These 6 Dividend Growth Stocks Are Now Paying Even Bigger Dividends

I’ve said it many times before, and I’ll say it again. High-quality dividend growth stocks are like the golden geese that lay ever-more golden eggs. The golden geese?

World-class businesses that produce ever-more profit by selling what the world wants and needs. Ever-more golden eggs?

The consistently increasing dividends these businesses pay to their shareholders. And when I say consistent, I really mean it.

I’m talking about businesses that increase their dividends year in and year out, like clockwork. Many of these businesses have been doing this for decades.

There’s no reason to think that many of these companies won’t continue to increase their dividends… for decades to come. Want to see this process in action?

Well, here you go. Today, I want to tell you about six dividend growth stocks that just increased their dividends. Ready? Let’s dig in.

The first dividend increase I have to tell you about is the one that came in from Air Products & Chemicals (APD).

Air Products & Chemicals just increased their dividend by 8%.

Passive income is great. But passive income that grows all by itself, without you lifting a finger, is so much better. And that’s what’s happened here. Air Products & Chemicals shareholders didn’t have to do anything to get this 8% boost to their passive dividend income. All they had to do was not sell their stock. That’s it.

This is the 40th consecutive year of dividend increases for the global industrial gases producer and supplier.

What did I say earlier? I said that many of these businesses have been consistently increasing their dividends for decades. This is a perfect example of that. Dividend Aristocrat Air Products & Chemicals has been consistently increasing their dividend, every year, for four straight decades in a row.

This most recent dividend increase isn’t that far off from their 10-year dividend growth rate of 10.1%. And this increase has pushed the stock’s yield up to 2.7%, which is 50 basis points higher than its five-year average. Since the payout ratio is at 62.9%, based on the midpoint of guidance for this fiscal year’s adjusted EPS, the dividend is secure and positioned to continue increasing roughly in line with the business.

This stock looks significantly undervalued right now.

It’s 25% off of its 52-week high. The pricing here is similar to where it was back in the summer of 2019, when the company was producing less revenue and profit and paying out a smaller dividend. We recently put together a full analysis and valuation video on the business, showing how shares could be worth nearly $343/each. Take a good look at this name, if you haven’t already.

Next up, I want to highlight the dividend increase that was announced by Genuine Parts (GPC).

Genuine Parts just increased their dividend by 9.8%.

Another dividend increase that was nearly double digits. And in an environment where inflation is running hot, that’s the kind of growth in your passive dividend income that you want to see in order to ensure that your purchasing power stays intact, or even increases.

As a longtime dividend growth investor, because my dividend income continues to grow every year, inflation doesn’t really bother me like it bothers others without those productive assets working for them.

The OEM automotive parts distributor has now increased its dividend for 66 consecutive years.

Boom. Yet again. Decades and decades of dividend increases. This is the kind of stuff you get to look forward to as a long-term dividend growth investor. After more than 60 consecutive years of dividend increases, you might expect the dividend growth from this Dividend Aristocrat to slow to a trickle. Nope.

This near-10% dividend increase was actually outsized for the company, blowing away the 10-year dividend growth rate of 6.0%. More than 60 years in and they’re accelerating dividend growth. Gotta love it. With a yield of 2.9% and a payout ratio of 57.5%, the dividend metrics are very solid across the board.

This is a great name to have on the watch list.

I really like this business. But the valuation isn’t so likable. Most basic valuation metrics are in line with, or actually higher than, their respective recent historical averages. With a P/E ratio of 19.6, it’s not outrageously valued.

But there’s also nothing cheap here. So it’s not a stock that I’d be aggressive with in terms of accumulation. If a more sizable pullback comes, though, that could be the long-term opportunity where you strike hard.

The third dividend increase I want to go over is the one that came courtesy of Home Depot (HD).

Home Depot just increased their dividend by 15.2%.

Inflation? What inflation? This dividend increase was twice as high as the inflation rate. Home Depot ought to consider changing the name of the company to Dividend Depot.

This marks the 13th consecutive year of dividend increases for the home improvement retailer.

It’s such a dividend growth monster. The 10-year dividend growth rate of 20.3% is proof of that. And even after all of that double-digit dividend growth, the payout ratio is still only at 48.9%. Usually, when you have a growth rate like this, you have to sacrifice yield. Well, because the stock happens to be down so much recently, that slide, combined with this dividend raise, has pushed the yield up to 2.4%. That’s a lot of yield to go along with that much growth.

The stock’s 25% drop from its 52-week high looks like a great long-term opportunity to me.

