2 stellar dividend growth stocks I'd buy today

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Tui cruise ships

The market doesn't seem impressed with full-year results from Smith Group(LSE: SMIN) today and the shares are down more than 5%, at 1,524p, as I write. But the technological products and components manufacturer's figures aren't too bad. Underlying revenue eased 1% compared to a year ago, continuing basic earnings per share lifted 15% and free cash flow surged 53% higher. The directors expressed confidence in the outlook by pushing up the dividend 3%.

Adapting to thrive

Smiths has a history stretching back well into the 19th century and has maintained a stock-market listing for more than 100 years. During that time, the firm has always adapted and changed direction to follow the prevailing opportunities of the day, and such nipping and tucking continues as we can see in today's report. Chief executive Andy Reynolds Smith explains that the disposal of four non-core businesses and the acquisition of Morpho Detection supports the "significant upgrading of the portfolio as we increasingly focus on scalable, technology-differentiated leadership positions in our chosen markets."

The year saw margins expand in all divisions and what the top executive describes as "increased, smarter investment in R&D and innovation," all of which he reckons has delivered a strong pipeline of new products due to be launched during 2018 and beyond. Meanwhile, the shares trade on a forward price-to-earnings (P/E) ratio just under 16 for the year to July 2018 and the forward dividend yield runs at just over 3%. I reckon the firm's efforts to align its offering with growth markets looks set to pay off for investors in the years to come and we could see decent growth in the dividend from here.

Performing well

The market received this morning's interim results from Saga(LSE: SAGA) with apparent indifference as the share price hardly moved. The insurance and travel company's headline figures show revenue eased 0.4% compared to a year ago and diluted earnings per share slipped a little over 5%. On a brighter note, underlying profit before tax put on 5.5% and the directors indicated their confidence in the outlook by raising the interim dividend by just over 11%.

Chief executive Lance Batchelor reckons the retail broking and travel divisions are performing well and points to strong pre-sales for the firm's new cruise ship, Spirit of Discovery, which should be ready in June 2019. Such is the company's confidence in forward demand that the directors decided to purchase a second new ship to be named Spirit of Adventure, which should arrive during August 2020.

Growth on the agenda

It's well known that Saga offers its services to those aged 50 and over, which strikes me as a decent business model because greying individuals tend to have reached a point in their lives where disposable income is more abundant than previously. Growth is on the agenda, yet the valuation remains modest with a forward P/E running at a little over 12 for the year to January 19 and a forward dividend yield of almost 6%. The firm has a decent record of dividend-raising, which I think looks set to continue.

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Kevin Godbold has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.