In this article, we take a look at 10 high growth dividend paying stocks to buy.
High growth can have different definitions for different people.
In this article, we define high growth stocks as stocks that analysts expect to increase their EPS by an average annual rate of 10% or more over the next 5 years.
Because they are expected to grow faster than the average, more of a company’s value is based on future results. If a company’s growth rate slows more than expected, its value might decline, sometimes substantially depending on various factors. As a result, many growth stocks are riskier than blue chip stocks.
Dividend stocks are stocks of companies that pay dividends.
Dividends and share buybacks are the two main ways companies return excess capital back to shareholders. In economic expansionary times, many profitable companies increase their dividends if their profits increase considerably. In recessionary times or more economic uncertain times, many company profits could decrease and many companies might decrease their dividends or suspend them all together.
Generally, it is harder to find high growth dividend stocks than it is to find normal growth dividend stocks as many stocks that pay dividends are in more mature sectors. Many growth companies also use their profits to reinvest into their operations rather than pay a dividend.
Nevertheless, some stocks that fit both criteria do exist although their dividend yields might not be as high as some other dividend stocks in many instances.
In terms of their fundamentals, many high growth dividend stocks depend on how well the U.S. and economy does. If the U.S. economy doesn’t do very well, the growth of high growth companies might not be as fast as expected.
In terms of 2023, the U.S. Federal Reserve is expected to raise interest rates further to ensure inflation has really peaked. Depending on how far the U.S. central bank raises interest rates, U.S. economic growth could slow or even contract.
Given the uncertainty in the economy, it could be a good idea for long term investors to own a well diversified portfolio of leading stocks across many different sectors.
Photo by sean pollock on Unsplash
Methodology
For our list of 10 High Growth Dividend Paying Stocks to Buy, we chose 10 stocks with competitive advantages that paid a dividend and that also had EPS Next 5 year ratios of over 10%.
We ranked the stocks based on their EPS next 5 year ratio.
EPS Next 5 Year Ratio is the estimated average annual EPS growth rate in the next 5 years.
Given EPS Next 5 Year Ratio is an estimate, it can change from time to time depending on economic events, company specific events, and analyst view changes.
For those of you interested, also check out 10 High Growth Low Debt Stocks to Buy.
10 High Growth Dividend Paying Stocks to Buy
10. Blackstone Inc. (NYSE:BX)
EPS Next 5 Year Ratio: 10.34%
Dividend Yield as of 2/19: 6.26%
Blackstone Inc. (NYSE:BX) is a leading private equity company that analysts expect will grow its EPS by an average rate of 10.34% a year over the next 5 years. Although higher interest rates are a headwind when it comes to debt costs, Blackstone Inc. (NYSE:BX) has earnings growth potential from AUM growth. As of 2/19, Blackstone Inc. (NYSE:BX) also has a dividend yield of 6.26%, which makes it one of the highest yielders on our list of 10 High Growth Dividend Paying Stocks to Buy.
Given higher yields can signify higher risk, the company’s near term results might not be as strong if the U.S. economy undergoes an economic slowdown or a recession.
Blackstone Inc. (NYSE:BX) has a big real estate business in its portfolio that has experienced some capital outflows given economic conditions. If economic conditions normalize, the company’s real estate business could benefit in the long term.
Alongside The Charles Schwab Corporation (NYSE:SCHW), Mastercard Incorporated (NYSE:MA), and ASML Holding N.V. (NASDAQ:ASML), Blackstone Inc. (NYSE:BX) is a dividend stock that’s expected to increase its average annual EPS at a fair rate over the next 5 years.
9. Costco Wholesale Corporation (NASDAQ:COST)
EPS Next 5 Year Ratio: 10.40%
Dividend Yield as of 2/19: 0.71%
Costco Wholesale Corporation (NASDAQ:COST) is one of the largest retailers in the world with LTM sales of $226.7 billion, 124 million square feet, and 304,000 employees worldwide as of November 20, 2022. Given its huge membership of 66.9 million households and 120.9 million total cardholders, the company also has LTM membership fees of $4.3 billion.
