3 Dividend Growth Stocks To Consider Buying If You’re In Your 30s

I’ve been investing for more than 10 years now. I started in my late 20s, and I’m now in my late 30s. So I have firsthand experience with how investing changes as you grow older.

Now, I’m a dividend growth investor. I stick only to high-quality stocks that pay safe, growing dividend income. Why?

Because they’re some of the best stocks in the world. There’s a chain reaction at play here.

It’s a virtuous circle of selling what the world wants, producing ever-more profit, and rewarding shareholders with ever-rising dividends.

But the specific stocks that might be best at one age might not necessarily be the best at a different age. That’s because of changes in one’s need for income, ability to tolerate risk, and time horizon.

As an investor in my 30s, I think I’m especially qualified to talk about dividend growth stocks that could be particularly compelling for investors in this same age range.

When you’re in your 30s, it’s very important to find that balance between yield and growth. And quality remains super vital because you have decades still ahead of you.

Whenever I buy a stock, I’m thinking about both the Jason of 2022 and the Jason of 2052. I desire market-beating income for today’s needs.

But I also seek growth in order to make sure my wealth and purchasing power continue to increase over time.

Today, I want to tell you about three dividend growth stocks to consider buying if you’re in your 30s. Ready? Let’s dig in.

The first dividend growth stock I want to highlight today is Aflac (AFL).

Aflac is a supplemental insurance company.

Want to get rich over the long run? Then it’s hard to ignore insurance. Insurance has long been one of Warren Buffett’s favorite business models, and he used it as a platform to build much of his $100 billion fortune. It’s also one of my favorite business models.

You’ve heard of making money from other people’s money, right? Well, insurance has perfected this idea.

That’s right. They collect premiums upfront. And because there’s typically a long delay between collecting said premiums and then paying out on claims, they’re able to invest that premium income. That turns into what’s called a “float” – a collective source of low-cost, low-risk capital that can earn a significant amount of money.

In fact, a lot of insurance companies make more money through the float than they do by selling actual insurance.

And this one-two punch can lead to tremendous results over the long run. Consider Aflac as a great example. By combining a solid supplemental insurance business model with their $100+ billion global investment portfolio, Aflac has turned in some great numbers. The stock has compounded at over 14% per year over the last decade. That kind of CAGR doubles your money every five years.

It’s not just that, though. Aflac is a dividend growth machine.

This stock offers a great balance between income for today and the growth of that income for the tomorrows to come. The stock yields 2.7%, which is about twice as high as the broader market’s yield. And this is a vaunted Dividend Aristocrat, which is a special status reserved for stocks with 25 or more consecutive years of dividend increases. Aflac has increased its dividend for 40 consecutive years, with a 10-year DGR of 7.9%. Inflation is high.

But Aflac’s dividend growth has been higher. Keep in mind, too, that their most recent dividend increase came in at over 21%. And with a payout ratio of 25.0%, the dividend has plenty of room to head higher and higher for years to come.

Despite great long-term performance, the stock is perennially cheap.

I’ve never seen this stock look expensive. But because the business continues to put up great numbers, the stock grinds higher. That’s kind of the best of both worlds. You get the performance, but you also get consistent ongoing entry points to buy. And that’s on top of the yield and growth. With a P/E ratio of 9.2, we’re talking about an earnings multiple that’s about half that of the broader market’s.

And it’s not even as high as the stock’s five-year average P/E ratio of 9.7, which in and of itself is quite low. Like I said, perennially cheap. This Dividend Aristocrat offers balance across the board for a thirtysomething.

Next up, I want to tell you about Johnson & Johnson (JNJ).

Johnson & Johnson is a global healthcare conglomerate.

You want another great business model? This is it. Think about it. What’s happening in the world? Humanity is expanding its population, so that’s more people. We also know that the average life expectancy keeps rising worldwide. So now it’s more people living even longer. And then there’s the fact that, on average, people are becoming wealthier.

What do you think a larger pool of older and wealthier people will demand?

Quality healthcare, of course. It’s a no-brainer. This is secular growth. And if you’re in your 30s, thinking about investing for the next few decades, that’s what you want. But it isn’t all just the birds in the bush. It’s not all future growth. Johnson & Johnson also gives you a bird in the hand.

