These 6 Dividend Growth Stocks Keep Giving Shareholders More Money

Dividend growth investing is, in my opinion, the best long-term investment strategy out there. It acts like a funnel.

That’s because it funnels investors right into some of the very best businesses in the world. Why? Well, what is dividend growth investing?

It’s a strategy that espouses buying and holding shares in world-class enterprises that pay reliable, rising dividends. How do reliable, rising dividends get funded? Through reliable, rising profits.

And only truly great businesses can consistently produce the growing profits necessary to fund consistently growing dividends.

When you’re a dividend growth investor, you basically avoid all of the companies out there that can’t make that happen.

By the way, when I say these growing dividends are consistent, I really mean it. And this article will show you just how consistent all of this is.

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 we have to talk about is the one that was announced by Apple (AAPL).

Apple just increased their dividend by 4.5%.

Yeah, I know. Not quite what many of us were expecting from Apple. Apple has become almost mythical in their ability to manage their global supply chain and overcome challenges, but even this company isn’t immune to some of the issues out there. Absent unique and short-term problems like continued lockdowns in China, I suspect this dividend increase would have been twice as large. Still, it is more money. And it’s hard to complain about that.

This is the 11th consecutive year of dividend increases for the tech giant.

And let me be clear, I think they’re just getting started with that. The five-year DGR is 9.2%. And, again, I think this most recent dividend increase would have been in that range, had the global supply chain not been so disrupted and caused a lack of supply to meet demand.

Even with Apple not being able to sell as much product as it would otherwise like to, the payout ratio is still at a very low 15.0% – which is before even getting into the hundreds of billions of dollars on the balance sheet. Basically, this dividend is bulletproof. Of course, the one bummer here is the yield. At only 0.6%, this is definitely more of a long-term compounder than an income play.

Like I’ve said many times before, this is a must-own stock for serious long-term dividend growth investors.

Who is the most serious long-term dividend growth investor in the world? I’d argue it’s Warren Buffett. And what is the single largest position, by far, in the $300+ billion common stock portfolio he oversees? Apple, of course. In fact, Buffett has been buying even more Apple in 2022. Meanwhile, Apple itself will be buying up a ton of its own stock.

They announced an increase to their buyback program on the order of $90 billion. This is a world-beater of a company. Its stock is down 13% YTD. And the company has so much demand, supply can’t keep up. If you’re not already invested in Apple alongside Buffett, it’d be a good idea to consider changing that.

The second dividend increase I want to have a quick conversation about is the one that came courtesy of Agree Realty (ADC).

Agree Realty just increased their dividend by 3.1%.

Only 3.1%? Is this another disappointment? Nope. Let me ask you something. What’s better than an annual dividend increase? How about two dividend increases per year? Yep. Agree Realty tends to increase their dividend twice per year. So look for another dividend increase later this year.

The retail real estate investment trust has now increased its dividend for 10 consecutive years.

Their five-year DGR is 6.1%. With a 3.1% dividend increase already in the bag for the year, we’re right on schedule here. Indeed, when you look at the dividend on a YOY basis, the current dividend is nearly 8% higher than it was 12 months ago. Along with that dividend growth, the stock yields a very appealing 4.2%.

That yield, by the way, is 60 basis points higher than its own five-year average. And it gets better. Agree Realty pays its dividend monthly. The payout ratio is at 80%, which isn’t all that high in the REIT space. This is a very nice monthly dividend.

This stock has gone nowhere over the last year, despite the business continuing to grow. That combination of business progress and stock regress has created an attractive valuation.

Like I just mentioned, the current yield is running well ahead of its recent historical average. So investors buying this stock today are getting compensated with much more yield for their trouble, relative to what investors have typically been able to get over the last five years. The P/CF ratio, at 18.0, is quite a bit below its own five-year average of 21.0. I think this is a very buyable REIT in this environment. In fact, I am buying it.

Next up, let’s have a quick conversation about the dividend increase that came in from Discover Financial Services (DFS).

Discover just increased their dividend by 20%.

That’s right. 20%. 20% more money for… drum roll, please… sitting on your hands and simply not selling stock you already owned. That’s how easy it is for long-term shareholders to get more money. If that’s not the easiest job in the world, I don’t know what is.

The financial services company has now increased its dividend for 12 consecutive years.

The 10-year DGR is 25.1%. This 20% dividend increase isn’t that far away from that historical growth rate. But what’s really notable here is that this dividend increase comes in earlier than expected, as the company most recently increased their dividend only three quarters ago. Gotta love that. The stock yields 2.1%, which is plenty of yield to go along with the huge, double-digit dividend growth. And the payout ratio is still only at 39%. The company has plenty of leeway for more sizable dividend increases in the future.

This stock has held up well, down less than 5% on the year. But I think it’s reasonably valued.

There are other names out there that are down way more on the year, but there’s no reason why Discover should be down. The company has been doing so well, partially evidenced by this ahead-of-schedule 20% dividend increase. Oh, and by the way, the company also announced a $4.2 billion buyback program – 13% of the company’s entire market cap! The P/E ratio of 6.7 is super low, but that’ll normalize in the quarters ahead.

