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Dividend stocks have historically outperformed non-payers by a wide margin, and did so with less volatility.
Buying income stocks can help you amass a fortune over time, and these three companies are proven dividend growth stock winners.
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Dividend stocks have long been a cornerstone of wealth-building, offering investors a compelling blend of income and growth. These stocks, issued by companies that share profits through regular dividend payments, have historically outperformed non-dividend-paying stocks.
Data from Hartford Funds shows dividend stocks delivered average annual returns of around 9.2% from 1973 to 2023, compared to 3.9% for non-dividend stocks, and did so with lower volatility. Their consistent payouts provide a reliable income stream, ideal for retirees or those seeking passive income, while reinvested dividends fuel compounding, boosting long-term returns.
Dividend stocks also act as a hedge against inflation, as many firms, particularly blue-chip companies, raise dividends over time. From growth-oriented investors to risk-averse individuals, dividend stocks suit diverse portfolios, offering stability during market downturns and capital appreciation when the market turns higher.
Below are three companies that just announced new dividend hikes and should be on your short list to buy.
Apple (AAPL)
Although not typically thought of as a dividend stock, Apple (NASDAQ:AAPL) stands out by blending income and growth for investors. As a tech giant with a market cap over $3.1 trillion, Apple has raised its dividend annually since 2012, showcasing the reliability of its payout.
Earlier this month, the iPhone-maker announced a 4% dividend hike, increasing the quarterly payout from $0.25 to $0.26 per share, backed by strong cash flow. With a yield of about 0.47% and a low payout ratio of 15.74%, Apple maintains dividend sustainability while continuing to fund innovation.
Additionally, Apple’s aggressive stock buyback program reduces outstanding shares, boosting earnings per share and supporting stock price growth. At the same time as the dividend increase, it also unveiled a $100 billion buyback plan, reinforcing its commitment to shareholder value.
While the yield may not suit high-income seekers, Apple’s combination of dividend growth, stock repurchasing, and market leadership makes it an excellent buy for long-term investors seeking stability and tech-driven capital appreciation.
Parker-Hannifin (PH)
Motion control specialist Parker-Hannifin (NYSE:PH), a Dividend King with 69 years of consecutive dividend increases, just announced a 10% dividend hike, raising its quarterly payout from $1.63 to $1.80 per share.
With a yield of 1.1% and a conservative payout ratio of 24.76%, the dividend is secure, backed by strong profits. Parker-Hannifin has consistently grown earnings, with adjusted earnings per share up 33% in the most recent quarter, driven by its aerospace segment. The company targets 25% adjusted segment operating margins by 2027 through its Win Strategy 3.0, leveraging acquisitions to boost efficiency, like its 2022 purchase of Meggitt, one of the largest deals in PH’s history.
Despite a premium valuation after a 38% rally from its 52-week low, Parker-Hannifin’s profit growth, margin expansion plans, and dividend reliability make it an attractive buy for long-term investors.
Paychex (PAYX)
Paychex (NASDAQ:PAYX) is a leading provider of payroll and human capital management solutions for small to medium-sized businesses and is a surprisingly compelling dividend stock to buy.
On May 2 it announced a 10.2% dividend hike, raising its quarterly payout from $0.98 to $1.08 per share, marking 15 consecutive years of increases. The dividend currently yields 2.67%, and PAYX has a payout ratio of 78.2%. While this may seem high, the firm has grown free cash flow at a healthy rate for the past decade, meaning its dividend is well-covered. This financial strength enabled its $4.1 billion acquisition of Paycor last month, expanding its market reach and service offerings.
Paychex exhibits strong returns on invested capital of around 22%, reflecting disciplined capital allocation that supports both dividends and strategic growth. Its recurring revenue model provides stability across economic cycles, making it a resilient business in all kinds of markets. Its consistent revenue, earnings, and cash flow growth, paired with strategic acquisitions, make it an attractive buy for dividend investors seeking income and stability.
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