12 Dividend Kings To Buy For Safe Dividend Growth

In this article, we will discuss 12 dividend kings to buy for safe dividend growth.

Inflation in the US remains widespread despite Federal Reserve’s continuous interest rate hikes. Fed Chair Jerome Powell has recently hinted toward a more aggressive hike in interest rates due to stronger-than-expected data on consumer spending and inflation, as reported by Reuters. The current stock market situation has investors anxious about their financial condition. According to Gallup’s recent survey, 50% of the respondents mentioned that their financial situation is worst, compared with a year ago period, the highest percentage since 2009. These circumstances uncovered different investment options that would help investors to generate stable income. In this regard, dividend investment took the center stage among other asset classes.

When investing in dividend stocks, investors focus on companies that have raised their payouts for a significant period of time. Dividend kings are the companies that have raised their payouts for 50 years or more. Dividend growers have exhibited strong performance over the years, notably outperforming their peers and the broader market. According to a report by RMB Capital, dividend growers delivered an annual average return of 9.62% from 1972 to 2018, versus a 2.40% return for dividend non-payers. During this period, the equal-weighted S&P 500 Index delivered an annual average return of 7.30%. Dividend stocks are also known to provide protection during bearish markets. From December 31, 1999, to March 31, 2022, the S&P High Yield Dividend Aristocrats outpaced the S&P Composite 1500 by an average of 140 basis points, as reported by S&P Dow Jones Indices.

Various studies have revealed the contribution of dividends to the overall market’s returns. According to research by Harvard Business Review, dividends represented nearly 37% of corporate earnings from 2003 through 2012.

Some of the best dividend kings for consistent growth include:

McDonald’s Corporation (NYSE:MCD)

Roper Technologies, Inc. (NYSE:ROP)

Aflac Incorporated (NYSE:AFL)

Hormel Foods Corporation (NYSE:HRL)

Illinois Tool Works Inc. (NYSE:ITW)

Photo by Nick Chong on Unsplash

Our Methodology:

For this article, we scanned the list of dividend kings, which are the companies that have raised their payouts for 50 years or more. From that list, we shortlisted companies that have 5-year annual average dividend growth rates above 7%.  We also considered hedge fund sentiment around each stock in Insider Monkey’s database, as of the fourth quarter of 2022. The stocks are ranked in ascending order of their annual average dividend growth in the past five years.

12. Lancaster Colony Corporation (NASDAQ:LANC)

5-Year Average Annual Dividend Growth Rate: 7.4%

Dividend Yield as of March 8: 1.80%

Lancaster Colony Corporation (NASDAQ:LANC) is an Ohio-based manufacturing company that specializes in specialty food products for retail and food service markets. On February 22, the company declared a quarterly dividend of $0.85 per share, which fell in line with its previous dividend. This was the company’s 60th consecutive year of dividend growth and in the past five years, it has raised its payouts at an annual average rate of 7.4%. The stock’s dividend yield on March 8 came in at 1.80%.

In addition to McDonald’s Corporation (NYSE:MCD), Roper Technologies, Inc. (NYSE:ROP), and Aflac Incorporated (NYSE:AFL), investors are also paying attention to Lancaster Colony Corporation (NASDAQ:LANC) due to its dividend growth streak.

Lancaster Colony Corporation (NASDAQ:LANC), one of the dividend kings for safe dividend growth, reported an 11.4% year-over-year growth in its revenue at $477.4 million in Q4 2022. At the end of December 2022, the company had over $95.4 million available in cash and cash equivalents, up from $60.2 million in 2021.

At the end of Q4 2022, 22 hedge funds tracked by Insider Monkey owned stakes in Lancaster Colony Corporation (NASDAQ:LANC), up from 19 a quarter earlier. The consolidated value of these stakes is nearly $194 million. Among these hedge funds, Diamond Hill Capital was the company’s leading stakeholder in Q4.

