5 Income Stocks With Excellent Dividend Growth Prospects

Includes: ADP, FLO, GD, MCD, NOC
by: Dividend Kings

It can often be difficult for investors to pursue opportunities associated with capitalizing on dividend yield when their overall investment is at risk based upon company performance and economic trends. Rather than risk your financial investment for a high-dividend yield, look to take advantage of real dividend growth from companies that are promising strong financial growth in the 2012 year. The following stocks come highly recommended with company prices and statistics derived from finviz.com.spe

Flowers Food Inc. (FLO) - When Flowers released its third-quarter numbers for 2011, it made the announcement that the 2011 sales growth for the company was in line with the guidance of 7% to 11%. It was also indicated that the outlook for the 2012 year would be within growth targets of 5% to 10%. This regular pattern of meeting expected growth throughout the year helps encourage my opinion that Flowers Food is a high-quality company for investment pursuit, especially when you recognize the real dividend growth. As a result of the continuing success found with Flowers, its board of directors has been able to match the promised annual dividend rate of $.60 per share in 2011 as announced in November of 2011. While the dividend rate for this year has not been announced yet, the high-dividend yield of 3.03% is promising.

General Dynamics Corp. (GD) - In the wake of expected cuts to defense contracts it would seem unwise to invest into a defense based company such as General Dynamics. However, I believe this company represents a unique opportunity for investors outside of traditional market trends to not only benefit from real dividend growth (current yield at 2.67%) but to also find success from the stock growth itself. According to Barron's there is an anticipated growth in General Dynamics of 12 times its regular earnings due to gulfstream development with a predicted stock price of $91. This is far beyond its current price of around $70 per share, which has already increased from $60 when this announcement was made in November of 2011.

Northrop Grumman Corporation (NOC) - Northrop represents another one of those defense contract companies that many are hesitant to invest in as a result of the budget restrictions found in the U.S. In my opinion Northrop is a company to invest in because of the $122 million counter-rocket, artillery and mortar contract it was just awarded. According to the contract, there are options available to raise the value of this contract to $311 million if fully utilized. This offers a promising return to investors since in the wake of defensive cuts this company is gaining access to tremendous resources of revenue, which will reflect nicely in real dividend growth when you take advantage of the 3.41% dividend yield.

McDonald's Corp. (MCD) - One of the best ways to benefit from real dividend growth is to invest in a company that offers regular growth regardless of economic conditions. I believe McDonald's represents one of those companies that will withstand the onslaught of economic fluctuations, representing one of the best companies for an investor to pursue. Over the last three years the stock has nearly doubled in value, increasing from around $50 per share in early 2009 to its current price of about $99 per share. Even with this staggering increase in the stock of the company it is still not meeting its expected target price of $108 per share.

It was announced in mid January 2012, that McDonald's will commit to an 8-year extension with The Olympic Partner Program. This helps to keep an image of activity and health to kids through the 2020 Olympic Games. McDonald's continuous commitment to brand and product development defines why I think any investor will discover real dividend growth when accessing McDonald's dividend yield of 2.8%.

Automatic Data Processing, Inc. (ADP) - Nothing proves more beneficial to investors seeking real dividend growth than a company that is expanding its reach on a global scale. When asked about the company's recent acquisition of Ma Foi Consulting Solutions, Mark Benjamin, President of ADP Employer Services International was quoted saying the following, "I am very pleased to take our longstanding partnership with Ma Foi to the ownership phase. ADP's acquisition of Ma Foi Consulting Solutions gives us a direct presence in the large and developing Indian market for HR BPO. The acquisition also enhances our ability to meet the needs of our large multinational clients with operations in India, whom we serve through our ADP Streamline and GlobalView solutions." Automatic Data Processing has seen significant growth over the last three months, increasing from about $47 per share to $55 per share, offering no indication of decline. The dividend yield of 2.86% along with its continued global expansion supports the real possibility for dividend growth for this company in 2012.

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