We recently compiled a list of the 13 Best Dividend Growth Stocks With 10%+ Yearly Increases. In this article, we are going to take a look at where Mastercard Incorporated (NYSE:MA) stands against the other dividend growth stocks.
Dividend stocks faced a tough year in 2024 as investor focus largely moved toward technology stocks. The Dividend Aristocrat Index, which tracks companies with a minimum of 25 consecutive years of dividend growth, gained just over 6% in 2024, falling well behind the broader market’s nearly 25% return. This lagging performance isn’t uncommon for dividend stocks, which often struggle to attract interest when more high-growth opportunities dominate the market. However, experienced investors may see the long-term value and stability that dividend stocks continue to offer.
Dividends have historically been a key component of total returns for US stocks, contributing nearly one-third of overall equity gains since 1926. Between 1980 and 2019, a period characterized by declining interest rates, dividends accounted for 75% of the broader market’s returns. In a low-rate environment, dividends become even more valuable by ensuring a steady income stream when fixed-income investments provide lower yields. Companies that introduce dividends rarely discontinue them and often increase payouts over time. In addition, offering a dividend can make a stock more attractive to investors, potentially driving up its market value.
Also read: 10 Best Energy Dividend Stocks To Buy Right Now
A report by Franklin Templeton highlighted that over the past decade, dividends for the broader market index have consistently grown at an average annual rate of just over 7%. In strong market conditions, dividends have helped enhance total returns, while in difficult years—such as 2020 and 2022, when market returns were weak or negative—they played a crucial role in stabilizing returns and strengthening portfolio resilience.
Dividend-paying stocks offer more than just regular payouts—they often provide a defensive edge, making them valuable during periods when preserving wealth and maintaining steady income are priorities. A report by Eagle Asset Management examined instances where the broader market declined by at least 15% before recovering to its previous high. The study used three dividend-focused benchmarks to emphasize the importance of not only investing in dividend-yielding companies but also prioritizing those with a track record of consistently increasing payouts. The findings revealed that indexes composed of dividend-paying companies tend to outperform the broader market, particularly during prolonged downturns. This highlights the resilience and potential outperformance of dividend-focused investments during turbulent market conditions.
Dividends play a significant role in global equity markets, contributing approximately 34% of the MSCI World Index’s annual returns since February 1, 1970. Historically, holding shares in companies committed to dividend growth has provided several advantages, including strong absolute returns and superior risk-adjusted performance across full market cycles. These investments have also demonstrated lower volatility compared to the broader MSCI World Index, offering a level of capital preservation even in challenging market environments. In addition, they provide a diversified income stream with the potential for both steady income growth and capital appreciation.
Within the dividend space, companies that regularly raise their payouts are more favored among investors. Given this, we will take a look at some of the best dividend growth stocks with over 10% dividend growth rate.
Our Methodology:
For this list, we used a Finviz stock screener and picked dividend companies with positive dividend growth rates in the past five years. From that group, we picked 13 stocks that have raised their dividends at an annual average rate of over 10% in the past five years and ranked them according to their dividend growth rates. 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).
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Mastercard Incorporated (NYSE:MA)
5-Year Average Annual Dividend Growth Rate: 14.54%
Mastercard Incorporated (NYSE:MA) is an American credit card company, headquartered in New York. The company offers a wide range of payment processing and related services to its consumers. The company has earned investor trust thanks to its strong growth, significant competitive advantage, and resilience in tough economic conditions. It primarily earns revenue through swipe fees, collecting just over 2% per transaction from co-branded cards. This straightforward and reliable business model thrives in good times and protects the company from credit risks during economic downturns. In the past 12 months, the stock has surged by nearly 23%.
In the fourth quarter of 2024, Mastercard Incorporated (NYSE:MA) reported revenue of $7.5 billion, which showed a 14% growth from the same period last year. The company’s net income for the quarter came in at $3.5 billion, up from $3 billion in the prior-year period. By December 31, 2024, the company had 3.5 billion Mastercard and Maestro-branded cards issued to its customers.
Mastercard Incorporated (NYSE:MA)’s cash position also remained strong. The company ended the quarter with over $8.4 billion available in cash and cash equivalents and its total assets amounted to over $19.7 billion. In FY24, it generated $14.7 billion in operating cash flow, up from $12 billion in 2023. Due to this strong cash position, the company returned $2.4 billion to shareholders through dividends in 2024.
Mastercard Incorporated (NYSE:MA), one of the best dividend stocks, has been growing its payouts for 13 consecutive years. In the past five years, it has raised its payouts at an annual average rate of 14.5%. The company offers a quarterly dividend of $0.76 per share and has a dividend yield of 0.54%, as of February 8.
Overall MA ranks 6th on our list of the best dividend stocks with dividend growth rates. While we acknowledge the potential for MA as an investment, 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 MA but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.