10 Stocks With Fastest Dividend Growth

BOSTON (TheStreet) -- Investing in dividend stocks requires more than the ability to spot high yields. Dividend growth is the surest way to outperform other income investments. The following 10 stocks offer attractive payouts, but more importantly, they sport some of the fastest dividend-growth rates in the market. They also receive high ratings from analysts. The stocks are ordered by their three-year dividend-growth rate, from fast to fastest.

10. AmTrust Financial Services ( AFSI) is a property and casualty insurer. Second-quarter profit increased 15% to $31 million, or 51 cents a share, as revenue grew 35% to $246 million. The operating margin narrowed from 20% to 15%. AmTrust's stock trades at a trailing earnings multiple of 7, a forward earnings multiple of 5.7 and a book value multiple of 1.3 -- 57%, 45% and 98% discounts to insurance industry averages. Of analysts covering AmTrust, all five rate its stock "buy." A median price target of $20 suggests that a return of 42% lies ahead.

9. Healthcare Services Group ( HCSG) provides housekeeping, laundry and food services to nursing homes, rehabilitation centers and hospitals. Second-quarter profit gained 12% to $8.7 million, or 20 cents a share, as revenue extended 13% to $193 million. The operating margin rose from 6.8% to 7.6%. Healthcare Services Group's stock trades at a premium to peers based on forward earnings, book value and cash flow. But, its double-digit sales growth justifies the premium. Half of the analysts following the company rate its stock "buy" and half rate it "hold."

8. AmerisourceBergen ( ABC) is a pharmaceutical-services company. Fiscal third-quarter profit advanced 37% to $163 million, or 57 cents a share, as revenue ascended 6.6% to $20 billion. The operating margin inched up from 1.2% to 1.3%. AmerisourceBergen's stock trades on par with peer averages for forward earnings, book value and cash flow. But, its PEG ratio, a measure of value relative to predicted long-run growth, of 0.5 signals a 50% discount to fair value. Around 72% of analysts rate the stock "buy." A median target of $45.88 implies 27% of upside.

7. PetSmart ( PETM) is a retailer of pet products. Second-quarter profit stretched 24% to $48 million, or 41 cents a share, as revenue gained 6.2% to $1.4 billion. The operating margin rose from 5.6% to 6.6%. PetSmart's stock sells for a forward earnings multiple of 15 and a book value multiple of 3.5 -- 5% and 29% premiums to specialty retail industry averages. Its PEG ratio of 0.8 reflects a 20% discount to estimated fair value. One third of researchers following PetSmart rate its stock "buy" and two thirds rate it "hold." A median target of $36.08 suggests a 5% return.

6. Flowserve ( FLS) sells precision-engineered flow-control equipment to oil and gas, industrial and power generation companies. Second-quarter profit dropped 15% to $92 million, or $1.62 a share, as revenue fell 12% to $961 million. The operating margin remained steady at 16%. Flowserve's stock sells for a trailing earnings multiple of 11 and a forward earnings multiple of 11 -- 46% and 37% discounts to machinery peer averages. Of analysts covering Flowserve, 85% rate its stock "buy" and 15% rate it "hold." A median target of $134.80 implies 37% of upside.

5. CMS Energy ( CMS) is an electric and gas utility in Michigan. Second-quarter net income rose 5.1% to $82 million, but earnings per share soared 86% to 39 cents. Revenue increased 9.4%. The operating margin climbed from 12% to 16%. CMS Energy's stock trades at a book value multiple of 1.4, a sales multiple of 0.7 and a cash flow multiple of 3.7 -- 26% and 40% discounts to utility industry averages. It's fairly valued based on forward earnings. Around 93% of analysts rate the stock "buy" and 7% rate it "hold." A median target of $18.69 suggests a 6% return.

4. UnitedHealth Group ( UNH) is a managed-health-care company. Second-quarter profit advanced 31% to $1.1 billion, or 99 cents a share, as revenue grew 7.4% to $23 billion. The operating margin stretched from 6.7% to 8.2%. UnitedHealth's stock sells for a trailing earnings multiple of 9.1, a forward earnings multiple of 9.5, a book value multiple of 1.5 and a cash flow multiple of 6.5 -- 38%, 25%, 38% and 28% discounts to health care industry averages. Two thirds of researchers rate the stock "buy." A median target of $38.15 implies 12% of upside.

3. CenturyLink ( CTL) is a telecommunications company in the process of merging with Qwest ( Q). Second-quarter net income more than tripled to $239 million, but earnings per share rose 16% to 79 cents, hurt by a larger share count. Revenue surged 179%. The operating margin extended from 28% to 32%. CenturyLink's stock trades at a forward earnings multiple of 11 and a book value multiple of 1.2 -- 18% and 54% discounts to industry averages. Around 65% of analysts rank the stock "buy." A median target of $36.86 suggests that the stock is fairly valued.

2. Western Union ( WU) provides money-transfer and payment services worldwide. Second-quarter profit climbed marginally to $221 million, or 33 cents a share, as revenue ascended 1.5% to $1.3 billion. The operating margin stayed at 17%. Western Union's stock sells for a trailing earnings multiple of 13, a forward earnings multiple of 11 and a sales multiple of 2.1 -- 27%, 32% and 29% discounts to peer averages. Of researchers covering the stock, 63% rate it "buy", 33% rate it "hold" and 4% rank it "sell." A median target of $21.19 implies 31% of upside.

1. Cal-Maine Foods ( CALM) sells shell eggs. Fiscal fourth-quarter profit doubled to $21 million, or 88 cents a share, as revenue grew 4% to $222 million. The operating margin widened from 7.1% to 15%. Cal-Maine's stock trades at a trailing earnings multiple of 11, a forward earnings multiple of 9.6, a book value multiple of 1.9 and a cash flow multiple of 6.2 -- 46%, 37%, 55% and 50% discounts to food products industry averages. One third of analysts rate the stock "buy" and two thirds rate it "hold." A median target of $33 suggests that a 10% return lies ahead.

-- Written by Jake Lynch in Boston.

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Disclosure: TheStreet's editorial policy prohibits staff editors, reporters and analysts from holding positions in any individual stocks.

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