Most basic valuation metrics are indicating undervaluation here. That aforementioned 2.4% yield, for instance, is 30 basis points higher than its five-year average. And the P/E ratio of 20.3 is well off of its five-year average of 23.3. When I think of great businesses with durable competitive advantages, this name comes to mind quickly. If you’re looking for a company that acts like a dividend depot, consider adding Home Depot to your stock depot.

I now want to highlight the dividend increase that was announced by L3Harris Technologies (LHX).

L3Harris just increased their dividend by 9.8%.

Yet another inflation-beating dividend raise by yet another world-class business. The world is a tough place. Why not make it a little bit easier by investing in businesses that reward you with ever-higher passive dividend income?

This is the 21st consecutive year in which the technology and defense company has increased its dividend.

L3Harris flies way under the radar, pun intended. They just don’t get the same attention that a lot of other defense contractors seem to get. But that hasn’t made them any less spectacular. The 10-year dividend growth rate of 14.4% goes a long way toward proving that. And this dividend increase pushed the yield up to a respectable 1.8% – 10 basis points higher than its five-year average. With a payout ratio of only 33.2%, based on midpoint guidance for FY 2022 adjusted EPS, this dividend is very healthy and positioned to continue increasing at a high rate.

This stock is up nearly 20% this year. If a pullback comes, though, don’t forget about this one.

L3Harris offers a lot of appeal for long-term dividend growth investors in the same way that defense companies in general offer a lot of appeal. You have an oligopoly selling necessary products in a world full of constant human conflict. The issues going on between Russia and Ukraine right now are a perfect example of this.

What makes L3Harris particularly appealing is their concentration on C6ISR, which gives the company a unique value proposition in the marketplace. A lot of basic valuation metrics are now at, or above, their respective recent historical averages after this huge run in 2022. But with L3Harris firing on all cylinders, and with the geopolitical environment heating up, there could be more to come.

I now have to tell you about the dividend increase that came from PepsiCo (PEP).

Pepsi just increased their dividend by 7%.

This has long been one of my favorite businesses. It easily passes the Peter Lynch test of investing in what you know. I mean, how difficult is it to understand beverages and snacks? And how likely is it that consumers will continue buying these beverages and snacks for years and years to come, which will lead to ever-higher dividends for years to come? My point exactly.

The multinational food and beverage company has now increased its dividend for 50 consecutive years.

How do you consistently increase your dividend for five straight decades? By consistently increasing your profit for five straight decades. The 10-year dividend growth rate of 7.7% from this Dividend Aristocrat shows remarkable consistency, as we’re right in that range for this most recent dividend increase.

The yield, now at 2.8%, easily beats the market and is right in line with its five-year average. My only concern here, as it relates to the dividend, is the payout ratio. At 73.5%, based on the company’s core EPS, that’s elevated. So I would expect future dividend raises to, perhaps, be more modest.

Great business. Great stock. Not so great valuation.

I wouldn’t say the valuation is egregious or anything like that. However, there are a lot of bonafide deals out there with so much volatility. This stock, on the other hand, has held up really well. And that’s made it somewhat less appealing, on a relative basis. The P/E ratio, based on core EPS, is 26.2.

That looks rich to me. For perspective, the stock’s five-year average P/E ratio is 25.2. Again, this is one of my favorite businesses. It’s one of my favorite dividend growth stocks. But it’s not one of my favorite ideas right now.

Last but not least, let’s talk about the dividend increase that was announced by T. Rowe Price Group (TROW).

T. Rowe Price just increased their dividend by 11.1%.

In times of trouble, with volatility going through the roof, there’s something comforting about a sizable dividend increase. That’s especially true when you’re living off of dividend income and not selling stocks to pay the bills. When you’re focused on dividend income, which is smoother and more predictable than stock movements, your life as an investor becomes a lot more peaceful.

The global investment management company has now increased its dividend for 36 consecutive years.

This Dividend Aristocrat is a golden goose that continues to lay ever-more golden eggs. Their 10-year dividend growth rate of 13.3% is impressive. And this dividend increase has pushed the yield up to a very appealing 3.3%, which easily beats the market and is 80 basis points higher than its own five-year average.

Even after generous dividend growth for years, the payout ratio is only at 36.6%. That indicates a dividend that’s headed even higher from here. Sounds like the pile of golden eggs is going to continue expanding.

This might be one of the very best opportunities in the market for long-term dividend growth investors.

We recently put out a full analysis and valuation video on the business, showing why it could be worth nearly $222/share. And that video came out before this dividend increase was announced, which only serves to make the stock that much more compelling.

I think this debt-free Dividend Aristocrat is materially undervalued, and our video makes the case for that. If T. Rowe Price isn’t already in your portfolio, now would be a good time consider changing that.

— 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.

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