You already know that I’m a dividend growth investor for life. What’s not to like about this strategy? It basically limits you to investing in some of the world’s best businesses.
That’s because it takes an incredible business to be able to pay out safe, growing dividends, year in and year out, like clockwork. And when you collect those safe, growing dividends from your shares, you’re literally getting paid to invest.
When looking at the entire universe of dividend growth stocks, Dividend Aristocrats are some of the best of all. These are stocks that have increased their dividends for at least the last 25 consecutive years.
However, a lot of investors are looking for tomorrow’s Dividend Aristocrats. They want to know about the stocks that are on their way to becoming the Dividend Aristocrats of the future.
Well, I’ve got you covered. Today, I want to tell you about three dividend growth stocks that are on their way to becoming Dividend Aristocrats. Ready? Let’s dig in.
Each of these three dividend growth stocks have solid but young and still developing dividend growth track records and are more than 10 years away from potential Dividend Aristocrat status.
But all of them are in attractive industries with secular growth, and they have great long-term prospects.
Also, each one has an industry competitor of some kind that’s already a Dividend Aristocrat, so there’s proof of concept. And I think these three can join their competition in that vaunted Dividend Aristocrat club in the future.
The first dividend growth stock to talk about? Apple (AAPL).
Apple is a global technology conglomerate with a market cap of $2.6 trillion.
This is kind of a no-brainer. Apple is a dominator and a world-beater. It’s perfectly positioned for the global economy of tomorrow, which is one that will almost surely rely even more on technology like AR, VR, smartphones, apps, and the Internet of Things. Apple is involved heavily in all of this, and they’re investing the time and money into growing all of these technologies. Because this company is so dominant, they’re able to heavily invest back into the business and pay out a safe, growing dividend.
Apple has increased its dividend for 10 consecutive years, but I’m fully confident they’ll continue growing the dividend for years to come and become a Dividend Aristocrat.
They’ve got 15 years to go before potential Dividend Aristocrat status, but I have zero doubts that they’ll get there. Their five-year DGR is 9.7%, so you’re getting solid growth while you wait for that to unfold. And with an extremely low payout ratio of 17.2%, this dividend is about as secure as it gets. That’s before even getting into the fact that Apple has nearly $100 billion in cash on the balance sheet. This dividend is practically guaranteed to continue growing. The only thing to not like about the dividend is the fact that the stock yields 0.6%, but this is more of a long-term compounder that’ll reward patient investors.
Apple’s an incredible performer with excellent long-term prospects.
Dividend Aristocrats are prized for their safe, growing dividends, which is particularly important for investors – like me – who live off of their dividends. But Dividend Aristocrats are also excellent total return performers over the long run. Apple’s stock has compounded annually at a rate of just under 33% over the last 10 years, turning a $1,000 investment 10 years ago into more than $17,000 today.
And with the world becoming more and more tied to and reliant on tech, Apple’s long-term prospects are excellent. International Business Machines (IBM) is a tech company that’s a Dividend Aristocrat, so tech does have legs. And I think Apple will join IBM in the future.
The second dividend growth stock that is on its way to becoming a Dividend Aristocrat is Mid-America Apartment Communities (MAA).
Mid-America Apartment Communities is a REIT that owns and manages apartments, with a market cap of $23 billion.
This real estate investment trust primarily focuses on the Southeast and Southwest regions of the United States. Also known as the Sunbelt. I love two things about this business model. Its simplicity and necessity. Not hard to understand the concept of investing in apartments. And since housing is a basic need in life, there’s constant demand for what they offer. I can’t imagine any future in which people don’t need shelter, so they’re positioned well for an extremely long runway of growth. That bodes well for the dividend.
This company has increased its dividend for 11 consecutive years, but I think they’re just getting started.
Now, 11 consecutive years of dividend raises is a great start. But I’m extremely confident that they’ll get to legendary Dividend Aristocrat status and continue growing their dividend for the next 15 years straight. The 10-year DGR is only 5.0%, but with the way Americans continue to move to the Sunbelt, there could be even higher dividend raises awaiting shareholders. Meantime, the stock yields 2.1%. And the dividend is secure, with a payout ratio of just 60.7%, based on the midpoint guidance for this fiscal year’s core FFO/share.
This is a high-quality dividend growth stock that has been performing compounding magic for years.
This stock has compounded at an annual rate of nearly 16% over the last decade, which is incredible. That would have turned a $1,000 investment into more than $4,000 today. 
Quadrupling your money on such a simple business model. I love it. And you get those safe, growing dividends along the way, while your wealth exponentially increases. Again, with the simplicity and necessity of shelter, this company is primed to become a Dividend Aristocrat of the future. Moreover, Essex Property Trust (ESS) another apartment REIT, is a Dividend Aristocrat, so we know the potential in this space. I see it as extremely likely that Mid-America Apartment Communities will join Essex and become a Dividend Aristocrat around 14 years in the future.
Last but not least is Pfizer (PFE).
Pfizer is a multinational pharmaceutical company with a market cap of $261 billion.
Healthcare is a great place to be for long-term investors, due to its secular growth. The world is becoming bigger. Simultaneously, it’s becoming older and wealthier. If more people are living longer than ever and have more money in their pockets than ever before, that obviously leads to more demand for quality healthcare. It’s like 2+2 = 4. And with Pfizer benefiting big time from its recent investments and the success of its co-developed COVID-19 vaccine, they’re positioned even more advantageously for the long term. This should translate to growing dividends for years to come.
Pfizer has already increased its dividend for 11 consecutive years, but I fully suspect that they’ll keep it going until hitting 25 years and beyond.
The 10-year DGR is 7.8%. And that’s paired with a yield of 3.4%, which is awfully attractive in this market. That’s almost three times higher than the S&P 500’s yield. And the payout ratio, at only 30.5%, is extremely low and sets this dividend up for continued clockwork-like growth. Pfizer makes so much sense for long-term dividend growth investors. You get a market-beating yield, inflation-beating dividend growth, and a clear path to many more years of consistent dividend raises because of the secular growth profile of the industry.
Pfizer also gives you a pretty impressive long-term total return story.
That’s right. Sleepy ol’ Pfizer has compounded at an annual rate of almost 14% over the last 10 years, turning a single $1,000 investment into $3,700 today. 
You also collect that market-beating dividend along the way. And because of Pfizer’s scale, breadth, and R&D, I have no doubt that the next 14 years is paved with ever-higher dividends for shareholders, which will allow them to join the exclusive Dividend Aristocrat club alongside fellow major pharma players in Johnson & Johnson (JNJ) and AbbVie (ABBV).
— Jason Fieber
P.S. If you’d like access to my entire six-figure dividend growth stock portfolio, as well as stock trades I make with my own money, I’ve made all of that available exclusively through Patreon.
My #1 fund for a rock-steady 7% dividend in 2022... paid monthly! [sponsor]It's the brainchild of one of the smartest investment managers alive and it pays you every single month. Even better, this fund trades at a discount to NAV, so there's near-certain price gains ahead! All the details are waiting for you, along with 2 other incredible picks from my full "7% Monthly Payer Portfolio."