The 7 Best Dividend Growth Stocks for Long-Term Investors

Stocks to buy

When faced with myriad market ambiguities, investors may be well served to target the best dividend growth stocks to buy. In many ways, this investment category represents the best of both worlds. Fundamentally, passive-income providers typically align with established (and therefore profitable) businesses. Since the market can go either way under ambiguous cycles, dividend providers offer a hedge.

However, pure passive-income plays don’t offer much upside return. On the other hand, growth-oriented investments generally provide significant returns during decisively bullish cycles. However, they also present risks. And that’s where the best dividend growth stocks come into play. Specifically, all these securities enjoy forecasted returns in the double digits. Just as well, they provide passive income, affording confidence in an uncertain environment. So, without further ado, below are the best dividend growth stocks to buy.

PM Philip Morris $99.59
KO Coca-Cola $59.98
SYY Sysco $77.47
BDX Becton Dickinson $240.40
KIM Kimco Realty $20.38
FANG Diamondback Energy $137.29
DVN Devon Energy $53.59

Philip Morris (PM)

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One of the big tobacco giants, Philip Morris (NYSE:PM) might not be everyone’s cup of tea and I get that. However, if you’re a sector-agnostic investor merely seeking the best dividend growth stocks to buy, PM is difficult to ignore. Currently, the company carries a forward yield of 5.08%. As well, it enjoys 14 years of consecutive annual dividend increases. Financially, the company could use a little bit of work, I’m not going to lie. For instance, its balance sheet ranks on the lower side of the average, with a low cash-to-debt ratio. At the same time, its Altman Z-Score hits 3.2, reflecting a reasonably stable profile.

Most notably on the optimistic front, Philip Morris gets it done on the bottom line. Its net margin stands at 28.49%, outpacing over 89% of the competition. As well, its return on asset pings at 20%, blowing past 75.5% of its peers. Finally, covering analysts peg PM as a consensus moderate buy. Their average price target stands at $111.09, implying over 11% upside potential.

Coca-Cola (KO)

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A soft drink juggernaut, Coca-Cola (NYSE:KO) represents an icon of American-style capitalism. Typically, investors consider it a boring entity. However, it actually ranks among the best dividend growth stocks to buy. On the passive income side, Coca-Cola carries a forward yield of 3.08%. That’s conspicuously above the consumer staple sector’s average yield of 1.89%. It’s also a Dividend Aristocrat,  featuring 62 years of consecutive dividend increases.

Financially, Coca-Cola’s strengths center on its operations. Its three-year revenue growth rate stands at 4.6%, beating out over 62% of its peers. As well, its book growth rate during the same period pings at 7.9%, above nearly 68% of the competition. Most notably, its net margin comes in at 22.19%, ranking above 93% of the industry.

Again, despite its boring reputation, Wall Street sees much upside potential in KO stock. Presently, covering analysts peg shares as a consensus strong buy. Also, their price target of $68.36 implies a return of over 14%. Thus, KO is one of the best dividend growth stocks to buy.

Sysco (SYY)

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A multinational corporation, Sysco (NYSE:SYY) markets and distributes food products, small wares, kitchen equipment, and tabletop items to various industries. These include restaurants, healthcare, and educational facilities, and hospitality businesses like hotels and inns. While boring, SYY actually offers a healthy mixture of growth and passive income. For the latter, Sysco carries a forward yield of 2.55%, also above the consumer staple sector’s average yield of 1.89%. Further, its payout ratio comes in at 42.63%, representing a sustainable yield. Moreover, Sysco is another Dividend Aristocrat, featuring 54 years of consecutive dividend increases.

Operationally, Sysco’s three-year revenue growth rate stands at 5.2%, beating out over 57% of its peers. Further, its return on asset pings at 6.45%, outpacing almost 77% of the industry. Although it does not carry the most exciting reputation, Sysco enjoys solid support on Wall Street. Covering analysts peg SYY as a consensus moderate buy. Further, they target a price of $88.15, implying nearly 15% upside potential. Thus, it’s another example of the best dividend growth stocks that investors shouldn’t ignore.

