3 Top Dividend Stocks to Buy This September

The appeal of dividend stocks among the investing community has been consistent, and with good reason. Generally, dividend-paying companies have a consistent track record of growing profitability, steady management, and a strong position in the market. Companies with a strong dividend history have also usually navigated multiple business cycles over the years, both good and bad.

Notably, the case for investing in dividend stocks becomes even stronger with the Federal Reserve now opting for a higher-than-standard 50-basis point rate cut, rather than the usual 25-bps trim. This bodes well for dividend stocks, which become more attractive as yield-seeking investors look outside the fixed-income market for returns. To that end, here are three high-quality stocks that have not only raised dividends at a healthy pace, but look set for continued growth as interest rates start to drop.

#1. Domino's Pizza

Founded by the Monaghan Brothers in 1960, Domino's Pizza (DPZ) is one of the foremost names when it comes to serving pizzas globally. One of the largest pizza chains in the world, Domino's operates in close to 21,000 locations across 90+ countries. The company specializes in delivering and carrying out pizza, along with other items like pasta, sandwiches, chicken, and desserts. The company currently commands a market cap of $14.3 billion.

DPZ stock hasn't delivered much movement in 2024 so far, falling marginally YTD. The company offers a dividend yield of 1.46%, which it has grown at a rate of 18% over the past five years. Additionally, Domino's has been increasing its dividends consistently for the past 12 years, and with a sustainable payout ratio of 33.4%, there's scope for further growth.

When it comes to growth in revenues and EPS, the company has had a strong showing, as well. Over the past 10 years, while the company's revenues have clocked a CAGR of 9.42%, its EPS has compounded at a rate of 14.02%.

The results for the latest quarter were mixed, with Domino's reporting a beat on earnings, but a miss on revenue. Sales rose by 5.2% from the previous year to $4.4 billion in the second quarter, aided by same-store growth in the U.S. and International segments. EPS improved by an impressive 30.8% in the same period to $4.03, easily outpacing the consensus estimate of $3.68. Notably, this marked the seventh consecutive quarterly earnings beat from DPZ.

Net cash from operating activities for the six months ended June 30 was $274.2 million, up 13.2% from the prior year. Liquidity-wise, the company remained on solid ground, ending the quarter with a cash balance of $283.7 million. This was much higher than its current debt of about $5 million. 

Domino's secret sauce lies in its capital-light asset model and harnessing the power of technology. This approach provides the company with strong competitive advantages, including economies of scale, brand strength, and a vast global franchise network.

Additionally, Domino's has been an industry innovator with its "fortressing" strategy, which reduces delivery distances by opening new stores in existing markets, placing them closer to customers. This has led to faster delivery times and lower costs per delivery. The Domino's Rewards loyalty program has also seen strong growth, with customer orders including loyalty redemptions doubling in the first half of 2024 compared to 2023. This has contributed to a 4.8% increase in same-store sales in the U.S.

With its sticky customer base, supreme brand recognition, and robust balance sheet, analysts are bullish about DPZ stock, with an overall rating of “Moderate Buy.” Out of 29 analysts covering the stock, 16 have a “Strong Buy” rating, 2 have a “Moderate Buy” rating, 10 have a “Hold” rating, and 1 has a “Strong Sell” rating.

DPZ's average 12-month price target of $496.31 denotes an upside potential of about 21.3% from current levels. 

#2. UnitedHealth Group

Founded in 1977, Minnesota-based UnitedHealth Group (UNH) is a diversified healthcare company that provides a range of services and products through its two primary business platforms: UnitedHealthcare and Optum. One of the largest health insurance companies in the world by revenue, UnitedHealth currently commands a market cap of $531.9 billion.

On a YTD basis, UNH stock is up 10.3%. The stock offers a dividend yield of 1.45%, which it has grown at a pace of nearly 15% over the past 5 years. UNH has raised dividends consistently for the past 15 years. Plus, with its conservative payout ratio of 29.3%, there's room for continued dividend growth.

