In this article, we will discuss some of the best dividend kings for safe dividend growth.

Investors often focus on stock price movements, anticipating gains, but may underestimate the value of dividends as a key component of returns. This becomes particularly attractive when looking at companies with a history of steadily increasing their dividends. That’s where Dividend Kings come into play. These businesses have consistently raised their payouts for at least 50 years. Achieving this milestone is no small feat, with only around 54 out of thousands of publicly traded US companies earning this distinction.

This dividend growth can be attributed to the solid financial positions of many high-quality companies. Since the pandemic began, these reserves have steadily increased, as a strong economy has allowed businesses to save more and earn returns on short-term investments. According to an analysis by the Carfang Group, based on the Federal Reserve’s quarterly flow of funds, US companies increased their cash holdings in the first quarter of 2024, reaching a record $4.11 trillion. This growth, supported by a resilient economy and relatively high interest rates, marked a 12.6% increase from the same period last year and was $1.28 trillion higher than pre-pandemic levels. Recent trends also showed that companies have been shifting more of their investments toward corporate and US government debt, according to Clearwater Analytics, which analyzed nearly 400 corporate portfolios with assets totaling just under $1 trillion. Despite this shift, most funds remain allocated to cash or cash-equivalent instruments, which delivered annualized returns exceeding 5.48% in May, as reported by Clearwater.

Also read: 8 Best Dividend Paying Debt Free Stocks to Invest in

Focusing on dividend growth reveals its significant appeal over the years. Stocks known for consistent dividend increases have performed exceptionally well, with the Dividend Aristocrats index standing out as a key benchmark. This index, which tracks companies with a minimum of 25 consecutive years of dividend growth, has consistently delivered strong returns, often surpassing other asset classes despite market fluctuations. ProShare emphasized the index’s value for income-focused investors, noting its history of outperforming the broader market while exhibiting lower volatility since its inception. Their report highlighted that a $10,000 investment in the index in May 2005 could have grown to over $61,000 by March 2023. The report also mentioned that the index outperformed the market during eight of the ten largest quarterly declines since 2005.

In addition to shareholder returns, dividend stocks have played a pivotal role in driving overall market performance, delivering substantial contributions. A report from T. Rowe Price highlighted that compounded dividends accounted for over 70% of global market returns. Similarly, the Harvard Business Review revealed that dividends made up nearly 37% of corporate earnings between 2003 and 2012.

Consistently maintaining dividend payouts is a significant challenge for companies, even more so than increasing them regularly. Analysts caution against falling for yield traps—stocks that offer high yields but have unreliable dividend policies. Brian Bollinger, president of Simply Safe Dividends, emphasized the importance of prioritizing quality over yield in dividend investing during an interview with CNBC. He advised focusing on high-quality companies that typically offer dividend yields of around 3% to 4%. These businesses often demonstrate consistent growth in their dividend payments, providing a steady income stream while mitigating the effects of inflation. Additionally, he noted that lower-yield stocks are generally safer, with more dependable payout structures. Given this, we will discuss some of the best dividend kings for safe dividend growth.

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 picked 8 companies with the highest 5-year annual average dividend growth rates. The stocks are ranked in ascending order of their annual average dividend growth in the past five years. We also considered hedge fund sentiment around each stock in Insider Monkey’s database, as of the third quarter of 2024.

Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points. (see more details here).

8. Stepan Company (NYSE:SCL)

5-Year Average Annual Dividend Growth Rate: 8.06%

Stepan Company (NYSE:SCL) is an Illinois-based chemical manufacturing company that specializes in specialty chemicals for consumer and industrial purposes. The stock is down by nearly 18% since the start of 2024 due to industry-related challenges. However, the company still managed to deliver strong earnings in the third quarter of 2024. Its adjusted EBITDA experienced double-digit growth, fueled by strong performance in the Surfactant and Specialty Product segments. Surfactants showed a notable volume recovery, achieving double-digit growth across the Agricultural, Oilfield, Construction and Industrial Solutions sectors, as well as through Distribution partners. In Latin America, Surfactant volumes increased by mid-single digits, supported by robust demand in Brazil’s Agricultural markets and new business contracts in Mexico.

Stepan Company (NYSE:SCL) reported revenue of $546.8 million, which fell slightly by 3% from the same period last year. Net sales decreased due to a combination of factors, including a 1% decline in volume, reduced selling prices, and the effects of foreign currency translation. That said, the company remains on course to achieve its $50 million cost reduction target for 2024, having realized $13.3 million in pre-tax savings during the third quarter.

