Dividend growth stocks typically outperform most other asset classes over five- to 10-year periods. I've selected 10 companies with strong dividend growth records that could amplify your portfolio returns over the long term.
These blue-chip companies have navigated various headwinds while continuing to increase their payouts at a blistering rate. Let's examine why these top dividend growers might be worth buying as part of a long-term capital-appreciation and income-generating strategy.
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1. Lowe's
Home-improvement retailer Lowe's(NYSE: LOW) has grown its dividend by 15.8% annually over the past five years. With a 1.93% yield and 19.1 P/E ratio, it balances income and value. Its strong market position in home improvement supports future dividend growth.
2. Visa
Payment processing company Visa(NYSE: V) has increased its dividend by 15.7% annually over the prior five years. Despite a meager 0.78% yield, its market dominance and high margin suggest room for future payout growth. However, Visa stock is priced at a premium, given its 29.6 P/E ratio.
3. Parker-Hannifin
Industrial technology firm Parker-Hannifin(NYSE: PH) has a five-year dividend growth rate of 13.1%. Its diverse product range and focus on growth markets like aerospace support ongoing increases. Its shares offer a decent 1.2% yield but are priced at a premium at 25.6 times trailing earnings.
4. Nordson
Precision manufacturing solutions provider Nordson(NASDAQ: NDSN) has grown its dividend by 12.3% annually over the past five years. Its specialized manufacturing solutions and global reach provide a foundation for future payout growth. Nordson stock pays a below-average 1.15% yield and its shares trade at 28.2 times trailing earnings, which is premium territory.
5. Abbott Laboratories
Diversified healthcare company Abbott Laboratories(NYSE: ABT) has increased its dividend by 11.4% annually over the past five years. Its diverse portfolio across medical devices, diagnostics, and nutrition offers multiple growth avenues and a margin of safety against downturns in any one segment. Abbott's stock pays a generous 2.16% yield, but it comes in as one of the most expensive dividend growers on this list, with shares exchanging hands at 32.2 times trailing earnings.
6. Target
Retail chain behemoth Target (NYSE: TGT) has grown its dividend by 11.1% annually over the past five years. Its omnichannel strategy and brand strength have helped it navigate numerous challenges in the fiercely competitive retail landscape. Target stock pays a rather generous 2.99% yield and its shares are trading in bargain territory at 16.8 trailing earnings. This retail giant thus scans as a top play for value-oriented dividend investors.
7. Nike
Athletic apparel and footwear company Nike(NYSE: NKE) has increased its dividend by 10.8% annually over the past five years. Its global brand strength and focus on direct-to-consumer (DTC) sales should support future dividend growth, despite the rocky start to its DTC campaign.
A 2.04% yield and 19.5 P/E ratio offer an attractive blend of income and value. That said, Nike's shares have been in a prolonged downward trend because of unfavorable competitive dynamics in the athletic apparel industry, a key risk factor investors should carefully consider from a weighting perspective.
8. S&P Global
Financial intelligence and analytics provider S&P Global(NYSE: SPGI) has grown its dividend by 9.8% annually over the past five years. Its key role in financial markets and data analytics positions it for continued success over the long term.
On the flip side, S&P Global's stock pays only a 0.76% yield, and its shares trade at a staggering 53.7 times trailing earnings. Still, its wide economic moat in a critical sub-industry of the financial sector should translate into strong dividend growth and share price appreciation for investors willing to hold for the long haul.
9. Amgen
Biotechnology company Amgen(NASDAQ: AMGN) has raised its dividend by 9.2% annually over the prior five years. Its product pipeline and focus on innovative therapies provide a base for future increases to the payout, as well as solid levels of share-price appreciation. Amgen stock pays a sizable 2.72% yield, but shares are priced at a hefty 47.4 times trailing earnings. This premium valuation may be warranted if Amgen's weight-loss pipeline bears fruit.
10. AbbVie
Biopharmaceutical company AbbVie(NYSE: ABBV) has grown its dividend by 7.69% annually over the past five years, despite its aggressive acquisition strategy and headwinds emanating from the loss of exclusivity for Humira.
Its diverse product range and solid clinical pipeline, though, should support additional dividend increases over the balance of the decade. AbbVie qualifies as a high-yield stock, with shares paying a 3.06% annualized yield. But its 51.3 P/E ratio may limit share-price appreciation in the near term.
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*Stock Advisor returns as of July 15, 2024
George Budwell has positions in Target. The Motley Fool has positions in and recommends Abbott Laboratories, Nike, S&P Global, Target, and Visa. The Motley Fool recommends Amgen and Lowe's Companies and recommends the following options: long January 2025 $47.50 calls on Nike. The Motley Fool has a disclosure policy.
