Dividend stocks attract many investors due to their steady cash flow. Corporations with strong balance sheets tend to give out quarterly dividends and hike their payouts every year. This combination makes it feasible for investors to retire on dividend income and cash from other sources, such as Social Security.
Some dividend stocks are well positioned to deliver meaningful dividend growth in the upcoming years. Investors may want to keep these rock-solid dividend stocks on their radars.
Broadcom (AVGO)
Broadcom (NASDAQ:AVGO) is a leading semiconductor company that is capitalizing on the AI boom. While the company’s chips generate plenty of demand, its recent acquisition of VMware continues to fuel its earnings. Revenue increased by 34% year-over-year in Q1 2024 as the company reached $11.96 billion. Broadcom anticipates generating more than $50 billion in fiscal 2024.
Wall Street analysts have quickly assigned higher price targets for the “Strong Buy” stock. The stock has 21 “Buy” ratings and three “Hold” ratings. The average price target suggests a 12% gain is coming.
Broadcom currently offers a 1.49% yield, which is good for a stock up by 459% over the past five years. A 30% year-to-date gain suggests momentum is still building for this long-term winner. Over the past five years, an annualized dividend growth rate of 17.49% cements the company as a top dividend stock.
American Express (AXP)
American Express (NYSE:AXP) has been in business since 1850 and has become a leading fintech firm in the credit and debit card industry. Millions of people use American Express cards for purchases, and the company makes a small percentage of each transaction.
As long as consumers continue to spend, American Express stands to benefit. The formula worked well for the company in Q1 2024. During that quarter, revenue increased by 11% year-over-year while net income rallied by 34% year-over-year.
American Express has been producing several solid quarters. Those successes have resulted in shares more than doubling over the past five years. The stock is currently up by 26% year-to-date and has a 20 P/E ratio. Furthermore, investors can get shares while they offer a 1.18% yield. American Express has had an annualized dividend growth rate of 10.51% over the past decade. The firm only has a 20.31% payout ratio, indicating plenty of room for dividend growth.
Main Street Capital (MAIN)
Main Street Capital (NYSE:MAIN) doesn’t have a high annualized dividend growth rate. The company recently hiked its annual dividend 2.1% year-over-year. While that’s not impressive, the business development company currently offers a 5.93% yield. Unlike most dividend stocks, Main Street Capital also issues monthly dividend payouts instead of quarterly payouts.
The stock typically stays flat but has an exceptional year. Main Street Capital has gained 22% over the past year as its diversified portfolio of lower middle market companies continues to generate returns. Total investment income increased by 9% year-over-year in Q1 2024.
The firm has 191 cumulative investments and $7.4 billion in capital under management. The management team has a cumulative 100 years of experience and prioritizes companies with revenue between $10 million and $150 million and EBITDA between $3 million and $20 million. Main Street Capital is diversified across several industries with a strong focus on internet software and services, machinery and professional services.
Walmart (WMT)
Walmart (NYSE:WMT) has become a top destination for people who want affordable prices for a wide range of goods. It is the largest grocer and continues to see high demand for its inventory. Revenue increased by 6.0% year-over-year in Q1 FY25 as the company saw more demand for its e-commerce and advertising segments. Both of those components exhibited year-over-year growth rates above 20%.
The stock is up 23% year-to-date and has soared by 93% over the past five years. Walmart trades at a 34 P/E ratio and offers a 1.27% yield. Dividend growth has been slow, but a recent 9% dividend hike offers long-term optimism. Walmart has raised its dividend for 51 consecutive years.
Revenue and dividends weren’t the only things going up for Walmart. The retailer also reported a 22.4% year-over-year increase in adjusted EPS. Walmart has $9.4 billion in cash and cash equivalents on its balance sheet, even after a $1.1 billion stock buyback during the quarter.
Microsoft (MSFT)
Microsoft (NASDAQ:MSFT) has exposure to numerous verticals and looks like it will continue to outperform the stock market. The tech conglomerate is currently the world’s most valuable publicly traded corporation. It has a $3.20 trillion market cap and is up by 16% year-to-date. Its 5-year gain comes to 248%.
Microsoft trades at a 37 P/E ratio with a 0.70% yield. While the dividend is low, most investors won’t mind due to the high long-term returns. However, the dividend can become a notable component soon enough. Microsoft has been raising its dividend considerably over the years. The annualized dividend growth rate has stood at 10.60% over the past decade.
The tech giant only has a 24.66% dividend payout ratio, so Microsoft likely maintains a double-digit growth rate for many years. However, Wall Street analysts aren’t waiting for the yield to increase. Based on the average price target, the stock is currently rated as a “Strong Buy” and has a projected 14% upside.
Costco (COST)
Costco (NASDAQ:COST) has a 32.50% dividend payout ratio and has an annualized dividend growth rate of 12.65% over the past decade. These metrics make the 0.57% yield look more promising, but the occasional special dividend payout leads to significant value for patient investors. Costco closed out 2023 with a special $15 dividend, a big jump from the quarterly payout of $1.16 per share.
The low yield shouldn’t discourage investors, thanks to the special dividend. However, that’s not the only perk of Costco stock. It’s been outperforming the market for several years. Shares are up by 24% year-to-date and have more than tripled over the past five years.
April sales results suggest that investors should expect more gains. Total company sales increased by 5.6% year-over-year over the previous 4-week period. E-commerce led the way with a 14.6% year-over-year increase. Costco also exhibited sales growth over the 35 weeks.
Procter & Gamble (PG)
Procter & Gamble (NYSE:PG) closes out the list of dividend dynamos with an impressive dividend streak. The consumer goods company has been paying out dividends for 134 consecutive years. That also includes 68 consecutive years of dividend hikes.
Dividend growth has been at a crawl for several years, but the corporation recently hiked its quarterly dividend from $0.9407 to $1.0065 per share. That’s a 7% year-over-year increase. The stock is up by 61% over the past five years and is off to a good start with an 11% year-to-date gain. Shares trade at a 27 P/E ratio and offer a 2.44% yield.
Procter & Gamble is currently rated as a “Moderate Buy” with a projected 3% upside. Only five analysts rated the stock as a “Hold,” while the other 12 rated it as a “Buy.” The company sells many essential goods that will continue to garner demand during a slower economic cycle. Procter & Gamble isn’t as vulnerable to dramatic price swings and offers a solid yield.
On this date of publication, Marc Guberti held long positions in AVGO and MSFT. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.