In this article, we will explore 10 dividend growth stocks that offer over a 3% yield. The debate between investing in dividend stocks with a strong history of growth in payouts versus those with high yields has been ongoing in the dividend investing world. Analysts generally lean towards dividend growth stocks as they indicate a healthy financial situation, while excessively high yields may suggest underlying financial troubles.
The S&P 500 Dividend Aristocrats Index, which tracks companies with at least 25 consecutive years of dividend growth, has shown strong returns in the past. According to S&P’s Phillip Brzenk, during six calendar years of negative performance for the S&P 500 since year-end 1989, the S&P 500 Dividend Aristocrats outperformed the equity benchmark by an average of 13.28%.
Data from Bloomberg indicates that dividend aristocrats have consistently outperformed high-yield stocks in different market conditions. Dividend aristocrats delivered a 12.50% return in falling interest rate periods and an 11.55% return in rising interest rate periods between February 2005 and December 2023, outperforming the Dow Jones U.S. Select Dividend Index.
While dividend growth stocks are preferred over high-yield stocks, a balance of both can offer advantages to investors, potentially maximizing returns while minimizing risks. The S&P 500 High Dividend Growth Index, which seeks the performance of companies with a minimum of five consecutive years of dividend growth and an average yield of 3%, returned 11.94% on an annual average basis from 2010 to 2022.
Some of the best dividend growth stocks to consider include Altria Group Inc., Verizon Communications Inc., and 3M Company, which have maintained impressive records of dividend growth and offer above-average yields. In this article, we will further discuss some of the best dividend growth stocks with yields above 3%.
Our methodology involved using a stock screener to select companies that have raised their dividends for at least 10 consecutive years or more and have dividend yields of at least 3%. We then narrowed down our options to 10 stocks with the highest number of hedge fund investors.
Exxon Mobil Corporation (NYSE: XOM) is a multinational oil and gas company that has been growing its dividends for the past 41 years. It offers a dividend yield of 3.22% as of May 11. Chevron Corporation (NYSE: CVX) is another energy company on our list with a dividend yield of 3.93% as of the same date.
United Parcel Service, Inc. (NYSE: UPS) is a global package delivery and logistics company with a dividend yield of 4.42%, while Eversource Energy (NYSE: ES) is an American electric services company with a dividend yield of 4.62%. LyondellBasell Industries N.V. (NYSE: LYB) is a multinational chemical industry company with a dividend yield of 4.93%.
These companies have demonstrated consistent dividend growth and strong financial standings, making them attractive options for investors seeking both growth and yield in their portfolios.