If you’re looking to boost your portfolio with reliable income that rises over time, dividend growth stocks are a great option. What I particularly value about these stocks, in contrast to high-yield options, is that they offer meaningful payouts while also having the potential for long-term capital appreciation.
As June 2024 rolls in, now is a great time to consider some of the best options available. For this month, I’ve selected three dividend growth stocks to buy that offer a solid mix of tangible income and potential for growth.
My criteria are as follows. First, I filtered for names with a yield above 4%, providing a strong foundation for solid income. Next, my picks must have a track record of increasing their dividends for at least 15 years, exhibiting management’s commitment to rewarding shareholders with growing capital returns.
Lastly, I require that their annual dividend growth averaged over 10% in the past five years, ensuring the dividends outpace inflation significantly and increase investors’ income rapidly in real terms. The following three stocks meet all these conditions!
United Parcel Service (UPS)
United Parcel Service (NYSE:UPS) provides a great mix of income and growth. The global logistics giant is currently attached to a dividend yield of 4.74%, which I find quite substantial given the strong pace of dividend increases in recent years. In particular, UPS has increased its dividend at a compound annual growth rate (CAGR) of 11.2% over the past five years. Further, the company has increased its dividend for 15 consecutive years!
While UPS saw its revenues and earnings decline last year following a period of outsized growth in 2021 and 2022 fueled by pandemic-induced delivery demand, the company remains well-positioned for steady expansion.
UPS’s most prominent growth catalyst remains the continued rise of e-commerce and its extensive network, which management can leverage to drive higher margins. International markets also offer significant growth opportunities, especially in cross-border e-commerce and supply chain solutions.
T. Rowe Price Group (TROW)
T. Rowe Price Group (NASDAQ:TROW) is another quality dividend growth company that meets my highly demanding criteria. The global investment management giant has increased its dividend for 38 consecutive years. In fact, it is a constituent of the elite group of stocks known as Dividend Aristocrats. The stock now offers a dividend yield of 4.24%, while dividend growth has averaged a strong 10.3% per annum over the past five years.
Like UPS, T. Rowe Price faced financial challenges last year. In the case of TROW, these setbacks were largely powered by the rise of interest rates, which naturally drained the investment management industry. Still, this is one of the most reputable firms in the space, praised for its investment and client service merit. Once the macro climate improves, T. Rowe Price is set to regain momentum and resume its growth trajectory.
Best Buy (BBY)
I hardly ever hear investors talk about Best Buy (NYSE:BBY) when discussing dividend growth opportunities. Yet, its dividend growth track record is surprisingly compelling. It has raised its dividends for 21 consecutive years. Also, the dividend has grown at a rate of 13% per annum, on average, over the past five years. Finally, its dividend yield stands at a noteworthy 4.23%, fulfilling all the criteria for consideration I initially set.
Even as e-commerce continues to dominate the retail landscape with every passing year, Best Buy has remained resilient against this trend. The company has seamlessly blended online and in-store operations through its omnichannel approach, actively competing in the market. Furthermore, Best Buy has maintained strong foot traffic in its stores due to its focus on customer satisfaction.
It’s also worth noting that besides being a solid dividend growth stock, Best Buy is a stock buyback machine. The company has repurchased and canceled 56% of its outstanding shares over the past 20 years, significantly contributing to its earnings-per-share (EPS) growth during that period.
On the date of publication, Nikolaos Sismanis did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.