Stepan Company (NYSE:SCL)’s cash generation remained strong during the quarter. The company’s operating cash flow for the quarter came in at $22.7 million and its free cash flow came in at $4 million. Due to its solid cash position, the company managed to raise its payouts for 57 years in a row. Moreover, in the past five years, it has raised its payouts at an annual average rate of over 8%, which makes it one of the best dividend kings on our list. The company pays a quarterly dividend of $0.385 per share and has a dividend yield of 2.01%, as of December 9.

The number of hedge funds tracked by Insider Monkey owning stakes in Stepan Company (NYSE:SCL) jumped to 13 in Q3 2024, from 8 in the preceding quarter. The consolidated value of these stakes is nearly $33 million. Among these hedge funds, Gotham Asset Management was the company’s leading stakeholder in Q3.

7. American States Water Company (NYSE:AWR)

5-Year Average Annual Dividend Growth Rate: 9.08%

American States Water Company (NYSE:AWR) is an American utilities company that mainly specializes in delivering safe, reliable, and sustainable services and products. Established in 1886, the water utility entered the public market in 2008 with an initial share price of $21.50, reaching approximately $85 per share by December 2024. As the largest water utility stock in the US, American Water Works enjoys the advantages of being a regulated monopoly, facing no competition in its service areas. In return, its pricing is overseen by state and local authorities. The company’s growth has been driven by strategic investments in its infrastructure, acquisitions, and expansion into market-driven ventures like its military services division.

In the third quarter of 2024, American States Water Company (NYSE:AWR) reported revenue of $161.7 million, which showed a 6.65% growth from the same period last year. The revenue also surpassed analysts’ estimates by $782,000. As of September 2024, the contracted services division secured $54 million in new construction projects, scheduled for completion between 2024 and 2027.

On October 30, American States Water Company (NYSE:AWR) declared a quarterly dividend of $0.4655 per share, which was in line with its previous dividend. The company holds one of the longest dividend growth streaks in the market, raising its payouts for 70 consecutive years. With a 5-year average annual dividend growth of over 9%, AWR is one of the best dividend kings on our list. The stock’s dividend yield on December 9 came in at 2.28%.

At the end of Q3 2024, 18 hedge funds tracked by Insider Monkey held stakes in American States Water Company (NYSE:AWR), compared with 20 in the previous quarter. These stakes have a collective value of nearly $62 million. Millennium Management owned the largest stake in the company, worth over $23.6 million.

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

5-Year Average Annual Dividend Growth Rate: 9.81%

S&P Global Inc. (NYSE:SPGI) ranks sixth on our list of the best dividend kings, with a 5-year average annual dividend growth rate of nearly 10%. The American capital market company offers services in financial information and analytics. Since the start of 2024, the stock has surged by nearly 18%. The impressive results demonstrate the company’s resilience across various sectors, even amidst economic challenges and intense competition.

S&P Global Inc. (NYSE:SPGI) aims to sustain a diversified revenue stream by capitalizing on various segments, including Ratings, Market Intelligence, Commodity Insights, and Indices, to drive growth and stability, even in fluctuating markets. Recently, the company has prioritized technological innovation, incorporating generative AI and introducing tools like ChatAI. Additionally, strategic actions such as divesting PrimeOne and acquiring Visible Alpha have strengthened its portfolio and enhanced its core strengths.

S&P Global Inc. (NYSE:SPGI) generated $3.6 billion in revenues in the third quarter of 2024, up 16% from the same period last year. In addition to its ratings division, the company benefits from consistent cash flow generated by its data and analytics segment. Year-to-date, it has produced nearly $4 billion in operating cash flow, marking a substantial increase from $2.4 billion during the same period the previous year.

Aristotle Atlantic Partners, LLC highlighted S&P Global Inc. (NYSE:SPGI)’s strong performance in its Q3 2024 investor letter. Here is what the firm has to say:

“S&P Global Inc. (NYSE:SPGI) contributed to portfolio performance in the third quarter, driven by growth in corporate bond issuance and refinancing activity, with expectations for further acceleration if interest rates decline. The company has also achieved better-than-expected expense and revenue synergies from its acquisition of IHS Markit.”

S&P Global Inc. (NYSE:SPGI) has been rewarding shareholders with growing dividends for the past 52 years. The company currently pays a quarterly dividend of $0.91 per share and has a dividend yield of 0.71%, as of December 9.

Of the 900 hedge funds tracked by Insider Monkey at the end of Q3 2024, 85 hedge funds owned stakes in S&P Global Inc. (NYSE:SPGI), compared with 90 in the previous quarter. The consolidated value of these stakes is more than $9.8 billion.

5. Target Corporation (NYSE:TGT)

5-Year Average Annual Dividend Growth Rate: 11.30%

Target Corporation (NYSE:TGT) is an American retail corporation, based in Minnesota. The company operates a chain of hypermarkets and discount department stores. Although a strong labor market and rising consumer confidence indicate a stable US economy, the lingering effects of price inflation in recent years and persistently high interest rates continue to pressure certain areas of consumer spending. Due to this, the stock is down by nearly 6% so far this year.

