Dividend stocks have been the backbone of market returns for over a century, contributing roughly two-thirds of total returns since 1900, according to a report by the Hartford Funds. Companies that consistently raise their dividends have been particularly strong performers, thanks to their ability to generate steady revenue growth and strong free cash flows across different market cycles.
These dividend growers share several important characteristics that make them compelling long-term investments. They typically maintain conservative payout ratios, possess durable competitive advantages in their respective industries, and generate reliable cash flows that can support continued dividend increases.
This financial strength means they can often maintain and grow their dividends even during economic downturns, providing investors with steady income growth regardless of market conditions.
Here's a closer look at two standout dividend growers with proven track records of delivering exceptional shareholder returns.
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One of pharma's fastest dividend growers
AbbVie(NYSE: ABBV) is an immunology powerhouse. While its blockbuster Humira faces biosimilar competition, the company's newer drugs Rinvoq and Skyrizi are delivering impressive results. Management's combined sales forecast for these medications has recently been raised to $31 billion by 2027, up from the previous target of $27 billion.
For income investors, AbbVie's dividend growth stands out. The company has increased its payout at a 13.6% annual rate over the past 10 years, making it one of the fastest dividend growers among major pharmaceutical companies. The drugmaker's current 3.3% yield, more than double the yield of the S&P 500, offers an attractive income stream for shareholders.
While the 259% payout ratio might raise eyebrows, this elevated level isn't uncommon for pharmaceutical companies given the cyclical nature of drug development. With Skyrizi and Rinvoq achieving 51% and 50% growth respectively in 2024, and their combined sales expected to grow at more than a 20% compound annual rate through 2027, AbbVie's dividend looks well-supported by its blistering growth trajectory.
Speaking to this point, the drugmaker's broader outlook remains solid, with 2024 revenue growing 4.6% on a constant-currency basis and 2025 guidance pointing to 5.7% growth. While AbbVie faces some headwinds, including pressure on its oncology drug Imbruvica and a recent setback in its neuroscience program, the company's strong transition in immunology and early stage pipeline, including potential treatments for ulcerative colitis, demonstrate the strength of its all-important innovation engine.
One of the financial sector's wide-moat dividend growers
S&P Global(NYSE: SPGI) is a powerhouse in financial markets, providing essential credit ratings, benchmarks, and data analytics. The company's wide economic moat stems from the high switching costs and network effects built into its business model -- once a benchmark is established in the financial markets, it's extremely difficult to displace.
For dividend growth investors, S&P Global offers an impressive track record. The company has grown its dividend at an 11.7% annual rate over the prior 10 years while maintaining a conservative 29% payout ratio. While the current 0.7% yield might seem modest, the company's growth trajectory suggests room for continued dividend expansion.
The company's outlook remains robust, with fourth-quarter revenue growing 14% to $3.59 billion, driven by a 54% surge in ratings transaction revenue. Management expects continued growth in 2025, with the ratings business projected to grow 3% to 5% despite some shifts in the issuance mix. The company's market intelligence segment is also showing strength, particularly in enterprise solutions, which grew 16% in the most recent quarter.
S&P Global's recent performance is particularly impressive for a company of its size. Its combination of strong growth, wide moat, and consistent dividend increases makes S&P Global an attractive option for investors seeking reliable dividend growth backed by a durable business model.
Good for investors
Companies that consistently raise their dividends often share essential traits: durable competitive advantages, strong cash flows, and the ability to grow through various market conditions. Both AbbVie and S&P Global exemplify these characteristics, offering investors different paths to dividend growth -- AbbVie through pharmaceutical innovation and higher current yield, and S&P Global through its entrenched market position and lower but well-covered payout.
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George Budwell has positions in AbbVie. The Motley Fool has positions in and recommends AbbVie and S&P Global. The Motley Fool has a disclosure policy.
