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Sometimes it’s not the dividend yield that investors are after, but rather, the rate of growth for the dividend. Ideally, these dividend growth stocks not only kick out a healthy yield, but also give investors a solid annual raise.
These income boosting stocks provide investors with an extra layer of return, but give attractive raises to those payouts. Think of it like a raise from your job. A 0% increase is not attractive, nor is a low-single-digit return.
However, imagine getting a 10% boost from your job. That’s what it can feel like with these dividend growth stocks, as they continue to raise their payouts. With that in mind, let’s break away from the list of typical dividend stocks and focus on the best dividend growth stocks.
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Best Dividend Growth Stocks: Starbucks (SBUX)
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Starbucks (NASDAQ:SBUX) has made the dividend a real focus over the years. The company noted that, “Starbucks initiated its dividend in 2010 and has increased it in each of the past 12 years.”
The company’s last increase came in September and was an 8.1% increase from the prior dividend. While that’s not the most robust increase, keep in mind the stock sports a 12.5% annual dividend growth rate over the last five years.
On the plus side, Starbucks continues to do quite well from an operational perspective.
Analysts expect double-digit revenue growth this year and next year, alongside 16% earnings growth in 2023 and an acceleration up to almost 20% growth in 2024. China may be the linchpin to the company’s growth outlook, though.
Last quarter, strong results in China gave Starbucks a significant boost to quarterly results. However, management spoke cautiously about its outlook in China going forward, causing some hesitation among investors.
Short-term hurdles aside, we know Starbucks is a long-term winner — and its dividend should be too.
Income Boost From a Dividend King: Target (TGT)
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Target (NYSE:TGT) is a unique combination as a dividend king and as one of the top dividend growth stocks.
In June, Target passed along a near-2% dividend increase, marking the company’s 52nd annual dividend increase. That has the stock in “dividend king” territory. From the company: “The 3rd quarter dividend will be the company’s 224th consecutive dividend paid since October 1967 when the company became publicly held.”
While the sub-2% hike is likely a concern among some investors, note that management increased the dividend by a whopping 20% in 2022. As a result, the retailer sports a five-year dividend growth rate of 11.75%.