In the third quarter of 2023, Target Corporation (NYSE:TGT) posted revenue of $25.7 billion, reflecting a slight 1.06% increase compared to the same period last year. However, this figure fell short of analysts’ expectations by $231.8 million. Looking ahead to Q4, the company expects comparable sales to remain stable, with projected GAAP and Adjusted EPS between $1.85 and $2.45. For the full year, it forecasts GAAP and Adjusted EPS in the range of $8.30 to $8.90.

Despite falling short of investor and analyst expectations, Target Corporation (NYSE:TGT) maintains a solid financial position to sustain its dividend payouts. Over the first nine months of 2024, the company generated $4.07 billion in operating cash flow and closed the quarter with $3.4 billion in cash and cash equivalents. During the same period, the company distributed $516 million to shareholders through dividends. Currently, it offers a quarterly dividend of $1.12 per share, yielding 3.31% as of December 9. With an impressive 53-year streak of dividend growth, Target stands out as one of the best dividend kings.

Target Corporation (NYSE:TGT) was a part of 49 hedge fund portfolios at the end of Q3 2024, compared with 52 in the previous quarter, as per Insider Monkey’s database. The stakes held by these funds have a collective value of nearly $1.4 billion. With nearly 3 million shares, Diamond Hill Capital owned the largest stake in the company.

4. Abbott Laboratories (NYSE:ABT)

5-Year Average Annual Dividend Growth Rate: 11.44%

Abbott Laboratories (NYSE:ABT) is an Illinois-based multinational medical device and healthcare company. It benefits greatly from its diversified business model, which creates multiple growth opportunities and allows the company to generate revenue from various sources. In the third quarter of 2024, the company reported revenue exceeding $10.6 billion, reflecting a 5% year-over-year increase. It also gains from strategic partnerships with key industry players. Notably, in August, Abbott announced a groundbreaking global collaboration with Medtronic to integrate its advanced continuous glucose monitoring (CGM) system with Medtronic’s insulin delivery devices. The stock has surged by nearly 5% since the start of 2024.

Abbott Laboratories (NYSE:ABT) has long been known for its stability, drawing on its extensive experience in navigating the highly regulated healthcare industry. The company has established a strong reputation within its niche, as healthcare professionals, like most people, prefer to rely on products they know are proven to be effective, especially when it comes to life-critical situations. The company also benefits from a significant portfolio of patents that safeguard its innovations.

On September 19, Abbott Laboratories (NYSE:ABT) declared a quarterly dividend of $0.55 per share, which was in line with its previous dividend. Overall, the company maintains a 52-year streak of consecutive dividend growth, which makes it one of the best dividend kings on our list. In the past five years, the company has raised its payouts at an annual average rate of 11.44%. The stock offers a dividend yield of 1.92%, as of December 9.

As of the close of Q3 2024, 63 hedge funds in Insider Monkey’s database owned stakes in Abbott Laboratories (NYSE:ABT), compared with 69 in the previous quarter. The overall value of these stakes is approximately $4 billion. With over 11 million shares, Fisher Asset Management was the company’s largest stakeholder in Q3.

3. Parker-Hannifin Corporation (NYSE:PH)

5-Year Average Annual Dividend Growth Rate: 13.38%

Parker-Hannifin Corporation (NYSE:PH) is an American manufacturing company that specializes in motion and control technologies. The company has experienced significant growth, with its stock rising by more than 232% over the past five years, significantly outperforming the broader market’s 96% increase. The company is also recognized for its strong dividend payouts and impressive cash flow generation. For fiscal 2024, it reported a 20% increase in year-to-date operating cash flow, reaching a record $2.1 billion, which represents 14.6% of sales, up from $1.8 billion in the prior-year period. The company also achieved notable improvements in adjusted segment operating margins, with the Aerospace Systems Segment delivering exceptional performance. This solid financial performance has led to record operating cash flow. Moving forward, the company expects a 50% increase in free cash flow and plans to double its dividend over the next five years, providing shareholders with larger payouts each year, which is expected to have a positive impact on the stock’s value.

Diamond Hill Capital highlighted PH in its Q3 2024 investor letter. Here is what the firm has to say:

“Other top Q3 contributors included Parker-Hannifin Corporation (NYSE:PH) and Ciena Corporation. Diversified industrial and aerospace manufacturer Parker-Hannifin is capitalizing on strength in its aerospace business to drive better-than-expected results against a challenging macroeconomic backdrop that has weighed on peers’ results.”