Considering its substantial scale, Costco Wholesale Corporation (NASDAQ:COST) has a competitive advantage versus smaller retailers. With its expected continued growth, analysts expect the company to grow its EPS by an average annual rate of 10.40% over the next 5 years. As of 2/19, the company also had a dividend yield of 0.71%. In terms of its dividend, Costco Wholesale Corporation (NASDAQ:COST) has increased its dividend at a compound annual growth rate of 13% since May 2004.
8. Microsoft Corporation (NASDAQ:MSFT)
EPS Next 5 Year Ratio: 11.77%
Dividend Yield as of 2/19: 1.05%
Microsoft Corporation (NASDAQ:MSFT) is a leading software company that has raised its annual dividend for 20 straight years.
Although the company’s sales growth has slowed recently and its profits have shrank, analysts expect the company to grow in the long term due to secular trends.
For Q2 FY 2023, which is Microsoft Corporation (NASDAQ:MSFT)’s quarter ended December 31, 2022, the company’s sales rose 2% year over year to $52.7 billion and adjusted diluted EPS was $2.32, down 6% year over year.
Nevertheless, Microsoft Corporation (NASDAQ:MSFT)’s cloud sales rose 22% year over year to $27.1 billion and the company has an EPS Next 5 year ratio of 11.77%.
With the expected earnings growth, Microsoft Corporation (NASDAQ:MSFT)’s dividends will likely continue to increase in the future if the company maintains its market share.
7. Deere & Company (NYSE:DE)
EPS Next 5 Year Ratio: 12.82%
Dividend Yield as of 2/19: 1.11%
Deere & Company (NYSE:DE) is a leading maker of heavy machinery in agriculture and construction that analysts estimate will increase its annual EPS by an average of 12.82% a year for the next 5 years. In terms of earnings estimates, analysts expect the company to earn $22.84 per share in FY2022, $29.37 per share in FY2023, $30.94 per share in FY2024, and $32.86 per share in FY2025. Although Deere & Company (NYSE:DE) only has an annual dividend of $4.80 per share which is a dividend yield of 1.11% as of 2/19, the company’s dividend could increase by a fair amount in the next five years if its EPS rises as expected.
6. Automatic Data Processing (NASDAQ:ADP)
EPS Next 5 Year Ratio: 13.43%
Dividend Yield as of 2/19: 2.19%
Automatic Data Processing (NASDAQ:ADP) is a leader in human capital management software and solutions that delivers payroll for more than 40 million workers globally. In November 2022, the company’s board approved a $0.21 increase in the quarterly cash dividend to an annual rate of $5 per share. The 20% increase in quarterly dividend was the 48th straight year of annual dividend increases. Automatic Data Processing (NASDAQ:ADP) is also expected to grow its annual EPS by an average of 13.43% a year for the next 5 years.
Like Automatic Data Processing (NASDAQ:ADP), The Charles Schwab Corporation (NYSE:SCHW), Mastercard Incorporated (NYSE:MA), and ASML Holding N.V. (NASDAQ:ASML) are dividend stocks that are expected to increase their average annual EPS by a fair rate over the next 5 years.
5. SAP SE (NYSE:SAP)
EPS Next 5 Year Ratio: 15.41%
Dividend Yield as of 2/19: 1.77%
SAP SE (NYSE:SAP) is a leading software enterprise company with an annual dividend per share of $2.08 per share and dividend yield of 1.77% as of 2/19.
For 2022, SAP SE (NYSE:SAP) CEO Christian Klein said, “SAP is more resilient than ever. We end 2022 with continued strong cloud momentum and a return to operating profit growth in the fourth quarter, marking an important inflection point. Heading into 2023, this gives us great confidence in delivering on our promise of accelerating topline and double-digit non-IFRS operating profit growth.”
In terms of future earnings, analysts expect SAP SE (NYSE:SAP) to increase its EPS by an average of 15.41% a year for the next 5 years, ranking the stock #5 on our list of 10 High Growth Dividend Paying Stocks to Buy.
