In this article, we discuss 12 best dividend stocks for steady growth. You can skip our detailed analysis of dividend growth stocks and their performance over the years, and go directly to read 5 Best Dividend Stocks For Steady Growth.
Investing in dividend stocks is not just about finding companies with a history of paying dividends. It is also important to consider whether those dividends are growing over time. Increasing dividends makes a stock more appealing to people who want to earn regular income from their investments. This combination of consistent payments and growing dividends is a winning strategy for successful dividend stock investing.
Although the market has favored tech stocks this year, it appears to be a favorable time to consider investing in dividend stocks as the Federal Reserve Chair, Jerome Powell, has indicated the possibility of increasing interest rates. Here are some comments from the Fed chief at the US central bank’s annual conference on August 25:
“Although inflation has moved down from its peak — a welcome development — it remains too high. We are prepared to raise rates further if appropriate, and intend to hold policy at a restrictive level until we are confident that inflation is moving sustainably down toward our objective.”
High-interest rate periods have historically fared well for dividend stocks. In one of our articles, we referred to Global X data, which revealed that from January 1960 to December 2017, about half of the returns from high-dividend stocks originated from dividends paid during times of elevated interest rates. During this period, portfolios containing high-dividend stocks yielded an average annual return of 13.02%, surpassing the S&P 500's return of 10%. The report also mentioned that in seven out of ten instances when interest rates were rising during this period, high-dividend stocks demonstrated superior performance compared to the broader market.
Another important aspect of dividends becomes evident when considering the impact of compounding. According to a report by S&P Dow Jones Indices, this compounding effect was examined for the S&P 500 across various timeframes. The data used were averages for each continuous period, based on monthly data spanning 50 years up to June 30, 2021. The results reveal that as the time horizon extends, the compounding effect becomes more pronounced, showing a positive correlation between the two factors. For instance, when comparing the annualized difference between the price return and total return of the S&P 500 over each 10-year span, the average difference amounts to almost 78%.
The Procter & Gamble Company (NYSE:PG), Colgate-Palmolive Company (NYSE:CL), and PepsiCo, Inc. (NASDAQ:PEP) are some of the best dividend stocks to consider for steady growth because these companies have raised their dividends for decades. In this article, we will further discuss dividend stocks with strong growth.
For this list, we screened for dividend stocks with a 3-year average dividend growth rate of above 10%. From that list, we picked stocks with dividend growth track record of over 10 years. The stocks are ranked in ascending order of their annual average dividend growth in the past three years.
Costco Wholesale Corporation (NASDAQ:COST) is a multinational retail corporation that operates a chain of membership-only warehouse clubs. On August 9, the company announced a quarterly dividend of $1.09 per share, which was in line with its previous dividend. In April this year, it stretched its dividend growth streak to 19 years, which makes it one of the best dividend stocks on our list. The stock has a dividend yield of 0.76%, as of August 29.
In addition to The Procter & Gamble Company (NYSE:PG), Colgate-Palmolive Company (NYSE:CL), and PepsiCo, Inc. (NASDAQ:PEP), Costco Wholesale Corporation (NASDAQ:COST) is also a reliable dividend stock to consider because of its dividend growth.
At the end of Q2 2023, 67 hedge funds tracked by Insider Monkey reported having stakes in Costco Wholesale Corporation (NASDAQ:COST), up from 63 in the previous quarter. The collective value of these stakes is over $2.2 billion. Ken Griffin's Citadel Investment Group was the company's leading stakeholder in Q2.
The Home Depot, Inc. (NYSE:HD) is a well-known American home improvement retailer that specializes in selling a wide range of products and services related to home improvement, construction, and renovation. In the second quarter of 2023, the company reported revenue of roughly $43 billion, which beat analysts' estimates by $690 million. Its cash position also remained strong in the first half of the year as it generated over $12.2 billion in operating cash flow during this period, up from $7.1 billion in the first half of 2022.
The Home Depot, Inc. (NYSE:HD), one of the best dividend stocks, currently offers a quarterly dividend of $2.09 per share. The company has raised its dividends for 13 years straight and in the past three years, it has raised its payouts by 11.79% on average. The stock's dividend yield on August 29 came in at 2.57%.
The number of hedge funds tracked by Insider Monkey owning stakes in The Home Depot, Inc. (NYSE:HD) grew to 68 in Q2 2023, from 65 in the previous quarter. The consolidated value of these stakes is over $2.23 billion.
Texas Instruments Incorporated (NASDAQ:TXN) is a Texas-based technology company that designs and manufactures semiconductors and integrated circuits. The company is a global leader in developing analog and embedded processing chips, which are essential components in a wide range of electronic devices and systems.
Texas Instruments Incorporated (NASDAQ:TXN) is one of the best dividend stocks on our list as it has raised its dividends for 11 consecutive years. The company currently offers a quarterly dividend of $1.24 per share and has a dividend yield of 2.94%, as of August 29.