Diamond Hill Capital mentioned Lancaster Colony Corporation (NASDAQ:LANC) in its Q4 2022 investor letter. Here is what the firm has to say:

“Other top contributors included AIG, Freeport-McMoRan and Lancaster Colony Corporation (NASDAQ:LANC). Diversified foods manufacturer and retailer Lancaster Colony Corporation has done a fairly effective job of offsetting inflation with a combination of price increases and cost-cutting measures, contributing to higher profits and improved margins.”

11. Hormel Foods Corporation (NYSE:HRL)

5-Year Average Annual Dividend Growth Rate: 8.63%

Dividend Yield as of March 8: 2.74%

Hormel Foods Corporation (NYSE:HRL) is a Minnesota-based food processing company that focuses on the packaging and selling of a wide range of food products. In March, Barclays maintained an Equal Weight rating on the stock with a $45 price target, expressing concerns regarding consumer softness toward the company’s products.

In fiscal Q1 2023, Hormel Foods Corporation (NYSE:HRL) reported mixed earnings. The company’s revenue for the quarter came in at $3 billion, which fell by 1.3% from the same period last year. Its operating cash flow for the quarter stood at $204 million.

Hormel Foods Corporation (NYSE:HRL) is one of the dividend kings on our list with 57 consecutive years of dividend growth. In the past five years, the company has raised its payouts at an annual average rate of 8.63%. It currently pays a quarterly dividend of $0.275 per share for a dividend yield of 2.74%, as of March 8.

At the end of Q4 2022, 28 hedge funds tracked by Insider Monkey reported owning stakes in Hormel Foods Corporation (NYSE:HRL), worth over $490.6 million collectively. With over 2 million shares, Bill & Melinda Gates Foundation Trust was the company’s leading stakeholder in Q4.

10. American States Water Company (NYSE:AWR)

5-Year Average Annual Dividend Growth Rate: 9.11%

Dividend Yield as of March 8: 1.86%

Another dividend king on our list for safe dividend growth is American States Water Company (NYSE:AWR), which is a California-based electric utility company. In the fourth quarter of 2022, the company reported revenue of $125.3 million, which showed a 7.5% growth from the same period last year. At the end of December 2022, its total assets amounted to over $2 billion, compared with $1.9 billion in 2021.

In December, Wells Fargo raised its price target on American States Water Company (NYSE:AWR) to $96, presenting a neutral stance on the sector.

American States Water Company (NYSE:AWR) currently offers a quarterly dividend of $0.3975 per share for a dividend yield of 1.86%, as of March 8. This dividend king has been raising its payouts consistently for the past 68 years. Moreover, its 5-year average dividend growth rate stands at 9.11%.

As of the end of Q4 2022, 14 hedge funds tracked by Insider Monkey reported owning stakes in American States Water Company (NYSE:AWR), compared with 15 in the previous quarter. These stakes are valued at over $25.2 million collectively.

9. Illinois Tool Works Inc. (NYSE:ITW)

5-Year Average Annual Dividend Growth Rate: 10.09%

Dividend Yield as of March 8: 2.21%

An American manufacturing company, Illinois Tool Works Inc. (NYSE:ITW) has been raising its dividends consistently for the past 50 years. The dividend king has grown its payouts at an annual average rate of 10.09% in the past five years. The company offers a quarterly dividend of $1.31 per share and has a dividend yield of 2.21%, as of March 8.

Following the company’s quarterly earnings and its ‘solid beat’, both UBS and Morgan Stanley raised their price targets on Illinois Tool Works Inc. (NYSE:ITW) in February to $245 and $223, respectively.

In Q4 2022, Illinois Tool Works Inc. (NYSE:ITW) posted revenue of roughly $4 billion, which showed an 8% growth from the same period last year. The company generated $811 million in operating cash flow and its free cash flow came in at $655 million.

The number of hedge funds tracked by Insider Monkey owning stakes in Illinois Tool Works Inc. (NYSE:ITW) grew to 34 in Q4 2022, from 27 in the previous quarter. The collective value of these stakes is over $1.04 billion. Adage Capital Management was the company’s leading stakeholder in Q4.

