Dividend growth stocks combine the best of both worlds. Investors receive a steady cash flow that grows quickly and benefits from stock appreciation. It’s a refreshing change from growth stocks that don’t give out dividends or dividend stocks with high yields and lackluster returns. By the time you retire, these dividend growth stocks can have sizable yields.

You don’t have to trade dividend growth stocks. These assets are more suitable for buy-and-hold investors. These corporations exhibit impressive revenue and earnings growth and seem primed to deliver financial growth for many years.

Each of these companies is well-established within their respective industries. Some are trillion-dollar corporations, while others look like they will reach that milestone soon. You’ll also find high-profit margins among the top dividend growth stocks that made it on this list.

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Broadcom (AVGO)

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Broadcom (NASDAQ:AVGO) has crushed the stock market. Over the past five years, it’s up by over 500% and is off to an impressive 55% year-to-date gain. The stock is currently rated as a Strong Buy with a projected 11% upside. However, recent price targets have been much higher thanks to the company’s recent earnings.

The AI chip beneficiary reported 43% year-over-year revenue growth in Q2 FY24 plus $2.1 billion in GAAP net income. Broadcom raised its guidance, suggesting that the firm will generate $51.0 billion in revenue, which includes contributions from VMware.

The earnings report was already good, but Broadcom attracted more buzz with a 10-for-1 stock split. The split will take effect on July 15, giving each shareholder 10 shares for every share that they have. While stock splits don’t change a company’s fundamentals, they attract more investors and publicity. Combine that with a 17.49% annualized dividend growth rate over the past five years, and it’s easy to see why most Wall Street analysts are bullish on Broadcom.

American Express (AXP)

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American Express (NYSE:AXP) is rated as a Moderate Buy with a projected 6% upside from current levels. The credit and debit card issuer is up 18% year-to-date and has gained 82% over the past five years.

The stock’s 1.26% yield is solid, but the fintech firm’s growth rate is exceptional. American Express recently announced a 17% dividend hike and has maintained a double-digit growth rate for several years. The quarterly dividend currently stands at $0.70 per share. American Express stock also trades at an 18 P/E ratio, which offers a good margin of safety.

A respectable yield and a low P/E ratio are good starting points, but financials are the most important factor for analyzing stocks. A stock can look good on paper but end up with sizable losses due to declining revenue and net income. Luckily, that’s not the case with American Express. In fact, the company started 2024 strong, with 11% year-over-year revenue growth in Q1 2024. Net income soared by 34% year-over-year, resulting in a 16.9% net profit margin.

Microsoft (MSFT)

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Microsoft (NASDAQ:MSFT) has consistently outperformed the stock market. Shares have tripled over the past five years, and most Wall Street analysts believe the stock has more room to run. The stock is rated a Strong Buy with a projected 12% upside from current levels. The highest price target of $600 per share suggests the stock can gain an additional 36% from current levels.

The tech giant has a relatively low 0.68% yield but has maintained an annualized dividend growth rate of 10.60% over the past decade. Microsoft stock has a dividend payout ratio of roughly 25%, indicating that the firm has more room to raise its dividend in the future.

Microsoft’s financials are also helping with dividend expansion. Revenue jumped by 17% year-over-year in Q3 and FY24, while net income was up by 20% year-over-year. Profit margins came in at 35.5% for the quarter. Microsoft is a well-diversified business that taps into artificial intelligence, cloud computing, social media, advertising, gaming and other segments. It’s likely to reward long-term investors.

On this date of publication, Marc Guberti held long positions in AVGO and MSFT. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Marc Guberti is a finance freelance writer at InvestorPlace.com who hosts the Breakthrough Success Podcast. He has contributed to several publications, including the U.S. News & World Report, Benzinga, and Joy Wallet.

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