investors praise companies that can raise their dividends year after year, and a commitment to a strong dividend policy is a company’s representation that it has faith in its earnings power well into the future.

Now that stocks have hit new all-time highs again in 2019, and the S&P 500 was up about 20% year to date, investors need to be closely monitoring their investments. After all, the current bull market is now the longest recovery of our lifetimes, and the media keeps warning that another recession could arrive soon.

What happens as stocks rise is that their dividend yield comes down for newer investors. To combat this, companies try to raise their dividends within their means. That means companies should never pay out more than they make today and not more than they think they will make in the future.

24/7 Wall St. has screened its universe of solid, large-cap dividend stocks for companies with very healthy dividends that have grown over time. What stood out is that there are still many companies that almost certainly will be able to afford dividend hikes ahead even if the economy hits the skids. Another class of dividend-paying stocks is worth examining. That is, the companies that can keep growing their dividend payouts by 10% or more cumulatively for the next five years.

There are some very dangerous high yield dividends out there in telecom, retail and other economically sensitive areas of the economy. Those companies already may have been forced to cut their dividends or are likely to in the future.

For a company to safely raise its dividend for five more years, it has to have tolerable payout ratios of dividends to total earnings. Such companies also have to be able to grow their income ahead, and they must not be under unmanageable debt loads or too much regulatory scrutiny. Many companies already have a history of double-digit dividend growth, but it’s an entirely different issue deciding which companies can keep raising their dividends by 10% or more for the next five years, or even longer.

There are always some risks that even the most stable companies may have to halt their dividend ambitions. They may choose to make an acquisition that eats up the cash, or they may choose to be very aggressive on buying back their own shares or to pay down their long-term debt rapidly. Moreover, if the next recession is far worse than a so-called “garden variety recession,” then it could stoke all sorts of caution and pain all over again.

Many investors expect that half of their total returns over time will come from dividends. Even the great Warren Buffett counts on dividends to juice his returns, even if he won’t pay a dividend to shareholders himself. Here are 10 solid dividends today that should see 10% or higher dividend growth in the next five years.

American Express

American Express Co. (NYSE: AXP) is rather different from Visa and Mastercard because it takes consumer credit risks rather than only acting as a toll-road operator in transactions. What has happened with Amex is that it is now out from under the Federal Reserve’s annual stress tests (2019 CCAR), but it still has to develop and maintain a capital plan and its board has to approve capital allocations. Amex may be under more regulatory reviews in the future if its assets get above the future threshold limits.

The most recent Amex quarterly payout of $0.39 per share and $1.56 annualized payout per share compares with $7.33 in earnings per share (EPS) in 2018, and it is only about 19% of the $8.13 EPS estimate for 2019 and about 17% of the $8.99 estimate for 2020. The company also has targeted 10% annual dividend hikes since it was allowed to raise its dividend back in 2012 after a five-year recessionary freeze. Unless there is a major earnings blow headed its way, Amex is likely to continue with 10% annual dividend hikes.

American Water Works

American Water Works Co. Inc. (NYSE: AWK) is one of the most defensive investments that can be found, as being a utility and selling water is never going away. The company has raised its dividend every year for the past decade, and the $2.00 annualized payout now compares to EPS estimates of $3.59 in 2019 and $3.90 in 2020. Its most recent dividend hike was by 9.9% rather than a true 10%, but American Water Works has a formal commitment of linking its dividend increases to EPS growth, with a target a payout ratio of 50% to 60% of its net income.

We recently evaluated this as a stock to own for the decade, but its shares have risen exponentially since that call was first made.

Corning

Corning Inc. (NYSE: GLW) is lumped in with technology companies because it makes screens for smartphones, TVs, monitors and so on, but Corning is a glass leader in many fields and is the world’s most recognized glass manufacturer. The company also has more than 150 years of operations. Corning has made steadfast efforts to return capital to shareholders of late, and the Investor Day presentation and a recently announced $5 billion stock buyback plan should offer great comfort.

In June, Corning’s management issued long-term outlooks for 2020 to 2023 for shareholder distributions of $8 billion to $10 billion. The fundamentals are annual dividend hikes of at least 10%, based on 12% to 15% compound annual EPS compounded annual revenue growth. It already has a 2.4% dividend yield, and the company has committed itself formally to keep making higher payouts.

Home Depot

A steady grower of revenue and income since the recession, Home Depot Inc. (NYSE: HD) has been able to avoid much of the retail apocalypse from Amazon and other online retailers. It also has hiked its dividends greatly in recent years.

