2 stocks dividend investors should consider now

Dividend investors often seek high yields. And that’s wise. But the most important factor for me is the ability of the business to grow dividends over time.

Therefore, today I focus on the compound annual growth rate (CAGR) for the dividends of two companies.

A healthy market

The first is Warehouse REIT (LSE: WHR), a Real Estate Investment Trust (REIT) invests in UK commercial property warehouse assets.

Data from 2018 shows a dividend CAGR of over 50%. But this is misleading because the figure is affected by a big jump in shareholder payouts in 2019.

For context, there were zero dividends in 2017. And that was the year the company came to the stock market. Then there was a small payment in 2018. But since then, the dividend has reached a meaningful level and has grown well.

For example, the payout for the trading year to March 2019 was 4.78p per share. And for the year to March 2024, City analysts are predicting a payout of 6.48p per share. And to me, that’s a decent growth rate.

But it all gets sweeter with current crop levels. With the share price close to 110p, the expected yield is set against analysts’ estimates of 5.9%.

However, there are risks with this stock, of course. As with any business stock. For example, the stock price has fallen more than 30% over the past year. This is, after all, a company with a fortune to match its share of the property market. And also vulnerable to the ups and downs of the wider economy.

But in December, the company reported strong leasing activity. And that shows the warehouse occupier market in the UK is healthy.

Fixed shareholder payments

Meanwhile, investment management companies Schroders (LSE: SDR) has a CAGR for dividends running at around 5.5%. And with the share price close to 499p, the forward yield for 2023 runs below 4.5%.

The characters seem interesting to me. And I’m impressed with how businesses keep paying shareholders through the pandemic.

However, diversified asset managers are other companies that are vulnerable to changes in general macro-economic and geopolitical events and trends. And one indicator of how tough trading is is the company’s earnings record.

In 2016, it posted a net profit of £490m with earnings of around 30p per share. And City analysts are predicting a net profit of £562m in 2023 on earnings of around 34p. So the dial hasn’t moved much during that period. Therefore, I do not expect growth next year to take the lights off.

However, I expect a general bull market for stocks. And if that happens, it will be good for Schroders. But the reverse is also true. Bear markets can cause problems for businesses.

However, I mainly consider the stability of the dividend and the potential for growth. And even if the growth is modest. So for that matter, I think Schroders is worthy of further research.