Stock investors always like to see growth. Yet, while most growth investorsfocus on earnings, you can see another positive sign of a great stock by looking at how its dividends growover time.

An arbitrary distinction
Interestingly, many investors think of dividend investingand growth investingas two completely different strategies that are almost mutually exclusive. That's because many growth stocks that are still in the early stages of their development don't pay any dividends, since they need any money they can make to plow back into their businesses. In fact, some investors would likely conclude that a growth stock that started paying a dividend must be nearly the end of its high-growth phase, given the implication that the company didn't have any better use for the cash than to return it to shareholders.

In contrast, many see traditional dividend stocks as conservative, boring companiesthat have no more growth prospects. Their mature businesses generate strong cash flow, but they don't have enough potential to justify reinvesting cash back into them, and so corporate managers simply pay it out as dividends.

But just because a stock pays a dividend doesn't mean that its growth days are automatically over. In fact, if you asked a dividend investor what they'd like to see in their ideal stock, they'd probably say that steady, sustainable earnings growth was just as important as a steadily growing dividend payout.

Two ways to grow that go well together
As it happens, a number of dividend stocks have exactly that combination of solid earnings and substantial dividend growth. Here's a small sample:

Stock

Dividend Yield

5-Year Earnings Growth Rate

5-Year Dividend Growth Rate

Payout Ratio

Monsanto (NYSE: MON)

1.3%

135%

47%

25%

McDonald's (NYSE: MCD)

3.5%

22%

36%

50%

Microsoft (Nasdaq: MSFT)

2.1%

17%

27%

31%

Lockheed Martin (NYSE: LMT)

3.0%

24%

22%

36% Continued...