9 Best Dividend Growth Stocks of 2024

The premise of a dividend growth stock is simple; they are companies that can comfortably pay dividends to their shareholders and grow the dividend per share annually. The number of US companies that have been able to sustain dividend growth by paying consecutive annual dividend increases for more than 20 years is just 146. There are only 75 who have managed this feat for 30 years, and just 26 who have done so for more than 50 years. While some companies pay a considerably high dividend yield, investors seek out dividend-growth stocks because of their consistency. Thus, there is less focus placed on outright yield and more emphasis on durability. A dividend can’t compound if it’s stopped in its tracks.

PRO TIP:

When searching for dividend growth stocks, focus on the following attributes to find companies likely to provide consistent returns:

1. 1. Dividend Streak: Focus on companies with a history of increasing dividends for more than 10 years.
   2. Payout Ratio: Ensure the payout ratio is sustainable, ideally at or below 100%.
   3. Dividend Growth: Confirm a strong history of growing dividends, with a CAGR of over 3.5% across a decade.
   4. Profitability Metrics: Look for companies with an EBIT margin and a net income margin both in positive territory, reflecting operational and overall profitability.
   5. Growth Projections: Consider companies with projected EPS and revenue growth of more than 3.5% annually over the next three years.
   6. Revenue Trends: Check for a total revenue CAGR of more than 5% over the last five years, indicating consistent growth.

The Koyfin Screener allows scanning through more than 100K global securities using 5,900+ filter criteria. Set filters as mentioned in our Pro Tip to refine your search.

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For those interested in other screening tools, the ‘Best Stock Screeners’ blog post offers a comparison to help find the perfect match.

*Data as of February 13th, 2024

Investing in dividend growth stocks isn’t just about choosing the right ones; it’s crucial to keep monitoring them regularly. Watch the overall market because it can change how your stocks do. Also, watch for any changes in how the companies handle their dividends. This can tell you a lot about how stable the company is financially.

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Starbucks is the world’s largest coffee franchise with more than 37,000 stores across North America (17,592), China (6,480), and the rest of the world (13,150). The company has paid consecutive annual dividend increases for more than 13 years and currently yields 2.4% or $0.57 per share. The global coffee enterprise is a cash generation machine, pumping out more than enough free cash flows and earnings to cover its dividends. Over the last 10 years, the dividend has increased by an annualized 17.1% each year.

Over time, Starbucks has shown how important paying their dividend is to them. This was illustrated during the pandemic when, for an entire year, cash flows were no longer able to support the dividend. Ordinarily, this would spell trouble for a dividend growth stock, and during the pandemic many companies halted or reduced their dividend to shore up liquidity. Instead, Starbucks halted share repurchases and committed to paying their shareholders.

The growth prospects for Starbucks look promising too. While there may be an argument for saturation in their domestic market, the company’s second-largest market, China, has decades of growth ahead. China, a market where Starbucks operates 100% of the stores itself, captures much of the attention these days, as it stands to be the company’s largest growth vector going forward. The company is eyeing 45,000 stores across the world in the coming years, most of which will come from China’s growth. SBUX is also featured in our best food stocks article, offering more insights on Starbucks within the food sector.

Key Investment Insights for Starbucks Corporation (SBUX):

The Sherwin-Williams Company specializes in the manufacture and distribution of paints, coatings, and related products to retail, professional, commercial, and industrial customers. Through its three operation segments (Americas, Consumer Brands, and Performance Coatings), SHW offers products that range from architectural paints and coatings, protective and marine products, OEM finishes, stains, varnishes, industrial products, wood finishes products, wood preservatives, applicators, corrosion inhibitors, aerosols, caulks, adhesives, and more. They have been in this business since 1866.

They also have an extensive history of annual dividend increases, highlighting their commitment to consistent dividend growth, stretching back 45 years so far. In the last decade, their dividend has grown by an annualized 13.8% per year. While the dividend yield might be one of the lowest on our list, at just 0.8%, the growth rate has been phenomenal, and the potential to further this dividend growth remains strong. At present, SHW has a payout ratio of just 30.6%, meaning the dividend is well covered.

