In this article, we discuss 12 high-growth forever dividend stocks to buy. You can skip our analysis of dividend stocks and their performance over the years, and go directly to read 5 High-Growth Forever Dividend Stocks to Buy.
Dividend growers are companies that consistently increase the dividends they pay to their shareholders over time. These companies usually have solid track records of stable earnings growth, which indicates their financial stability. Moreover, dividend growers exhibit strong performance than their peers in times of market downturn. According to a report by Capital Group, dividend growers delivered a 9.3% return to shareholders from 1990 to 2022, representing a volatility of 14.5%. In contrast, non-dividend payers returned 4% during the same period, with a volatility of 19.7%. The report also mentioned that nearly one-third of the market’s total return came from dividend income from 1926 to 2021.
Nuveen, an American asset management company, revealed that dividends represented 67% and 72% of the total return in the 1940s and the 1970s, respectively. These were the decades when inflation reached its record high in the US. The report also mentioned that the S&P 500 experienced a 10% growth in dividends per share in 2022 and is expected to grow by 5% in 2023. Another report by IHS Markit shed light on the outlook of dividend stocks this year. The report mentioned that the energy, banking, and industrial goods sectors will represent roughly 40% of global dividends in 2023. Moreover, dividends in the US are expected to reach $706 billion this year, up 3% from 2022.
McDonald’s Corporation (NYSE:MCD), Roper Technologies, Inc. (NYSE:ROP), and Aflac Incorporated (NYSE:AFL) are some of the major companies that maintain long dividend growth track records, becoming top choices for investors. These companies offer a reliable stream of income to shareholders as well as potential capital appreciation over the long term. Considering this data on dividend growth, we will discuss the best high-growth dividend stocks in this article.
Photo by Dan Dennis on Unsplash
Our Methodology:
For this list, we scanned through the list of Dividend Aristocrats, the companies that have raised their dividends for 25 years or more. From that list, we shortlisted companies with 5-year annual average dividend growth rates above 8%. These growth rates go up to 20%, as you will further see in the article. The stocks are ranked in ascending order of their dividend growth rates.
12. Caterpillar Inc. (NYSE:CAT)
5-Year Average Annual Dividend Growth Rate: 8.6%
Dividend Yield as of March 4: 1.88%
Caterpillar Inc. (NYSE:CAT) is a Texas-based company that specializes in construction and mining equipment. The company offers a quarterly dividend of $1.20 per share and has a dividend yield of 1.88%, as of March 4. It has been raising its dividends consistently for the past 28 years and has grown its payouts at an annual average rate of 8.6% in the past five years. It is among the high-growth dividend stocks on our list.
In addition to McDonald’s Corporation (NYSE:MCD), Roper Technologies, Inc. (NYSE:ROP), and Aflac Incorporated (NYSE:AFL), investors are also paying attention to Caterpillar Inc. (NYSE:CAT).
In the fourth quarter of 2022, Caterpillar Inc. (NYSE:CAT) reported revenue of $16.6 billion, which showed a 20.3% growth from the same period last year. The company returned nearly $6.7 billion to shareholders through share repurchases and dividends in 2022.
The number of hedge funds tracked by Insider Monkey owning stakes in Caterpillar Inc. (NYSE:CAT) grew to 50 in Q4 2022, from 43 in the previous quarter. These stakes have a total value of over $5 billion. With 7.3 million shares, Bill & Melinda Gates Foundation Trust was the company’s leading stakeholder in Q4.
Diamond Hill Capital mentioned Caterpillar Inc. (NYSE:CAT) in its Q4 2022 investor letter. Here is what the firm has to say:
“In the case of Caterpillar Inc. (NYSE:CAT), the company reported a better-than-expected Q3 as demand in mining, non-residential construction and energy remained healthy through the year even as recession fears grew. Caterpillar showed strong pricing power and operating efficiency in the face of supply chain constraints and labor shortages, which in turn contributed to better-than-expected share price performance.”
