These 3 Dividend Growth Stocks Are Committed To Consistently Increasing Their Dividends: Philip Morris (PM), Microsoft (MSFT) and Texas Instruments (TXN)

Dividend growth investing is by far my favorite investment strategy. You almost can’t lose as a dividend growth investor.

After all, this strategy is all about buying and holding shares in high-quality businesses paying reliable, rising dividends. By the very nature of this strategy, you’re sticking with some of the best businesses in the world.

And that’s partially evidenced by those reliable, rising dividends. Can’t fake cash. You certainly fake ever-growing cash dividend payments without doing a lot of things right as a business.

As someone who lives off of dividends, I must say that they are an excellent source of completely passive income. And because these dividends are increasing, all by themselves, my purchasing power can keep up with, or even exceed, inflation.

Dividend growth investing sets you up to be nearly bulletproof over the long run. Today, I want to tell you about three dividend growth stocks that just increased their dividends. Ready? Let’s dig in.

The first dividend increase I have to tell you about came from Philip Morris (PM).

Philip Morris just increased their dividend by 4.2%.

Just a solid, solid dividend increase from a company that has been nothing short of magnificently consistent. Consistency is so important. Not just in terms of your dividends being consistent, but also in terms of your dividend increases being consistent. Because inflation sure is consistent.

This marks the 14th consecutive year of dividend increases for the tobacco giant.

That track record is as long as it possibly could be, as Philip Morris was spun off from former parent, legacy Altria, in 2008. This dividend increase lines up very well with their five-year dividend growth rate of 3.2%. Again, consistent. And this mid-single-digit dividend growth is really all you need when you consider that the stock yields 5%. This is a compelling combination of yield and growth. The payout ratio, at 83.1%, based on midpoint guidance for this fiscal year’s EPS, is high, but that’s not atypical for a mature tobacco business.

This is a great stock for market-beating income and inflation-beating growth.

It’s performed well, up nearly 24% YTD. And, in my view, it now looks fairly valued. In fact, I highlighted this stock as an undervalued opportunity back in April, when the stock was under $93/share. In that video, I showed why the stock was potentially worth a bit over $102/share. With the stock currently at $101/share, we’re basically at fair value now. But you could do a lot worse than pay a fair price for a great business, especially when you’re getting this kind of yield in this kind of environment.

Next up, let’s talk about the dividend increase that came in from Microsoft (MSFT).

Microsoft just increased their dividend by 10.7%.

A double-digit dividend increase from one of the best companies in the world. This is what dividend growth investing is all about. Those who focus on high yield, particularly in the junk stock arena, totally miss this. They also miss out on incredible long-term performance by chasing yield. Those who appreciate Microsoft are being amply rewarded.

The global tech conglomerate has now increased its dividend for 20 consecutive years.

Their 10-year DGR is an impressive 14.3%. The crazy thing is, even after 20 straight years of growing dividends, I think Microsoft is just getting started with dividend increases. Even after this double-digit dividend boost, the payout ratio is only 30.8%. And that’s before getting into the fact that they’ve got more than $100 billion in total cash on the balance sheet. This dividend is only going up from here, which is good news when you see that the yield is only 0.8%.

This stock is up 35% YTD, and more than 400% over the last five years.

Yep. That’s the kind of total return that a high-quality dividend growth stock like Microsoft can give you. If you’re focusing on the yield trees and missing the total return forest, you’re doing your money a disservice. I highlighted Microsoft as one of my best long-term investment ideas back in April, when the stock was around $250/share. It’s now coming up on $300/share, but it’s likely headed even higher from here.

Last but not least, I have to tell you about the dividend increase that was recently announced by Texas Instruments (TXN).

Texas Instruments just increased their dividend by 12.7%.

Another high-quality dividend growth stock. Another double-digit dividend increase. It’s like déjà vu or something. In all seriousness, though, how can you not love this? All you have to do is hold shares in a world-class enterprise, and you get a near-13% “pay raise”. It’s a beautiful thing.

This is the 18th consecutive year of dividend increases for the semiconductor company.

Texas Instruments flies under the radar, overshadowed in the tech arena by some of the juggernauts like the aforementioned Microsoft. Nonetheless, this is a dividend growth all star. This dividend increase doesn’t quite stand up to their 10-year DGR of 22.5%, but I doubt any shareholders are complaining. Also, the stock yields 2.4%. So we’re talking about a yield-and-growth combination that’s well into the double digits here. And with a payout ratio of 64.2%, the dividend is handily covered.

This stock is up more than 40% over the year, and the valuation looks a bit stretched.

Most basic valuation metrics are running ahead of their respective recent historical averages. For instance, the P/E ratio of 26.9 is notably higher than its five-year average of 24.2. So this is a stock that usually commands a premium in terms of its earnings multiple, but this current premium is heavy. If this stock corrects by 10% or so, however, it’s a high-quality tech name that should absolutely be on your radar.

— 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.