Over the last 10 years, UnitedHealth has grown its revenue and earning at CAGRs of 11.83% and 10.48%, respectively.

In the most recent quarter, UNH beat estimates on both revenue and earnings. Revenues for the second quarter came in at $98.9 billion, up 6.5% from the previous year, with EPS rising by 10.7% over the same period to $6.80, beating the consensus estimate of $6.65. This was UNH's 16th consecutive quarterly earnings beat.

The company's liquidity position also remained solid, as it exited the quarter with a significant cash balance of $31.3 billion - much higher than its short-term debt levels of $11.4 billion.

As a result of its balance sheet strength, UnitedHealth has been able to carry out some material acquisitions, which has helped it to enhance its competitive advantage. For instance, its 2022 acquisition of Change Healthcare has allowed it to enhance its Optum Insight business with substantial data assets and an expanded customer base. Or its 2023 buyout of LHC group, one of the nation’s largest home health providers, for $5.4 billion enables UnitedHealth’s Optum business to expand their high-quality home and community-based care.

Despite concerns about a recent cyberattack, UnitedHealth's position as the largest health insurer will enable it to capitalize on rising healthcare costs. The Centers for Medicare and Medicaid Services (CMS) forecasts national health spending to grow by 5.1% annually from 2021 to 2030, reaching $6.8 trillion by 2030.

UnitedHealth's payer-agnostic strategy ensures that its divisions and subdivisions operate independently, avoiding conflicts of interest and building trust among customers.

With its diversified divisions across key healthcare services segments, UnitedHealth is rated as a “Strong Buy” among analysts, with a mean target price of $626.14. This reflects an upside potential of roughly 7.8% from current levels. Out of 23 analysts covering the stock, 21 have a “Strong Buy” rating, and 2 have a “Moderate Buy” rating.

#3. Keurig Dr Pepper

We conclude our list of top dividend growers to invest in this September with Keurig Dr Pepper (KDP). Formed in 2018 through the merger of Keurig Green Mountain and Dr Pepper Snapple Group, the company is in the production and distribution of a wide range of beverages, including coffee, tea, soda, and flavored water. Its market cap has soared to a sizeable $50.8 billion.

KDP stock is up 12.6% on a YTD basis, and it also offers a dividend yield of 2.45%. The dividend has grown at a 7.5% rate over the past five years, with a very manageable payout ratio of 46.2%.

In the latest quarter, Dr Pepper reported net sales of $3.92 billion, up 3.4% from the previous year, while EPS rose 7.1% to $0.45. While Q2 revenues surpassed consensus estimates, EPS arrived right in line with expectations.

Over the past five years, Dr Pepper's revenue and earnings have expanded at CAGRs of 6.76% and 17.85%, respectively.

The company exited Q2 with a cash balance of $438 million, up 64% from the start of the year, though much lower than its short-term debt levels of $2.4 billion. For the first six months of 2024, KDP reported net cash flow from operating activities of $742 million, up from $452 million in the year-ago period.

KDP boasts a robust portfolio of well-recognized brands, paving a smoother path toward growth. Its popular offerings include Dr Pepper, 7 Up, Schweppes, Sunkist, and Lavazza, among others. The company's numerous strategic partnerships further strengthen its position. Notable examples include the C4 partnership, which has demonstrated strong growth with C4 retail sales increasing 30% year-over-year in Q2 2024, despite a slowdown in the energy drinks segment. Other successful collaborations involve CORE Hydration and Mott's back-to-school programming.

Broader economic tailwinds, such as softer inflation readings and commodity price deflation, also favor the company's outlook. Combined with management's focus on driving improvements in supply chain optimization, digital capabilities, and shared services, KDP appears poised for success. These factors collectively position the company as a potential winner in the competitive beverage market.

Analysts like KDP's prospects, with an average rating of “Moderate Buy.” Out of 16 analysts covering the stock, 7 have a “Strong Buy” rating, 1 has a “Moderate Buy” rating, and 8 have a “Hold” rating. The stock trades at a premium to its mean price target of $36.82, but has room to run 9.3% to its Street-high target price of $41.