Key Investment Insights for The Sherwin-Williams Company (SHW):

Home to Moody’s Investors Service and Moody’s Analytics, MCO is an integral part of the financial industry; most commonly known for publishing credit ratings and providing assessment services on various debt obligations, programs and facilities, and entities that issue such obligations, such as various corporate, financial institution, and governmental obligations.

Founded in 1900, Moody’s has proven its ability to survive every recession it has faced. Part of this is due to its impressive moat and the fact that its services are so important to the industry. Moody’s has paid a dividend since the year 2000 and has gone 15 years in a row for consecutive dividend hikes. Currently yielding 0.77%, MCO pays investors $0.77 per share, and has grown its dividend by an annualised 15.9% over the last decade. The payout ratio, of 37.5%, is also well covered.

Moody’s has one of the strongest margin structures on our list, with gross margins above 70% and 35% EBIT margins.

Key Investment Insights for Moody’s Corporation (MCO):

Another business that is an integral part of the financial system, is S&P Global. SPGI operates in similar fields to Moody’s and also provides credit ratings, benchmarks, analytics, and workflow solutions in the global capital markets. Founded in 1860, S&P Global has been hiking its dividends annually for more than 51 years! Over the last ten years, the dividend has grown at an annualized 12.4% per year and currently pays investors a yield of 0.85%.

With both S&P Global and Moody’s, investors received a modest dividend, but one characterized by consistent dividend growth, comfortability due to their parent’s high margins and meaty business practices, and the prospect of attractive returns.

Key Investment Insights for S&P Global Inc. (SPGI):

Almost every human with a computer has touched a Microsoft product in their lifetime. Whether it’s the hardware or software, Microsoft has had to reinvent itself many times over during its lifespan. More recently, the company has begun to build out an impressive Cloud business, as well as demonstrating a desire to get ahead of the curve with their investments into AI, such as the acquisition of OpenAI, or their partnerships with Meta.

Having consecutively raised annual dividends for 19 years, Microsoft has the lowest payout ratio on our list thanks to its fat margins and incredible cash flow. The dividend yield is on the smaller side, at just 0.72%, but comes with the benefit of owning one of the world’s largest and most powerful technology companies.

Key Investment Insights for Microsoft Corporation (MSFT):

The Hershey Company is one of the world’s largest confectionery businesses, selling their chocolates, snacks, and other consumer packaged goods across the world. A handful of their brands include: Hershey’s, Reese’s, Kisses, Jolly Rancher, Almond Joy, Brookside, Cadbury, Good & Plenty, Heath, Kit Kat, Payday, Rolo, Twizzlers, Whoppers, York, Ice Breakers, Breath Savers, Bubble Yum, Lily’s, SkinnyPop, Pirates Booty, Paqui, and Dot’s Homestyle Pretzels.

The company boasts a dividend growth track record with 15 years of consecutive annual dividend hikes. With a yield of 2.5%, it plans to stretch that tally for years to come. Interestingly, despite no major changes to the businesses, sentiment has turned sour for Hershey’s more recently, and other “non-healthy” snacking CPG companies because of the rise of various weight loss drugs in the US. Some investors’ fear that demand will fall for these goods in the coming decade.

After falling 35% from their previous high, and more than 15% YTD, Hershey now trades at a forward PE ratio of ~19x, which places it in the bottom quartile relative to its own 20-year history. If you believe the fears are overblown, now could be the time to make a contrarian trade in the CPG industry.

Key Investment Insights for The Hershey Company (HSY):

Church & Dwight Co., Inc., a renowned manufacturer of household and personal care products, offers a broad spectrum from baking soda goods to animal productivity supplements. It’s carved out a significant market share via innovative products and astute acquisitions, such as THERABREATH and Hero. The company’s strategic focus on both premium and value brands has fueled robust consumer demand and improved case-fill rates, thus driving substantial revenue growth.