4. Visa Inc. (NYSE:V)
EPS Next 5 Year Ratio: 15.48%
Dividend Yield as of 2/19: 0.81%
Visa Inc. (NYSE:V) is a payments network giant that analysts expect to continue to increase its EPS by an average of 15.48% a year over the next 5 years given the expected continued growth in commerce and e-commerce. Specifically, analysts see Visa Inc. (NYSE:V) earning $7.42 per share in FY2022, $8.46 per share in FY2023, $9.69 per share in FY2024, and $11.21 per share in FY2025. Visa Inc. (NYSE:V) has increased its annual dividend for 14 consecutive years and has a dividend yield of 0.81% as of 2/19.
In February 2023, the CFPB proposed a rule to curb excessive credit card late fees to $8 as opposed to the existing late fee of up to $41. In terms of the stock reaction, Visa Inc. (NYSE:V) shares didn’t decline all that much in the days after the news and it is not clear just how much the company’s growth will be affected by the rule proposal.
3. The Charles Schwab Corporation (NYSE:SCHW)
EPS Next 5 Year Ratio: 18.46%
Dividend Yield as of 2/19: 1.25%
The Charles Schwab Corporation (NYSE:SCHW) is a leading provider of financial services, with 33.8 million active brokerage accounts, 2.4 million corporate retirement plan participants, 1.7 million banking accounts, and $7.05 trillion in client assets. In January, the company’s board of directors approved a 14% increase to the quarterly cash dividend to $0.25 per common share, giving the stock a dividend yield of 1.25% as of 2/19. In terms of earnings growth, The Charles Schwab Corporation (NYSE:SCHW) ranks #3 on our list of 10 High Growth Dividend Paying Stocks to Buy given its EPS next 5 year ratio of 18.46%.
2. Mastercard Incorporated (NYSE:MA)
EPS Next 5 Year Ratio: 20.34%
Dividend Yield as of 2/19: 0.63%
Mastercard Incorporated (NYSE:MA) is a leading payments operator with a dividend yield of 0.63% as of 2/19. Despite higher inflation, the company has done relatively well in terms of its financial results.
For the fourth quarter, Mastercard Incorporated (NYSE:MA)’s net sales rose 12% year over year to $5.8 billion and its fourth quarter gross dollar volume rose 8% year over year. Four quarter adjusted net income was $2.5 billion and adjusted diluted EPS was $2.65.
For full year 2022, the company’s gross dollar volume rose 12% year over year, adjusted net revenue rose 18% year over year to $22.2 billion and adjusted diluted EPS rose 27% year over year to $10.65. For full year 2022, Mastercard Incorporated (NYSE:MA) also repurchased 25.7 million shares at a cost of $8.8 billion and the company also paid $1.9 billion in dividends. Mastercard Incorporated (NYSE:MA) has a EPS next 5 year ratio of 20.34%.
Like Visa Inc. (NYSE:V), Mastercard Incorporated (NYSE:MA) could be affected by the CFPB proposal to curb excessive credit card late fees to $8 if passed although the exact effect on the company’s growth is uncertain.
1. ASML Holding N.V. (NASDAQ:ASML)
EPS Next 5 Year Ratio: 29.80%
Dividend Yield as of 2/19: 1.53%
ASML Holding N.V. (NASDAQ:ASML) is a leading semiconductor equipment producer that ranks #1 on our list of 10 High Growth Dividend Paying Stocks to Buy given analysts expect the company to grow its EPS on average by 29.8% a year for the next 5 years.
As it stands, the company is pretty profitable given it has considerable scale and is on the cutting edge of a very important industry.
In Q4 2022, ASML Holding N.V. (NASDAQ:ASML) had net sales of €6.4 billion, gross margin of 51.5%, and net income of €1.8 billion, and for 2022, the company had net sales of €21.2 billion, gross margin of 50.5%, and net income of €5.6 billion.
The company is expected to grow fairly rapidly in 2023 with ASML Holding N.V. (NASDAQ:ASML) stating in January 2023 that it expects 2023 net revenue to grow over 25% compared to 2022.
As of 2/19, ASML Holding N.V. (NASDAQ:ASML) has a dividend yield of 1.53%.
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Disclosure: None. 10 High Growth Dividend Paying Stocks to Buy is originally published on Insider Monkey.
