Compounding Cash Cows: 7 Dividend Growth Stocks to Buy in 2024

Stocks to buy

Dividend growth stocks with high dividend growth rates can reward investors with appreciation and higher payouts each year. Patient investors who can hold onto their investments for more than a decade can generate significant cash flow that can help with living expenses.

The telltale signs of a dividend growth stock are rising financials and a favorable dividend payout ratio. These companies have good runways and can deliver long-term returns for their shareholders. Investors looking for solid dividend growth stocks may want to consider these top picks.

Visa (V)

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Visa (NYSE:V) offers profit margins that regularly exceed 50% thanks to its state-of-the-art credit and debit cards. The company makes a small percentage of every credit and debit card transaction and is a barometer for consumer spending.

The fintech firm indicated things are going smoothly with its Q1 FY24 earnings report. Revenue increased by 9% year-over-year (YoY), while net income jumped by 17% YoY. Profit margins reached 56.6% for the quarter. The company also allocated $4.4 billion to increasing shareholder value through buybacks and dividends.

Visa CEO Ryan McInerney stated that consumer spending remained resilient in the quarter. Those comments and Visa’s results have helped the stock secure a 6% year-to-date gain. Shares are up by 72.6% over the past five years. Visa stock currently has a 0.75% dividend yield and only has a 21.50% payout ratio. The firm has maintained an 18.18% dividend growth rate over the past decade.

Walmart (WMT)

Walmart (NYSE:WMT) has established itself as the top retailer of affordable products. It has a $485 billion market cap, a 31 P/E ratio and a 1.38% dividend yield. The company’s expansion into e-commerce and advertising can translate into higher revenue growth and better profit margins.

Those two developments can help Walmart reaccelerate its dividend growth. Investors got a taste of a renewed focus on growth when Walmart recently announced a 9% hike in its dividend. That growth rate came alongside 5.7% YoY revenue growth in the fourth quarter of fiscal 2024. Global e-commerce and advertising sales increased by 23% and 33% YoY, respectively.

Walmart is up 78% over the past five years and has outperformed the stock market with a 15% year-to-date gain. Walmart has a 39.58% dividend payout ratio, which suggests more growth is on the table. The company has hiked its dividend for 49 consecutive years and has averaged a 1.95% growth rate over the past decade. That’s why the recent 9% dividend hike is such a big surprise and should give shareholders optimism.

Broadcom (AVGO)

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Broadcom (NASDAQ:AVGO) is a beneficiary of the artificial intelligence boom. It’s also one of the best dividend growth stocks when looking at appreciation, yield and the compounded annual growth rate.

The stock is outperforming the market with a 23% year-to-date gain. Shares are also up 117% over the past year and 324% over the past five years. The stock trades at a 49 P/E ratio and offers a 1.56% dividend yield. Broadcom maintains a 70.09% dividend payout ratio and has averaged a 17.49% growth rate over the past five years.

Broadcom’s recent acquisition of VMware has already paid off for the company. Infrastructure software sales are on the rise and helped the company generate $11.96 billion in revenue in the first quarter of fiscal year 2024. That’s a 34% YoY improvement. The company also repurchased $8.29 billion worth of shares to reward long-term investors. Broadcom anticipates generating $50 billion in revenue during fiscal 2024.

UPS (UPS)

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UPS (NYSE:UPS) offers a high yield for investors who want a stable investment. The stock has declined by 25% over the past year but is up by 26% over the past five years. Shares have a 4.50% yield and an 18.4 P/E ratio.

UPS is a critical company within the supply chain, ensuring it will stick around for many years. The company’s history already stretches beyond 100 years. Dividend growth has recently slowed down due to some headwinds. However, the company normally does a good job of raising its dividend. Its annualized dividend growth rate is 12.23% over the past five years.

UPS CEO Carol Tomé acknowledged that 2023 was a challenging year when discussing Q4 2023 results. Consolidated revenue is expected to range from $92.0 billion to $94.5 billion compared to $91.0 billion in full-year 2023 revenue. The increase is small but can help the company get back on track.

Caterpillar (CAT)

Caterpillar (NYSE:CAT) has outperformed the stock market with a 62% gain over the past year. The construction equipment firm has also risen by 158% over the past five years and has a 1.42% dividend yield.

The company reported full-year revenue growth of 13% YoY. Caterpillar also returned $7.5 billion to shareholders through share repurchases and dividends. The company hiked its quarterly dividend from $1.20 per share to $1.30 per share in 2023. The company is due to raise its dividend again this summer.

Caterpillar has raised its dividend for 31 consecutive years and has a low 24.80% dividend payout ratio. The company has averaged an 8.20% compounded annual return over the past decade. The dividend yield dropped considerably in recent years since stock gains have outpaced dividend growth. However, the stock still offers a good proposition for new investors. Caterpillar is gaining market share and has plenty of room to support high dividend growth moving forward.

Oracle (ORCL)

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Oracle (NYSE:ORCL) has more than doubled over the past five years and offers a 1.32% dividend yield. The company currently trades at a 32 P/E ratio and has a $333 billion market cap.

The software firm has revitalized its growth rates through cloud computing. Overall revenue increased by 7% YoY in the third quarter of fiscal 2024. Cloud revenue jumped by 25% YoY, and makes up nearly half of the company’s total revenue. Cloud Infrastructure came to $1.8 billion and was up by 49% YoY.

The high margins and growth rates from cloud computing can power up the company’s dividend growth rate. Oracle has maintained a 14.31% compounded growth rate over the past decade. Meanwhile, the company has an 18.56% compounded growth rate over the past three years. Oracle only has a 41.07% payout ratio, indicating more room for growth. The company has been raising its dividend for 10 consecutive years.

American Express (AXP)

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American Express (NYSE:AXP) offers rising profit margins and is gaining market share in the credit and debit card industry. The company reported 11% YoY revenue growth in the fourth quarter of 2023. Net income growth was even more impressive at 23% YoY.

The financial firm doesn’t have the same profit margins as Visa. However, the company generated a respectable 12% net profit margin in Q4 2023. American Express has more room to expand its profit margins and currently trades at a reasonable 19.4 P/E ratio. The stock also has a 1.28% dividend yield.

American Express offers enticing dividend growth and has an annualized growth rate of 10.43% over the past decade. The firm has plans to achieve 9% to 11% YoY revenue growth and an EPS growth rate in the mid-teens beyond 2026. American Express has outperformed the stock market with a 16% year-to-date gain and a 97% rally over the past five years.

On this date of publication, Marc Guberti held a long position in AVGO. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Marc Guberti is a finance freelance writer at InvestorPlace.com who hosts the Breakthrough Success Podcast. He has contributed to several publications, including the U.S. News & World Report, Benzinga, and Joy Wallet.

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