8. Stepan Company (NYSE:SCL)

5-Year Average Annual Dividend Growth Rate: 10.24%

Dividend Yield as of March 8: 1.45%

Stepan Company (NYSE:SCL) is an American chemical manufacturing company that provides services to a wide range of industries. In the fourth quarter of 2022, the company reported revenue of $627 million, up 2.8% on a year-over-year basis. The company’s net income for the quarter was over $10.8 million.

Stepan Company (NYSE:SCL), one of the dividend kings on our list, has been raising its dividends consistently for the past 55 years. The company offers a per-share dividend of $0.365 every quarter for a dividend yield of 1.45%, as recorded on March 8. Its 5-year average annual dividend growth rate stands at 10.24%.

At the end of December 2022, 9 hedge funds tracked by Insider Monkey reported having stakes in Stepan Company (NYSE:SCL), the same as in the previous quarter. The collective value of these stakes is over $20.3 million. Ken Griffin, D. E. Shaw, and Cliff Asness were some of the company’s major stakeholders in Q4.

7. Target Corporation (NYSE:TGT)

5-Year Average Annual Dividend Growth Rate: 10.97%

Dividend Yield as of March 8: 2.66%

An American retail company, Target Corporation (NYSE:TGT) is another dividend king on our list for safe dividend growth. On January 12, the company declared a quarterly dividend of $1.08 per share, which remained consistent with its previous dividend. It maintains a 51-year streak of dividend growth and has raised its payouts at an annual average rate of 10.97% in the past five years. The stock’s dividend yield on March 8 came in at 2.66%.

In March, RBC Capital maintained an Outperform rating on Target Corporation (NYSE:TGT) with a $198 price target, highlighting the company’s ‘better-than-expected’ results and outlook for FY23.

In the fourth quarter of 2022, Target Corporation (NYSE:TGT) remained committed to its shareholder obligation, returning $497 million to investors in dividends, compared with $432 million paid during same period last year.

As of the close of the December quarter, 48 hedge funds tracked by Insider Monkey reported owning stakes in Target Corporation (NYSE:TGT), down from 52 in the previous quarter. The collective value of these stakes is roughly $1.7 billion.

Madison Funds mentioned Target Corporation (NYSE:TGT) in its Q4 2022 investor letter. Here is what the firm has to say:

“Despite having already addressed excess inventories, Target Corporation (NYSE:TGT) reported a disappointing third quarter and further cut fourth quarter guidance. Although sales were slightly better than expected, Target saw a slowdown in discretionary sales. Gross margins were below expectations with higher markdowns, increased shrink, and incremental costs. Long-term, we expect Target to be able to return to operating margins in the 6% to 8% range as inventories return to normal levels as well as seeing a normalization in supply chain costs.”

6. Parker-Hannifin Corporation (NYSE:PH)

5-Year Average Annual Dividend Growth Rate: 11.8%

Dividend Yield as of March 8: 1.47%

Parker-Hannifin Corporation (NYSE:PH) is an Ohio-based manufacturing company that specializes in motion and control technologies. In March, BMO Capital raised its price target on the stock to $390 with an Outperform rating on the shares, noting the company’s strong performance last year.

On January 26, Parker-Hannifin Corporation (NYSE:PH) declared a quarterly dividend of $1.33 per share, which fell in line with its previous dividend. The dividend king has been raising its dividends consistently for the past 66 years. In the past five years, its annual average dividend growth rate stands at 11.8%. The stock’s dividend yield on March 8 came in at 1.47%. Other dividend stocks that have been grabbing investors’ attention include McDonald’s Corporation (NYSE:MCD), Roper Technologies, Inc. (NYSE:ROP), and Aflac Incorporated (NYSE:AFL).

At the end of Q4 2022, 47 hedge funds tracked by Insider Monkey reported owning stakes in Parker-Hannifin Corporation (NYSE:PH), up from 45 in the previous quarter. These stakes have a consolidated value of over $721.7 million.