Becton Dickinson (BDX)

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A medical technology company, Becton Dickinson (NYSE:BDX) manufactures and sells medical devices, instrument systems, and reagents. For those seeking stability in their best dividend growth stocks, BDX may be what the doctor ordered. Currently, its forward yield sits at 1.52%, which is modest. However, its payout ratio is 26.77%, signifying much confidence in yield sustainability. Also, it’s a Dividend Aristocrat. Becton commands 51 years of consecutive dividend increases.

Even better, the market prices BDX at a forward multiple of 19.83. As a discount to earnings, Becton ranks better than 66.67% of the competition. Also, it offers solid profit margins. For instance, its net margin stands at 8.48%, outpacing 66% of its peers. Turning to Wall Street, analysts peg BDX as a consensus moderate buy. Also, their average price target pings at $278.63, implying over 16% upside potential.

Kimco Realty (KIM)

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A real estate investment trust (REIT), Kimco Realty (NYSE:KIM) is North America’s largest publicly traded owner and operator of open-air, grocery-anchored shopping centers, including mixed-use assets, per its website. Notably, its exceptional relevance also makes KIM one of the best dividend growth stocks to buy.

For passive income, Kimco offers a forward yield of 4.5%. That’s just a hair above the real estate sector’s average yield of 4.46%. However, prospective investors should note that its payout ratio presently stands at 125.71%. Fiscally, Kimco could use a little extra work. For instance, while it features a net margin of 7.29%, it’s one of the worst-ranking REITs available. As well, the impact of the coronavirus pandemic dropped Kimco’s Altman Z-Score to 1.23, technically signifying distress. However, moving forward, prospective investors should note its three-year book growth rate of 8.2%. This stat beats out almost 80% of the competition.

Lastly, Kimco brings significant heat in the forecasted capital appreciation segment. Covering analysts peg KIM as a consensus moderate buy. As well, their average price target stands at $24.03, implying over 17% upside potential.

Diamondback Energy (FANG)

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With all the current and potential rumblings in the energy sector, investors should consider Diamondback Energy (NASDAQ:FANG) as one of the best dividend growth stocks to buy. Currently, the company carries a forward yield of 2.24%. True, this ranks lower than the energy sector’s average yield of 4.24%. However, its payout ratio sits at a mere 13.14%. Therefore, it’s easily sustainable.

Fiscally, Diamondback may offer a compelling bargain. The market prices FANG at a trailing multiple of 5.47. As a discount to earnings, Diamondback ranks better than 63.7% of the competition. Also, FANG trades at a forward multiple of 5.49. Here, the energy firm outpaces nearly 65% of its rivals.

As well, Diamondback delivers operationally. Its three-year revenue growth rate stands at 22.7%, above nearly 86% of the industry. Also, its net margin pings at 45.47%, above over 90% of sector peers. Heading to the Street, covering analysts peg FANG as a consensus strong buy. Further, their average price target stands at $177.77, implying over 32% upside potential.

Devon Energy (DVN)

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Headquartered in Oklahoma City, Oklahoma, Devon Energy (NYSE:DVN) specializes in hydrocarbon exploration. Because of the underlying relevancies, Devon ranks among the best dividend growth stocks to buy. For passive income, Devon carries a forward yield of 6.63%. That’s noticeably above the energy sector’s average yield of 4.24%. And while its payout ratio of 48.77% is relatively elevated, it’s still quite manageable.

As with Diamondback above, Devon also offers prospective investors a possible bargain. Currently, the market prices DVN at a trailing multiple of 5.89. As a discount to earnings, Devon ranks better than 61.9% of the competition. In addition, DVN trades at a forward multiple of 6. Here, the company ranks above 60.5% of the industry.

Operationally, Devon really hits it out of the park. Its three-year revenue growth rate pings at 23.7%, outpacing 86.43% of its peers. Further, its net margin is 31.38%, above 83% of the underlying sector. Finally, covering analysts peg DVN as a consensus moderate buy. Even better, their average price target stands at $73.85, implying over 37% upside potential.

On the date of publication, Josh Enomoto did not have (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.

A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare.

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