11. Hormel Foods Corporation (NYSE:HRL)
5-Year Average Annual Dividend Growth Rate: 8.63%
Dividend Yield as of March 4: 2.71%
Hormel Foods Corporation (NYSE:HRL) is an American food processing company that has operations in over 80 countries around the world. In March, Barclays maintained an Equal Weight rating on the stock with a $45 price target, expressing concerns about ongoing supply issues.
Hormel Foods Corporation (NYSE:HRL), one of the high-growth dividend stocks on our list, has been raising its dividends consistently for the past 57 years. 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 and has a dividend yield of 2.71%, as of March 4.
In fiscal Q1 2023, Hormel Foods Corporation (NYSE:HRL) reported revenue of $3 billion, which fell by 2.41% from the same period last year. The company’s operating cash flow for the quarter came in at $204 million and its operating income stood at $289 million.
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.
10. Illinois Tool Works Inc. (NYSE:ITW)
5-Year Average Annual Dividend Growth Rate: 10.09%
Dividend Yield as of March 4: 2.19%
Illinois Tool Works Inc. (NYSE:ITW) is a global industrial company that specializes in consumable systems and specialty products. In the fourth quarter of 2022, the company posted revenue of nearly $4 billion, which showed an 8% growth from the same period last year. Its operating cash flow for the quarter came in at $811 million and its free cash flow amounted to $655 million.
UBS appreciated Illinois Tool Works Inc. (NYSE:ITW)’s performance, highlighting the company’s revenue, organic growth, and operating profit in the recent quarter. Given this, the firm raised its price target on the stock to $245 in February with a Neutral rating on the shares.
Illinois Tool Works Inc. (NYSE:ITW) is one of the high-growth dividend stocks on our list as the company maintains a 50-year streak of consistent dividend growth. The company offers a quarterly dividend of $1.31 per share and has a dividend yield of 2.19%, as of March 4. In the past five years, it has raised its payout at an annual average rate of 10.09%.
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.
9. Target Corporation (NYSE:TGT)
5-Year Average Annual Dividend Growth Rate: 10.97%
Dividend Yield as of March 4: 2.60%
Target Corporation (NYSE:TGT) is an American retail corporation, based in Minnesota. The company specializes in groceries and everyday essentials. In March, DA Davidson raised its price target on the stock to $200 with a Buy rating on the shares, appreciating the company’s recent quarterly earnings. The firm expects the company to show solid growth in the retail sector.
In the fourth quarter of 2022, Target Corporation (NYSE:TGT) reported revenue of $31.4 billion, which showed a 1.3% growth from the prior-year period. During the quarter, the company paid approximately $497 million in dividends, up from $432 million paid during the same period last year.
One of the high-growth dividend stocks, Target Corporation (NYSE:TGT) has been raising its dividends consistently for the past 51 years. Moreover, it has raised its payouts at an annual average rate of 10.97% in the past five years. The company currently pays a quarterly dividend of $1.08 per share and has a dividend yield of 2.60%, as of March 4.
As of the close of Q4 2022, 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.”
8. Abbott Laboratories (NYSE:ABT)
5-Year Average Annual Dividend Growth Rate: 12.7%
Dividend Yield as of March 4: 1.95%
Abbott Laboratories (NYSE:ABT) is another high-growth dividend stock on our list. The American medical device company has raised its dividends at an annual average rate of 12.7% in the past five years. The company’s dividend growth streak stands at 51 years. It pays a per-share dividend of $0.51 per share and has a dividend yield of 1.95%, as recorded on March 4.
In the fourth quarter of 2022, Abbott Laboratories (NYSE:ABT) reported revenue of $10.1 billion, which beat Street estimates by $410 million. The company’s sales grew by 5.4% year-over-year on an organic basis.
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.”
7. A. O. Smith Corporation (NYSE:AOS)
5-Year Average Annual Dividend Growth Rate: 14.20%
Dividend Yield as of March 4: 1.76%
A. O. Smith Corporation (NYSE:AOS) is one of the world’s leading manufacturers of residential and commercial water heaters and boilers. In February, Baird raised its price target on the stock to $70 with a Neutral rating on the shares, appreciating the company’s setup.