Stewart Asset Management mentioned Parker-Hannifin Corporation (NYSE:PH) in its Q3 2022 investor letter. Here is what the firm has to say:

“”We also need to point out one global consequence of the rapid rise in interest rates: an irrepressibly strong dollar. This hurts the reported earnings of U.S. companies who sell their goods and services overseas. Foreign currency earnings translate into fewer dollars and thus lower earnings. Most of the companies in your portfolios gain a notable amount of earnings from their international operations. While the strength or weakness of a currency doesn’t change the quality of a business or its longer-term earnings power, it can change the reported earnings of a company over short periods of time. It is difficult to forecast this effect accurately because many of our companies manufacture where they sell, which to some extent dulls the sharp negative effect of a surging dollar. Others sell goods that are priced in dollars such as Parker-Hannifin’s (NYSE:PH) aerospace products.

5. Abbott Laboratories (NYSE:ABT)

5-Year Average Annual Dividend Growth Rate: 12.7%
Dividend Yield as of March 8: 2.05%

Abbott Laboratories (NYSE:ABT) is an Illinois-based medical device company that provides innovative medical solutions to its consumers. The company currently offers a quarterly dividend of $0.51 per share and has a dividend yield of 2.05%, as of March 8. The company is a dividend king with 51 years of consecutive dividend growth. Its 5-year average dividend growth stands at 12.7%.

In January, Barclays raised its price target on Abbott Laboratories (NYSE:ABT) to $125 with an Overweight rating on the shares, highlighting the company’s medical device growth.

As per Insider Monkey’s Q4 2022 database, 60 hedge funds tracked by Insider Monkey reported owning stakes in Abbott Laboratories (NYSE:ABT), compared with 62 in the previous quarter. These stakes are collectively valued at over $3.2 billion.

Vulcan Value Partners mentioned Abbott Laboratories (NYSE:ABT) in its Q4 2022 investor letter. Here is what the firm has to say:

“Abbott Laboratories (NYSE:ABT) is one of the largest and most diversified health care companies in the world. It operates in four segments: diagnostics, medical devices, nutritional products and established pharmaceuticals. The company quickly established itself as a global leader in the development and deployment of COVID-19 rapid diagnostic tests. Consequently, its revenue and profit growth accelerated during the pandemic. As demand for testing slowed to a more sustainable level, the company is facing difficult earnings comparisons. In addition, Abbott voluntarily recalled certain infant formula products and shut down a plant in Michigan where the products were manufactured, which put more pressure on its earnings comparisons. The plant has resumed production, and Abbott is regaining lost market share. We believe that these events, one positive and one negative, have distorted Abbott’s sustainable earning power and has given us an opportunity to purchase it with a margin of safety.”

4. Nordson Corporation (NASDAQ:NDSN)

5-Year Average Annual Dividend Growth Rate: 16.02%
Dividend Yield as of March 8: 1.17%

Nordson Corporation (NASDAQ:NDSN) is an American adhesive manufacturing company, based in Ohio. KeyBanc upgraded the stock to Overweight with a $255 price target. The firm appreciated the company’s ‘best-in-class’ returns and its constructive capital allocation.

Nordson Corporation (NASDAQ:NDSN) currently offers a quarterly dividend of $0.65 per share for a dividend yield of 1.17%, as of March 8. The company maintains a 59-year streak of consistent dividend growth, which places it as one of the best dividend kings for safe dividend growth. In the past five years, the company has raised its dividends at an annual average rate of 16.02%.

At the end of Q4 2022, 25 hedge funds in Insider Monkey’s database owned stakes in Nordson Corporation (NASDAQ:NDSN), compared with 26 in the previous quarter. The collective value of these stakes is over $284.3 million.

3. S&P Global Inc. (NYSE:SPGI)

5-Year Average Annual Dividend Growth Rate: 16.04%
Dividend Yield as of March 8: 1.05%

An American private banking company, S&P Global Inc. (NYSE:SPGI) ranks third on our list of the dividend kings to buy for safe dividend growth. The company has raised its payouts for 50 years in a row, with a 5-year average annual dividend growth of 16.04%. It currently pays a quarterly dividend of $0.90 per share and has a dividend yield of 1.05%, as recorded on March 8.

Following the company’s strong quarterly earnings and its outperformance last year, both Argus and Credit Suisse raised their price targets on S&P Global Inc. (NYSE:SPGI) in February to $400 and $395, respectively.