As of the close of Q2 2023, 56 hedge funds in Insider Monkey's database owned investments in Texas Instruments Incorporated (NASDAQ:TXN), compared with 52 in the previous quarter. The total value of these stakes is over $2.34 billion. Among these hedge funds, Generation Investment Management was the company's leading stakeholder in Q2.
An American multinational tech company, Broadcom Inc. (NASDAQ:AVGO) is next on our list of the best dividend stocks to consider for steady growth. In the past three years, the company has raised its dividends by 14.70% and its dividend growth streak stands at 12 years. It currently pays a quarterly dividend of $4.60 per share and has a dividend yield of 2.14%, as reported on August 29.
In the second quarter of 2023, Broadcom Inc. (NASDAQ:AVGO) generated revenue of $8.7 billion, which showed a 7.8% growth from the same period last year. The company's cash flow remained strong as its free cash flow for the quarter came in at $4.4 billion. It also returned roughly $2 billion to shareholders through dividends.
At the end of June 2023, 72 hedge funds tracked by Insider Monkey owned investments in Broadcom Inc. (NASDAQ:AVGO), which remained the same from the previous quarter. The stakes owned by these hedge funds are collectively valued at nearly $4.2 billion.
Aristotle Atlantic Partners mentioned Broadcom Inc. (NASDAQ:AVGO) in its Q2 2023 investor letter. Here is what the firm has to say:
“Broadcom contributed to outperformance, as the company is seen as a key beneficiary of the investment in generative Artificial Intelligence (AI) and Large Language Models (LLM). The company’s Application-Specific Integrated Circuit (ASIC) chips are being custom-built for customers to use in their data centers for accelerated computing. Broadcom’s networking chipsets are also expected to see increased levels of demand, as customers increase investments to enable the high-speed data transfer required by advanced AI training and inference. The company also announced a new multi-year supplier relationship with Apple, the company’s largest customer.”
UnitedHealth Group Incorporated (NYSE:UNH) is an American healthcare and insurance company. In Q2 2023, the company's revenue came in at $93 billion, which saw a 15.6% growth from the same period last year. Its operating cash flow for the quarter stood at $11 billion. The company returned $4.8 billion to shareholders through the combination of dividends and share repurchases, which places it as one of the best dividend stocks on our list.
In the past three years, UnitedHealth Group Incorporated (NYSE:UNH) has raised its dividends by 15.63%. Moreover, the company maintains a 13-year streak of consistent dividend growth. The company offers a per-share dividend of $1.88 every quarter for a dividend yield of 1.53%, as of August 29.
UnitedHealth Group Incorporated (NYSE:UNH) was a part of 111 hedge fund portfolios at the end of Q2 2023, according to Insider Monkey's database. The stakes owned by these funds are worth over $10.1 billion in total.
7. Booz Allen Hamilton Holding Corporation (NYSE:BAH)
3-Year Average Dividend Growth: 21.46%
Consecutive Years of Dividend Growth: 11
Booz Allen Hamilton Holding Corporation (NYSE:BAH) is a Virginia-based global consulting and professional services firm that provides a wide range of advisory and analytics services to government agencies, businesses, and organizations. On August 11, the company announced a quarterly dividend of $0.47 per share, which was in line with its previous dividend. The company has been raising its dividends consistently for the past 11 years and its 3-year average dividend growth stands at 21.46%.
Insider Monkey's database for Q2 2023 shows that 25 hedge funds owned investments in Booz Allen Hamilton Holding Corporation (NYSE:BAH), worth roughly $233 million in total.
Baron Funds mentioned Booz Allen Hamilton Holding Corporation (NYSE:BAH) in its Q2 2023 investor letter. Here is what the firm has to say:
“We re-initiated a position in Booz Allen Hamilton Holding Corporation (NYSE:BAH), the premier provider of outsourced civil and military consulting services to the federal government. We believe that Booz’s consultants (65% of whom possess security clearances) are best in class at tackling sensitive and high priority cybersecurity, intelligence, defense, and spending efficiency projects for various government agencies. Under longtime CEO Horacio Rozanski, the company has thoughtfully invested in AI, cybersecurity, software, and other advanced technologies. It had remained ahead of its peers and is an important partner providing the government mission-critical and highly technical solutions. In addition, Booz is the largest single provider of AI services to the federal government, which we believe will be a source of ongoing, outsized growth.
Lowe's Companies, Inc. (NYSE:LOW) is a large American retail company that operates a chain of home improvement and appliance stores. In the past three years, the company grew its dividend by 21.5% on average and holds a 59-year streak of consistent dividend growth. It currently pays a quarterly dividend of $1.10 per share and has a dividend yield of 1.98%, as of Q2 2023.
The Procter & Gamble Company (NYSE:PG), Colgate-Palmolive Company (NYSE:CL), and PepsiCo, Inc. (NASDAQ:PEP) are some other dividend stocks to consider for steady growth.
Of the 910 hedge funds tracked by Insider Monkey at the end of Q2 2023, 64 hedge funds owned investments in Lowe's Companies, Inc. (NYSE:LOW), compared with 67 in the previous quarter. The collective value of stakes owned by these hedge funds is over $3.7 billion.