A. O. Smith Corporation (NYSE:AOS), one of the high-growth dividend stocks, currently pays a quarterly dividend of $0.30 per share. In 2022, the company stretched its dividend growth streak to 29 years and raised its payouts at an annual average rate of 14.20% in the past five years. The stock’s dividend yield on March 4 came in at 1.76%.
In Q4 2022, A. O. Smith Corporation (NYSE:AOS) posted revenue of $936 million, which beat analysts’ estimates by $22.5 million. In FY22, the company reported an operating cash flow of $391.4 million and its free cash flow was $321 million.
At the end of December 2022, 26 hedge funds in Insider Monkey’s database owned stakes in A. O. Smith Corporation (NYSE:AOS), compared with 29 a quarter earlier. These stakes have a consolidated value of over $483 million.
LRT Capital Management mentioned A. O. Smith Corporation (NYSE:AOS) in its Q2 2022 investor letter. Here is what the firm has to say:
“A.O. Smith is the largest US manufacturer of residential and commercial water heaters, boilers and water treatment products. The company generates close to $3 billion in annual sales. The majority of the company’s business (73%) is done in North America, with the balance coming from China and India. Approximately 80% of demand is replacing existing heaters and 20% is tied to new construction. The company continues to benefit from a shift towards higher efficiency, but more expensive, tankless heaters.
A.O. Smith generates returns on invested capital in the high teens. The company uses its earnings to consistently grow its dividends and share repurchases. Over the past three years the company’s performance has been hurt by its exposure to China as its business there suffered due to the US-China trade war and poor execution. We believe the China business is back on track and the all-important US business is doing better than ever as housing demand heats up in the US. The company beat earnings estimates over the past several quarters and is currently enjoying very good performance as the hot U.S housing market continues to be strong.19 A.O. Smith also recently increased its share repurchase authorization.”
6. Automatic Data Processing, Inc. (NASDAQ:ADP)
5-Year Average Annual Dividend Growth Rate: 14.7%
Dividend Yield as of March 4: 2.22%
Automatic Data Processing, Inc. (NASDAQ:ADP) is a New Jersey-based management services company that provides software-related services to its consumers. In fiscal Q2 2023, the company reported revenue of nearly $4.4 billion, which saw a 9% growth from the same period last year. At the end of December 2022, the company’s operating cash flow came in at $1.6 billion, compared with $1.2 billion in the prior-year period.
On January 11, Automatic Data Processing, Inc. (NASDAQ:ADP) declared a quarterly dividend of $1.25 per share, which fell in line with its previous dividend. The company is one of the high-growth dividend stocks on our list as it has raised its dividends at an annual average rate of 14.7% in the past five years. Moreover, it maintains a 48-year track record of consistent dividend growth. The stock’s dividend yield on March 4 came in at 2.22%. McDonald’s Corporation (NYSE:MCD), Roper Technologies, Inc. (NYSE:ROP), and Aflac Incorporated (NYSE:AFL) are other dividend growth stocks to consider.
At the end of Q4 2022, 49 hedge funds tracked by Insider Monkey owned stakes in Automatic Data Processing, Inc. (NASDAQ:ADP), up from 48 in the previous quarter. These stakes have a consolidated value of over $3.5 billion. With over 5.5 million shares, Fundsmith LLP was the company’s leading stakeholder in Q4.
Carillon Tower Advisers mentioned Automatic Data Processing, Inc. (NASDAQ:ADP) in its Q3 2022 investor letter. Here is what the firm has to say:
“Despite a difficult macroeconomic environment, hiring trends have remained robust and Automatic Data Processing, Inc. (NASDAQ:ADP) shares reacted positively to strong quarterly earnings and guidance that was well above consensus expectations.”
Click to continue reading and see 5 High-Growth Forever Dividend Stocks to Buy.
Suggested articles:
- 15 Companies that Just Started Paying Dividends
- Motley Fool’s High Growth Stock Picks
- 13 High Growth Consumer Stocks to Buy
Disclosure. None. 12 High-Growth Forever Dividend Stocks to Buy is originally published on Insider Monkey.