As of the close of Q4 2022, 97 hedge funds in Insider Monkey’s database reported having stakes in S&P Global Inc. (NYSE:SPGI), up from 90 in the previous quarter. With over 9 million shares, TCI Fund Management was the company’s largest stakeholder in Q4.

Andvari Associated mentioned S&P Global Inc. (NYSE:SPGI) in its Q4 2022 investor letter. Here is what the firm has to say:

“S&P Global Inc. (NYSE:SPGI) is another company we own that is part of a duopoly in the business of credit rating. S&P and Moody’s have roughly equal market shares and rate more than 90% of all bonds worldwide. The service provides high value for the cost. A company that chooses to issue debt without a rating will pay an interest rate that could be higher by half of a percent. The cost of a higher interest rate far exceeds any savings gained by not using the services of S&P.

We think of S&P as a toll road that earns fees from its customers in exchange for cost-effective access to capital. As such, the company has extraordinary margins and pricing power and requires little of its own capital to grow. Even after fully reinvesting in its business, S&P still has an excess of cash. In 2021, S&P produced $3.5 billion of free cash from $8.3 billion of revenues. The company returns the majority of its free cash to investors in the form of dividends and share repurchases.”

2. AbbVie Inc. (NYSE:ABBV)

5-Year Average Annual Dividend Growth Rate: 16.9%
Dividend Yield as of March 8: 3.97%

AbbVie Inc. (NYSE:ABBV) is an American multinational pharmaceutical company. The company is one of the dividend kings to buy for safe dividend growth as it has raised its payouts for 50 consecutive years. Its five-year annual average dividend growth stands at 16.9%. The company offers a quarterly dividend of $1.48 per share for a dividend yield of 3.97%, as of March 8.

In March, Guggenheim initiated its coverage on the stock with a Buy rating and a $172 price target, noting the company’s overall performance.

At the end of December 2022, 73 hedge funds in Insider Monkey’s database reported owning stakes in AbbVie Inc. (NYSE:ABBV), compared with 80 in the previous quarter. The collective value of these stakes is over $1.5 billion.

Baron Funds mentioned AbbVie Inc. (NYSE:ABBV) in its Q3 2022 investor letter. Here is what the firm has to say:

“AbbVie Inc. (NYSE:ABBV) is a drug developer best known for Humira, an immunosuppressant that is the best selling drug of all time. Given outsized key product risk (patent cliff and generic launches beginning in 2023), AbbVie has broadened its pipeline, highlighted by its Allergan acquisition. Shares fell on results that missed consensus and indications that legacy franchises were outperforming newer product launches, calling into question AbbVie’s long-term strategy. With promising assets in the pipeline and its robust cash flow profile, we believe AbbVie will grow well into the future.”

1. Lowe’s Companies, Inc. (NYSE:LOW)

5-Year Average Annual Dividend Growth Rate: 20.1%
Dividend Yield as of March 8: 2.08%

Lowe’s Companies, Inc. (NYSE:LOW) tops our list of dividend kings to buy for safe dividend growth. The home improvement company offers a quarterly dividend of $1.05 per share. It has raised its dividends consistently for the past 59 years, with a 5-year average annual dividend growth rate of 20.1%. The company’s shares have a yield of 2.08%, as of March 8.

Lowe’s Companies, Inc. (NYSE:LOW) was a popular buy among hedge funds in Q4 2022, as 68 funds tracked by Insider Monkey owned stakes in the company, up from 61 in the previous quarter. These stakes are valued at nearly $5.7 billion.

Pershing Square Holdings mentioned Lowe’s Companies, Inc. (NYSE:LOW) in its Q2 2022 investor letter. Here is what the firm has to say:

“Lowe’s Companies, Inc. (NYSE:LOW)’s is a high-quality business with significant long-term earnings growth potential underpinned by a superb management team that is successfully executing a multi-faceted business transformation. (Click here to read the full text)

You can also take a look at 30 Biggest SaaS Companies in the World in 2023 and 13 Best Annual Dividend Stocks to Buy Now

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Disclosure. None. 12 Dividend Kings To Buy For Safe Dividend Growth is originally published on Insider Monkey.