The hike of the quarterly payout from $1.03 to $1.36 may not be expected to be seen again, but Home Depot has the ability to raise its dividend by 10% or more for the foreseeable future. That would be a normalization of the dividend growth that would be sustainable for years to come, rather than paying everything out and then dealing with a slowdown or recession with less dry powder in future years after its long-term debt has risen.

With $9.89 in EPS in 2018, the consensus earnings estimates are $10.12 per share for 2019 and $11.01 per share in 2020.

Lockheed Martin

Lockheed Martin Corp. (NYSE: LMT) dominates in the profitable defense sector and seems to have clear skies ahead as major governments around the globe spend ever more for defense and warfare capabilities. While it depends on U.S. government spending trends, international ally nations are a huge growth opportunity. The company already has close to a 2.4% dividend yield, but its history has been for dividend growth of 10% in recent years. The current $8.80 per share payout is only about half of its trailing earnings of $17.59 per share in 2018, and EPS estimates are $20.57 in 2019 and $24.98 in 2020.

Sherwin-Williams

Sherwin-Williams Co. (NYSE: SHW) is a steady growth engine in paints and coatings, and the only debate about the company that seems credible is whether it should have been allowed to acquire Valspar. The combined company is now worth $42 billion, and the $4.52 annualized dividend payout compares with $18.53 EPS in 2018. Consensus estimates of $20.95 EPS in 2019 and $24.16 EPS leave ample room for that dividend growth to continue.

Back in February, the paint and coatings giant raised its quarterly dividend by 31% to $1.13 per share. This increase came after 40 consecutive years of dividend increases, and the company has a low payout ratio. It may be hard to call for 30% dividend growth to be the norm a year after corporate tax rates were lowered, but this is a very low payout ratio, even considering its $10 billion in long-term debt.

Southwest Airlines

The first steady dividend payer of all airline carriers was Southwest Airlines Co. (NYSE: LUV). While it’s now more and more similar to a legacy carrier than just the discount carriers, Southwest got serious about its dividend payments in 2013, and it has been aggressively hiking the payout since. The four cents per quarter dividend in 2013 was up from just a one-cent quarterly payout before, and now the quarterly payout of $0.18 per share makes for a $0.72 per share annualized payout.

Southwest’s EPS was $4.24 in 2018, and the consensus forecast is that it will rise to $4.51 EPS in 2019 and $5.25 in 2020. The airlines may be more interested in buying back stock, but the payout ratio is only about 16% of expected current-year earnings. To add even more comfort, Southwest carries far less debt and leverage than its legacy carrier peers.

Starbucks

Starbucks Corp. (NASDAQ: SBUX) has a reputation for overcharging for coffee and other drinks, and the company has rapidly expanded its options for beverages and food along with its global footprint. Back in 2018, Starbucks updated its strategic priorities with a plan to return approximately $25 billion to shareholders via buybacks and dividends through fiscal year 2020. That was a $10 billion increase from its target announced in late 2017.

The most recent hike was 20% to the dividend, and the current $1.44 annualized per share payout compares with EPS estimates of $2.78 in 2019 and $3.09 in 2020. The only issue that may get in the way of double-digit growth seems to be if Starbucks overspends on its share buybacks or keeps increasing its long-term debt.

Visa

Visa Inc. (NYSE: V) has seen its shares surge in 2019, with a gain of 35% on last look. Unlike traditional credit card players, Visa is simply the clearing mechanism, and that means it has no transaction risk like the card issuers. It simply gets its fee with every transaction. One problem that Visa has is that its dividend is embarrassingly low at just 0.56%, and that $1.00 per share payout is against EPS of $4.61 last year, and consensus estimates are $5.37 EPS in 2019 and $6.21 EPS in 2020.

Visa’s last dividend hike was from $0.21 to $0.25 per share, and a 10% hike would only need to go to $0.275 per quarter (or $1.10 annualized). At that level, Visa would still be considered a “dividend miser.” A similar argument can be made for Mastercard, but Visa’s $400 billion market cap is considerably higher than Mastercard’s $282 billion.

Zoetis

Risk in the pharmaceutical sector around drug prices might make Zoetis Inc. (NYSE: ZTS) stand out here, but there is a consensus that companies won’t be regulated on what they charge for drug prices, vaccines and diagnostics for pets, fish, livestock and other animals.

With an annualized payout of $0.66 per share and a share price of $114, Zoetis does not quite yield even 0.6%. Earnings were $3.13 per share in 2018, and the consensus estimates are $3.48 per share in 2019 and $3.87 per share in 2020. The current quarterly payout of $0.164 per share was raised from $0.126 in 2018 and from $0.105 in 2017. Its debt has been rising to more than $6 billion as of last year, but with a $55 billion market cap and such a low payout, it seems more than safe to assume that Zoetis can and should be continuing with double-digit dividend hikes for some time.

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