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Cash flow analysis is very important when considering a stock for its dividends. Because free cash flow is the first and most sustainable source for dividend payments, healthy cash flows indicate that a company’s dividend is more sustainable.

We ran a screen with this idea in mind, searching for dividend stocks that have seen fast growth in free operating cash flows over the last five years (measured with compound annual growth rate). We then screened for stocks seeing high growth in their dividend, comparing the current year dividend per share estimate to the trailing-twelve-month dividend per share.

Interactive Chart: Press Play to compare changes in analyst ratings over the last two years for the stocks mentioned below. Analyst ratings sourced from Zacks Investment Research.



We also created a price-weighted index of the stocks mentioned below, and monitored the performance of the list relative to the S&P 500 index over the last month. To access a complete analysis of this list's recent performance, click here.

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Do you think these companies will keep raising their dividends? Use this list as a starting-off point for your own analysis.

List sorted by market cap.

1. CNOOC Ltd. (CEO): Independent Oil & Gas Industry. Market cap of $98.37B. Dividend yield at 2.11%, payout ratio at 32.20%. 5-year free operating cash flow CAGR at 38.48%. Current year dividend per share estimate at $10.91 vs. TTM dividend per share at $5.57. The stock has gained 35.65% over the last year.

2. International Paper Co. (IP): Paper & Paper Products Industry. Market cap of $13.53B. Dividend yield at 2.43%, payout ratio at 22.47%. 5-year free operating cash flow CAGR at 89.32%. Current year dividend per share estimate at $0.97 vs. TTM dividend per share at $0.56. This is a risky stock that is significantly more volatile than the overall market (beta = 2.21). The stock has gained 29.07% over the last year.

3. KKR Financial Holdings LLC (KFN): Asset Management Industry. Market cap of $1.67B. Dividend yield at 6.85%, payout ratio at 25.17%. 5-year free operating cash flow CAGR at 20.14%. Current year dividend per share estimate at $0.80 vs. TTM dividend per share at $0.52. This is a risky stock that is significantly more volatile than the overall market (beta = 2.69). The stock has gained 23.13% over the last year.

4. MKS Instruments Inc. (MKSI): Diversified Machinery Industry. Market cap of $1.42B. Dividend yield at 2.22%, payout ratio at 0.0%. 5-year free operating cash flow CAGR at 22.34%. Current year dividend per share estimate at $0.60 vs. TTM dividend per share at $0.15. The stock has had a couple of great days, gaining 8.22% over the last week.

5. El Paso Electric Co. (EE): Electric Utilities Industry. Market cap of $1.39B. Dividend yield at 2.67%, payout ratio at 10.81%. 5-year free operating cash flow CAGR at 30.51%. Current year dividend per share estimate at $0.77 vs. TTM dividend per share at $0.22. The stock has gained 56.59% over the last year.

6. First Commonwealth Financial Corp. (FCF): Regional Banks Industry. Market cap of $559.17M. Dividend yield at 2.26%, payout ratio at 14.25%. 5-year free operating cash flow CAGR at 49.93%. Current year dividend per share estimate at $0.12 vs. TTM dividend per share at $0.06. The stock is a short squeeze candidate, with a short float at 6.28% (equivalent to 12.98 days of average volume). The stock has gained 7.46% over the last year.

*Dividend and cash flow growth data sourced from Screener.co, all other data sourced from Finviz.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Source: 6 Stocks Seeing Rapid Growth in Dividends and Free Cash Flows