Parker-Hannifin Corporation (NYSE:PH) reported strong earnings in the third quarter, despite challenges in the industrial sector. The company reached a milestone with nearly $20 billion in sales, a record adjusted segment operating margin that saw a 200 basis point improvement from the previous year, and an 18% increase in adjusted earnings per share. It also generated a record $3 billion in free cash flow. With a strong outlook for fiscal year 2025, the company is well-positioned to achieve its financial goals for fiscal year 2029.

Parker-Hannifin Corporation (NYSE:PH), one of the best dividend kings, has been growing its dividends for 68 consecutive years. The company’s 5-year average annual dividend growth rate comes in at 13.38%. It currently offers a quarterly dividend of $1.63 per share and has a dividend yield of 0.95%, as of December 9.

Insider Monkey’s database of Q3 2024 indicated that 62 hedge funds owned stakes in Parker-Hannifin Corporation (NYSE:PH), down from 67 in the previous quarter. The consolidated value of these stakes is more than $2.22 billion.

2. Nordson Corporation (NASDAQ:NDSN)

5-Year Average Annual Dividend Growth Rate: 14.55%

Nordson Corporation (NASDAQ:NDSN) ranks second on our list of the best dividend kings. The multinational company designs and produces dispensing equipment used for applying adhesives, sealants, coatings, and other materials. The company reported strong earnings in the third quarter of 2024, generating revenues of $661.6 million, up 2% from the same period last year. Its net income for the quarter came in at $117 million. The Advanced Technology Solutions segment experienced sequential growth compared to the second quarter, driven by steady improvements in order entry within electronics end markets. Throughout the organization, strong operational execution resulted in robust gross margins and an impressive 31% EBITDA margin.

Nordson Corporation (NASDAQ:NDSN)’s cash position came in strong in the most recent quarter. The company ended the quarter with over $165.3 million available in cash and cash equivalents, up from $115.6 million in the prior-year period. Its operating cash flow came in at $460 million.

Nordson Corporation (NASDAQ:NDSN) currently offers a quarterly dividend of $0.78 per share, having raised it by 14.7% in August this year. This marked the company’s 61st consecutive year of dividend growth. Moreover, in the past five years, it has raised its payouts at an annual average rate of 14.55%. The stock’s dividend yield on December 9 came in at 1.22%.

Nordson Corporation (NASDAQ:NDSN) was included in 18 hedge fund portfolios at the end of Q3 2024, compared with 21 in the previous quarter, as per Insider Monkey’s database. The stakes held by these funds have a collective value of over $68.3 million. Among these hedge funds, Schonfeld Strategic Advisors was the company’s leading stakeholder in Q3.

1. Lowe’s Companies, Inc. (NYSE:LOW)

5-Year Average Annual Dividend Growth Rate: 16.91%

Lowe’s Companies, Inc. (NYSE:LOW) is an American retail company that specializes in home improvement. The ongoing demand for construction, repair, and remodeling supplies provides a solid foundation for sustained growth, as long as the company remains focused on addressing customer needs. However, Lowe’s is currently feeling the impact of a slow-moving economy. In the most recent quarter, it reported revenue of $20.17 billion, which fell by nearly 2% from the same period last year. That said, the earnings slightly surpassed expectations, even without considering storm-related activity. High single-digit growth in Pro sales, robust online performance, and smaller-scale outdoor DIY projects supported this.

Madison Investments also highlighted this in its Q3 2024 investor letter. Here is what the firm has to say:

“In the third quarter, the top five individual contributors to performance relative to the benchmark were Parker-Hannifin Corporation, Fiserv, Lowe’s Companies, Inc. (NYSE:LOW), Brookfield Corporation, and Progressive Corporation. Despite operating in very different sectors, Lowe’s Companies and Brookfield Corporation are both expected to benefit from the economic activity spurred on by declining interest rates. The Federal Reserve’s decision to lower interest rates sparked investor enthusiasm for both companies during the quarter, even as their sales and profits continue to moderate. For Lowe’s, sales remained weak in the latest quarter as most measures of the housing market remain sluggish. However, if interest rates come down and mortgages become more affordable, activity should return to the housing market which will boost Lowe’s business.”

Lowe’s Companies, Inc. (NYSE:LOW) is one of the best dividend kings as the company has been growing its dividends for 59 consecutive years. The company offers a quarterly dividend of $1.15 per share and has a dividend yield of 1.68%, as recorded on December 9.

At the end of the third quarter of 2024, 60 hedge funds in Insider Monkey’s database owned stakes in Lowe’s Companies, Inc. (NYSE:LOW), compared with 62 in the previous quarter. The total value of these stakes is over $2.2 billion.

Overall, Lowe’s Companies, Inc. (NYSE:LOW) ranks first on our list of the best dividend kings. While we acknowledge the potential for LOW to grow, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than LOW but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock. 

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