This company has both balance and excellence across the board.

There’s almost nothing to fault with Johnson & Johnson. Everything is either really good or great. The stock has been a very good performer – a CAGR of better than 13% over the last decade, which has been powered by very good business performance. No problems there.

Oh, and how about that balance sheet? It’s one of only two companies in the world with a AAA credit rating from Standard & Poor’s. And then there’s the fact that the business model is balanced across healthcare, with exposure to medical devices, pharmaceuticals, and even consumer products.

It’s the same story with the dividend.

We get more balance and excellence. First, the excellence. We’ve got another Dividend Aristocrat on our hands. Actually, this is a Dividend Aristocrat more than twice over, with 59 consecutive years of dividend increases under its belt. Now, balance. You get a solid, market-beating yield of 2.5%. And you balance that with a solid, consistent 10-year DGR of 6.4% – a level that has historically, up until the last year, easily beaten inflation.

So it’s a good amount of income today, and a good amount of growth for the future. Then there’s the balanced payout ratio. The dividend will only suck up 40.3% of the company’s adjusted EPS for this coming fiscal year, based on forward guidance at the midpoint. That balances returning cash to shareholders with retaining profit for internal growth.

And even the valuation is balanced.

Let’s be clear. This is a high-quality Dividend Aristocrat. You shouldn’t expect it to be priced like a low-quality money loser. All the same, though, the valuation is not at all egregious right now. Based on that aforementioned guidance, the forward P/E ratio is only 16.4. Bargain basement territory? No. But definitely not expensive. It’s reasonable.

There’s also a potential catalyst to unlock further value here, with Johnson & Johnson set to spin off their consumer health division sometime next year. In my view, this is a perfect stock to consider for thirtysomething dividend growth investors.

Last but not least, let’s talk about T. Rowe Price (TROW).

T. Rowe Price is a global investment management firm.

Insurance is a great long-term bet. So is healthcare. Well, I’d argue that global asset management is yet another. After all, a big part of the global expansion in wealth that I noted earlier is, of course, due to the rising prices and values of global assets.

T. Rowe Price has huge exposure to this tide lifting all boats because of their $1.6 trillion in assets under management.

Do you believe that companies will continue to sell more products and/or services, to more people, at higher prices? Do you believe that the world will continue to increase its global population, technology prowess, efficiency, and overall capital? In my opinion, it’d be silly to think otherwise. And so it’s not difficult to draw a straight line from all of that to T. Rowe Price making more money through the fees it charges on a rising base of AUM.

This is a company that’s very high quality across the board.

The balance sheet is a great example. The company has no long-term debt. I repeat. No long-term debt. And all it’s done over the last decade is consistently grow its revenue and EPS. That consistent growth in the business has led to consistent growth in the stock. The stock’s CAGR is almost 12% over the last decade, and that’s even factoring in the recent weakness that’s come with the broader market’s recent volatility.

Their dividend track record is more evidence of T. Rowe Price’s high quality.

We’ve got another Dividend Aristocrat on our hands. Perfect for young-ish investors who still have decades ahead of them to think about and plan for and want that kind of current and long-term security. T. Rowe Price has increased its dividend for 36 consecutive years.

And the 10-year DGR is 13.3%, which is twice as high as the unusually high recent rate of inflation. Along with that double-digit long-term dividend growth comes a market-beating yield of 3.6%. This dividend is protected by not only that debt-free balance sheet but also a low payout ratio of 36.6%.

You get quality, growth, yield, and even value here.

After a 40% drop from its 52-week high, you now get it all. The P/E ratio of 10.3 is incredibly low for a company of this quality. And it’s well off of its own five-year average of 15.4. Now, the company has been printing some great numbers over the last few years. The recent volatility will bring down AUM, fees, and EPS. So this P/E ratio is probably a bit higher than it appears to be. Still, the stock is priced like it was before the pandemic hit.

So we’ve effectively already zeroed out all of the gains in the business over the last two years. This debt-free Dividend Aristocrat is a compelling idea for dividend growth investors in their 30s looking for a high-quality business that can give them a good amount of secure dividend income for their needs today, as well as growth for their needs in the years ahead.

— 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.