INVESTING
4 Dividend Growth Stocks (To Have Your Cake & Eat It, Too)
They’re not even hard to find.
We all know regular dividend-payers won’t net you 1,000% returns over the next few years. But does steady cash flow mean giving up growth? Does solid growth mean you’re in for a wild ride? Certainly not.
Right now, there are companies under your nose that have:
- Raised dividends steadily for 10+ years
- Grown EPS by double-digit percentages for 5+ years
- And outperformed the S&P 500 in 2021 to date
Best of all, we’re not talking obscure companies. Nope, we’re talking huge, obvious ones that anybody can find.
And below are 4 of my favorites.
I’m not a financial professional. This is purely opinion and entertainment, not advice. Do what’s right for you, and if in doubt about what that is, then it’s important to find someone who’s legally able to tell you.
#1: Home Depot (HD)
On top of its already dominant market share, Home Depot has averaged 16.92% EPS growth over the last 5 years and 20.77% dividend growth over the last 10.
It’s even grown 2.07% points faster than the S&P in 2021 to date.
#2: Allstate (ALL)
Allstate is similar to Progressive (PGR) in market cap but with a much more attractive 14.45% dividend growth since 2011.
EPS growth averaged 27.93% over the last 5 years, and it’s also edged out the S&P by 2.18% points in 2021.
#3: T Rowe Price (TROW)
Asset management firm T Rowe Price rode the bull market’s wave to 16.62% avg EPS growth over 5 years, with a 13.29% 10-year div growth rate. (And that’s without the $3.00/share special dividend coming up!)
It’s outperformed the S&P by a hefty 16.07% points.
#4: Essex Property Trust (ESS)
If you’ve ever rented in a large apartment building, you’ve probably contributed to Essex’s impressive 20.00% EPS 5-year CAGR.
While their 10-year div growth is a less astounding 7.23%, they’re up a whopping 19.36% points YTD versus the S&P, which help make up for their relatively slower price growth over the last five years.
Nothing is guaranteed, but these trends prove you can outperform the market in price, earnings, and dividends at the same time. And if household names offer these opportunities, just imagine what you’d find with a little digging.
This excludes companies that went to the moon in the past year’s bizarro-world market. It’s boring, by design.
The good news is that when you keep your sights here on Earth, there are plenty of opportunities for long-term, low-stress investments that won’t send you into manic spells when some CEO tweets a meme.
“Fine,” you might be thinking. “Good for you. But how do I actually find these?”
Glad you asked. The first step is as simple as running through your brokerage’s screening tools. I recommend looking for moderately above-average dividend yield, moderately above-average EPS growth, and moderately better performance than the S&P 500.
Cut out anything with a P/E you consider unreasonable; that number could be well into the 20s these days, depending on the firm. Then, use Yahoo Finance to check the remainder for steady dividend increases over at least a decade.
My own thresholds for all the above are rather beside the point. I’m unequivocally not omniscient, plus it’s critical to have your own conviction.
(However, I will say that stocks that are extraordinarily better than average in any respect might be worth investigating…but are likelier to either a) have ridiculous growth expectations priced in or b) be value traps/yield traps that you’ll regret buying.)
Voilà: a shortlist for a portfolio that may not impress anyone on TikTok, but will let you sleep at night—quite possibly on a fancy mattress that your ever-growing dividends have paid for.
Again, there are no guarantees in life and especially not in finance. Do your own research.
Disclosure: long HD and TROW as of publication.