Meantime, the yield of 2.1% is basically right in line with is own five-year average. The P/B ratio of 2.6 is running slightly ahead of its own five-year average of 2.4. I wouldn’t rush out to put every penny into this stock, but this is a wonderful business that continues to handsomely reward long-term shareholders. If you haven’t yet discovered Discover, now’s the time to do so.

The fourth dividend increase I want to tell you about came courtesy of Johnson & Johnson (JNJ).

Johnson & Johnson just increased their dividend by 6.6%.

I’ve said this before, but Johnson & Johnson could rename their company to Quality & Quality or Consistent & Consistent. Because this company exudes quality from every pore, and the consistency is legendary. This dividend increase is just another data point proving it.

This is the 60th consecutive year of dividend increases for the healthcare conglomerate.

Let me continue on the consistency theme. Their 10-year dividend growth rate is 6.4%. This dividend increase came in at 6.6%. Yeah, that’s consistent. The stock only yields 2.5%, but one shouldn’t expect or demand a super high yield from a blue-chip healthcare conglomerate of this caliber. Indeed, the five-year average yield for the stock is 2.5%.

Again, everything is just right in place with this name. The payout ratio is at 44.1%, based on midpoint guidance for this fiscal year’s adjusted EPS. That payout ratio balances retaining earnings for business growth against returning cash to shareholders.

With Johnson & Johnson, I almost always assume it’s buyable for long-term dividend growth investors.

The day, month, or year doesn’t really matter to me. I’ve been a big fan of Johnson & Johnson since the very first day I started investing in early 2010. And I’m a big fan of it now, 12 years later. In fact, I made it one of my top five stock picks for 2022. The stock is up 4% YTD, in a market that’s down heavily on the year, but Johnson & Johnson is the kind of company you buy with the intention to basically hold for a generation.

Most of its basic valuation metrics indicate a valuation that’s basically fair. It’s a world-class business with 60 consecutive years of dividend increases and a AAA-rated balance sheet. This is the kind of company that could be the cornerstone of a portfolio. Don’t underestimate it.

I now have to tell you about the dividend increase that was announced by Procter & Gamble (PG).

Procter & Gamble just increased their dividend by 5%.

Here we go again. If there’s any company that can wrestle Johnson & Johnson for the consistency trophy, it’s this one. This is one of those companies that figuratively makes the world go round. Toothpaste, razors, soap, shampoo, tissue, etc. These are the products that billions of people all over the world use every single day. And that has led to the company being able to consistently grow its profit and dividend for decades.

The global consumer products company has increased its dividend for 66 consecutive years.

That’s an entire lifetime for some people. I mean, if that doesn’t speak on my earlier point about consistency, I’m not sure what will. The 10-year DGR is 5.2%, so we’re right where we should be here. The stock’s yield of 2.3% won’t knock you dead, but this isn’t the kind of stock that anyone buys because of yield or huge growth prospects.

Instead, it’s just a steady-eddy business that you can sleep well at night owning a slice of. And with the payout ratio at 63.9%, Procter & Gamble is almost a lock for mid-single-digit dividend growth for many years to come.

This is a great dividend growth stock. But I don’t think it’s a great idea right now.

All basic valuation metrics are running ahead of their respective recent historical averages. For example, the P/CF ratio of 23.6 is quite a bit higher than its own five-year average of 18.5. This has been a safety play for a lot of market participants who are seeking shelter in the storm. When volatility kicks up, people look for something they can count on.

But with so many names looking positively cheap right now, Procter & Gamble would not strike me as a priority. That said, if the valuation comes down, it’s a classic holding for long-term dividend growth investors.

The last dividend increase I want to tell you about came from Parker-Hannifin (PH).

Parker-Hannifin just increased their dividend by 29.1%.

Boom. Parker-Hannifin drops the hammer. When’s the last time you got a near-30% pay raise from your day job? Never? Same here. Back when I still had a job, I don’t recall ever getting a 30% YOY pay raise. And that was even after showing up for 50+ hours per week. As a shareholder, you simply have to hold stock. That’s it. It’s so easy, even I can do it.

The motion and control technologies company has now increased its dividend for 66 consecutive years.

Here we go again. Yet another company with 60 or more consecutive years of dividend increases. Like I said at the outset of the video, dividend growth investing is all about consistently increasing dividends. This strategy funnels you right into some of the world’s best businesses. The company’s 10-year DGR is 10.8%, but there’s been a real acceleration in recent dividend growth.

This 29.1% dividend increase follows up last year’s 17.1% dividend increase. And you even get a market-beating 2% yield to go along with that growth. The payout ratio is at only 38.3%, so the dividend has plenty of room to head higher for many years to come.

This stock is down 13% YTD, and the valuation has become more acceptable.

This is one of those stocks that seems to always be just a tad too expensive. But the recent correction has put the valuation into a range that I find quite palatable. It’s not super cheap. But this is a great business, and the market often assigns it an elevated multiple. The P/E ratio is at 19.7 right now. That’s actually slightly lower than its own five-year average of 21.4. A combination of the correction and the giant dividend increase has me more enthusiastic about Parker-Hannifin than I’ve been in a while. Take a look at this one.

— 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.