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Summary

  • Fast growing dividend payments isn't the only metric income investors should focus on.
  • There are many underrated stocks that have grown their dividend payments by a 30% CAGR over the last five years.
  • The five stocks we've found that are growing dividend at a fast pace are also fairly cheap and all yield more than 2%.

The idea of fast growing dividends is easily misunderstood. Just because a company is growing its dividend at a rapid rate doesn't always make it a great stock. Especially if its starting yield is a mere 0.5%. However, fast growing dividends on a 2% yield or more can quickly become a high-yielding stock. It gets even better when these stocks are cheap.

The 5 fast growing dividends that are priced to own that are outlined below all have P/E to growth (PEG) ratios at or below 2. They all have payout ratios of 50% or less, and most importantly, have been growing their dividends at a blistering pace. All of these five stocks have also grown their dividend payments at a 30% CAGR or better over the last half decade.

First on the list is Ireland based consulting giant Accenture PLC (NYSE:ACN). Accenture has managed to grow its dividend payment by an annualized 31.5% over the last half decade.

Its current yield is 2.2% and represents a 41% payout of earnings. Its P/E to growth ratio is still a reasonable 1.7. As far as IT servicing companies go, Accenture has one of the best returns on assets (coming in at 17.5%) and it has no debt.

It has close to 250,000 employees and is one of the largest companies in the consulting field. Accenture's outsourcing division, which makes up around 40% of its revenues, is set to continue excelling as wages rise in developed nations, ultimately boosting the demand for more outsourcing to the less-developed countries. Accenture expects revenues to grow around 5% for 2014.

Helmerich & Payne, Inc. (NYSE:HP) is the second company on the list, with a 36% five-year annualized dividend payment growth rate. Its dividend yield comes in at 2.1% and its payout ratio is only 32%. As well, it has a very enticing PEG ratio of 1.1.

The Oklahoma-based company is an oil/gas drilling and exploration company. Heading into 2014, Helmerich had 305 rigs in the U.S. and 29 internationally. Helmerich did get a downgrade recently by FBR Capital Markets, lowering the company to market-perform; but the company is still a solid way to invest in the energy space. When it comes to the oil and gas drilling and exploration industry, Helmerich is one of the best picks in the industry considering it has virtually no debt. It also has close to 5% of its market cap covered by cash.

Third is Huaneng Power International (NYSE:HNP), which has grown its annual dividend payment at a 30% CAGR over the last five years. It also has the lowest PEG ratio of the five, coming in at 0.6. Its 3.1% dividend yield also happens to be the highest of the five.

This is another stock with exposure to the fast growing energy space. Based in China, the stock offers exposure to one of the fastest growing countries in the world. Huaneng Power International engages in the generation of electricity for the regional grid utility companies in China and Singapore. Its generating capacity is close to 60,000 megawatts, which is enough electricity to power 100,000 average mid-sized homes for a year. Huaneng also has a low beta, at only 0.7, and a high return on equity -- at 28%.

Taiwan Semiconductor Manufacturing (NYSE:TSM) is fourth on the list with the best dividend growth rate of the five. Its five-year annualized dividend payment growth rate is 38%. Its dividend yield is 2.3% and its PEG ratio is 1.1.

Taiwan Semiconductor is a manufacturer of integrated circuits and semiconductor devices in the technology sector. It's also engaged in the designing and testing of these products. Based in Taiwan, the company operates in Taiwan, the U.S., Asia and Europe. The ever increasing demand for cloud computing and network infrastructure is driving the need for manufacturing more and more complex, yet smart, semiconductor devices. Taiwan Semiconductor is one of the biggest players in this industry. It's also another low beta stock, coming in at 0.85.

Airgas (NYSE:ARG) is fifth on the list. Its five years annualized dividend growth rate is 28%. This company is one of the top suppliers of industrial, medical and specialty gases. Airgas has one of the lowest dividends, at 2%, and one of the highest PEG ratios -- at 2.1 However, it does have one of the lowest betas of the five stocks -- at 0.66.

Airgas is a key player in the chemical industry. It has grown from merely a chemical supplier to a service provider through a series of strategic acquisitions, although the chemical supplies segment delivers the most profit. Its gross margin (at over 55%) is one of the highest in the chemcials industry, as is its 20% return on equity.

Bottom line

Accenture is one of those long-term plays on the need for company's to become more efficient. Outsourcing and consulting are two of the easiest ways for companies to boost margins. With companies looking to grow earnings, margin expansion is the easiest way, versus trying to grow its top lines in a low growth economic environment.

Helmerich & Payne should continue taking market share from major peers (including Patterson-UTI and Nabors) thanks to its commitment to technology. Its FlexRig is a tech- and safety-focused piece of equipment. Helmerich & Payne is building up to four new FlexRigs per month and now has 354 FlexRigs, compared to 384 land rigs. The success of this rig should continue driving Helmerich & Payne higher. During the first half of this year, Helmerich & Payne won 53 contracts for new-build FlexRigs, which are backed by long-term customer contracts.

One of the biggest opportunities for Huaneng Power International is China's pollution problem. Thus, the country is turning to cleaner forms of energy generation. This includes hydro. For the first five months of 2014, power generation from hydro grew by 14.1% year-over-year, while generation from coal only grew by 5.4%. Huaneng Power International gets half of its earnings from hydro generation.

Taiwan Semiconductor Manufacturing should be a big benefactor of Apple's continued success. Taiwan Semiconductor Manufacturing is the world's largest chip maker by revenue. It will start producing chips for Apple (NASDAQ:AAPL) this year, ultimately reducing its exposure to Samsung Electronics (OTC:SSNLF).

Airgas should be a benefactor of a rebounding economy. But it could also be a buyout target should Air Products become more aggressive at the prodding of billionaire Bill Ackman (owning nearly 10% of the company). Air Products tried to buy Airgas in the past, but with a new CEO getting ready to takeover, they could revisit such a notion. This makes sense consider that Airgas is expected to grow earnings at an annualized rate that's 200 basis points above Air Products for the next five years.

These five fast growing dividends, but they aren't just fast growing, they have a solid dividend yield. Most of them are also low volatility (low beta) investments. They are all still reasonably priced, with fairly low PEG ratios. Each appears to be great investments for the medium- to long-term.

Source: 5 Fast Growing Dividend Stocks That Are Priced To Own