The company currently pays a dividend yield of 1.15% and has knocked up a 13-year period of consecutive annual dividend hikes

Key Investment Insights for Church & Dwight Co. Inc. (CHD):

PepsiCo is a dividend king, having paid consecutive annual dividend hikes for more than 52 years. The company is most known for its iconic Pepsi-Cola beverages but also owns Lay’s, Doritos, Cheetos, Gatorade, Pepsi-Cola, Mountain Dew, Quaker, Aquafina, Emperador, Diet Mountain Dew, Diet Pepsi, Gatorade Zero, Propel, Marias Gamesa, Ruffles, Sabritas, Saladitas, Tostitos, 7UP, Diet 7UP, H2oh!, Manzanita Sol, Mirinda, Pepsi Black, San Carlos, Toddy, Walkers, Chipsy, Kurkure, Sasko, Spekko, White Star, Smith’s, Sting, SodaStream, Lubimy Sad, a large portion of Celsius Energy, and other brands.

Founded in 1898, Pepsi currently yields 3% and offers diversified exposure to the CPG industry across the world. More recently, the company has shown pricing power, managing to increase revenues while volumes weaken during a global inflationary period.

Key Investment Insights for PepsiCo Inc. (PEP):

One investor’s trash is another’s treasure. Waste Management has been in the business of trash collection since 1987 and operates across the US and Canada delivering services such as the collection, transportation, and recycling of waste materials, as well as landfill management. The company pays a dividend yield of 1.49% and has consecutively raised their dividend for more than 20 years.

While the 10Y CAGR is lower than some others on our list, at 6.2%, Waste Management operates the largest waste management business in the country with relatively little competition. While it’s hard to forecast which technologies will be most important to humans in twenty years, it’s reasonable to believe that we will still need our trash collected.

Key Investment Insights for Waste Management Inc. (WM):

How To Find Top Dividend Growth Stocks

Step 1: Sign Up to Koyfin for Free. Register an account and get started; no credit card required. 

Step 2: Create a Screener. Head to ‘My Screens’, create a new screener and give it a name. 

Step 3: Define your Investment Universe. Select a trading region, or multiple regions, and choose from a range of universe filters such as; country, ETF constituents, industry, sector, exchange, and description. 

Step 4: Add Filter Criteria. We have thousands of data points you can add to a screener. For a high-quality dividend screener, we recommend the following criteria, but you can make your own too: 

• Dividend Streak: More than 10 years
• Payout Ratio (LTM): A maximum of 100%
• Dividend per share CAGR (10Y FY): More than 3.5%
• EBIT Margin (LTM): More than 5%
• Net Income Margin (LTM): More than 0%
• Est EPS CAGR (3Y): More than 3.5%
• Est Rev CAGR (3Y): More than 3.5%
• Total Revenues CAGR (5Y FY): More than 5%

 Step 5: Create Screen. When you are happy with your screener, give it a name and hit save and apply. You can also save this screener output as a watchlist too.

How to Create a Watchlist for Top Dividend Growth Stocks

Step 1: Sign Up to Koyfin for Free. Register an account and get started; no credit card required.  

Step 2: Create a Watchlist. Head to ‘My Watchlists’, create a new watchlist and give it a name. 

Step 3: Add Tickers. Click ‘Add Ticker’, then ‘Import Securities’, then copy and paste the below list of tickers. 

SBUX, SHW, MCO, SPGI, MSFT, HSY, CHD, PEP, WM

Step 4: Customize Columns. Hit the ‘Columns’ icon to add and remove columns from your watchlist table. 

We have thousands of data points you can add to a watchlist, including fundamental data, price and returns data, analyst estimates, percentile ranks, security information, portfolio tools, and the ability to create your own formulas and labels. 

Now your watchlist is ready, and you can use the rest of the Koyfin terminal to track and analyze these stocks.

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Our insights are derived solely from historical information and analyst predictions, employing an impartial approach. Please note that our articles do not serve as financial guidance.