7 Growth Stocks That Pay Generous Dividends

Stocks to buy

When it comes to dividend-paying growth stocks, it can be difficult to find names that are both high-growth and high-yield. This makes sense, given that companies with high dividend yields are typically paying out a large portion of their earnings as a dividend, leaving little capital to fund growth. That said, there are quite a few stocks that, while not exactly “high-yield,” have annual yields above that of the S&P 500 (1.69%), plus offer the opportunity for growth. Hitting this “sweet spot,” these dividend stocks could be a path to generating solid long-term total returns for your portfolio.

How? First, their above-average yields provide a consistent baseline of returns. Then, over an extended timeframe, shares move steadily higher, in tandem with earnings growth. That’s the story here with these seven dividend-paying growth stocks. Each of them has a forward yield of at least 2%, plus the strong potential to report strong earnings growth in the coming years.

ADP Automatic Data Processing $219.90
ARCO Arcos Dorados $7.62
AZN AstraZeneca $68.64
F Ford Motor $12.05
QCOM Qualcomm $125.09
TXRH Texas Roadhouse $107.92
WELL Welltower $69.96

Automatic Data Processing (ADP)

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Admittedly, Automatic Data Processing (NASDAQ:ADP) may not be what first comes to mind when you think of “growth stock.” The payroll processing and outsourced HR services company is generally regarded as a blue-chip. As I’ve discussed before, the stock is also a year away from attaining “dividend aristocrat” status.

But besides dividend growth, ADP stock has strong potential to continue delivering further earnings growth. Sell-side forecasts call for ADP’s earnings to grow by nearly 16% this fiscal year (ending June 2023), by 10.6% next fiscal year, and by 11.3% the fiscal year after that.

This earnings growth could enable ADP to rise by double-digits annually over the next few years. Add in ADP’s 2.33% dividend, which has itself grown by double-digits on average annually over the past five years,  and it’s easy to see why Automatic Data Processing is a strong candidate for any growth-focused portfolio.

Arcos Dorados (ARCO)

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Arcos Dorados (NYSE:ARCO), which means “Golden Arches” in Spanish, is the master franchisee for McDonald’s (NYSE:MCD) throughout much of Latin America and the Caribbean. The Uruguay-based company operates in over 20 markets.

ARCO stock is a name that offers investors not only a solid dividend yield (2.12%) and the prospect of earnings growth but value as well. Shares today trade for only 11.2 times earnings. Arcos’ profitability has been bouncing back since the pandemic. Per analyst estimates, earnings per share (or EPS) could keep climbing over the next few years. There may be big upside potential if this plays out for ARCO. Renewed confidence in Arcos Dorados’ earnings growth may result in a re-rating for the stock. Instead of trading for 11 times earnings, shares may have room to climb to much higher earnings multiple, like, say, 15 or even 20 times earnings.

AstraZeneca (AZN)

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AstraZeneca (NASDAQ:AZN) is another established company that’s one of the best dividend-paying growth stocks. The U.K.-based pharma firm reported strong growth during 2022, however, the company reported declining growth last quarter, due to falling demand for its Covid-19 vaccine and treatment.

That said, according to the company’s latest guidance, further earnings growth is on the menu for AZN stock this year. Management has guided for high single-digit to low double-digit earnings growth in 2023, as growth from drugs such as cancer treatment Calquence and diabetes treatment Farxiga, outweigh a further drop in sales for its Covid offerings.

Alongside promising earnings growth prospects, AZN pays its investors around $1.45 per share in dividends annually. This gives the stock a forward yield of around 2.1%. Although dividend growth has been non-existent in recent years, a resurgence in earnings growth may lead to larger payouts down the road.

Ford (F)

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Like with ADP, Ford (NYSE:F) is another “old school” company that on the surface may not seem like it is a growth stock. Worse yet, unlike recession-resistant ADP, Ford is a cyclical automaker, and in theory, could be hit hard by a possible 2023 recession.

Still, you may not want to dismiss the potential for F stock to become an unexpected growth play. It’s not definite that Ford experiences declining sales and heavy losses during this year. Pent-up demand from last year’s chip shortage may result in solid sales during 2023, despite all the recession talk. More specific to Ford’s bona fides as a growth play, the company’s pivot towards electric vehicles (or EVs), if successful, could put it on the path to earnings growth through the end of the decade. While waiting for this to take shape, sit back and collect the stock’s 4.74% dividend.

Qualcomm (QCOM)

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With a 2.47% forward yield, Qualcomm (NASDAQ:QCOM) is clearly a dividend stock, but does it belong in the dividend-paying growth stocks category? Many would say no. Largely, because for the mobile chip maker, there’s the overhang of key customer Apple (NASDAQ:AAPL) moving modem chip production in-house.

However, while this factor has resulted in the market taking a “wait and see” approach with QCOM stock, the company may be able to do more than makeup for the loss of Apple. How? As I discussed back in January, Qualcomm is making a big move into fast-growing areas such as advanced automotive chips.

Although earnings are set to slide this fiscal year (ending September 2023), earnings growth may be poised to re-accelerate in FY2024 and FY2025. A return to growth could spark a big move higher for shares, which today trade for just 11.7 times earnings.

Texas Roadhouse (TXRH)

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Rallying by nearly 30% over the past year, Texas Roadhouse (NASDAQ:TXRH) has managed to stay in bull market mode, even as the broad market has struggled during this time frame. Of course, this strong performance isn’t entirely surprising.

The steakhouse chain has continued to report above-average growth. Revenue and earnings both grew by double-digits, during Q4 and the full year of 2022. Based on earnings forecasts for TXRH stock, expect this to carry on in 2023, 2024, and 2025. Even with this strong level of organic growth, the company manages to pay a generous dividend.

Shares currently yield 2.07%, with TXRH’s rate of payout more than doubling since 2018. Future dividend growth may be more modest by comparison, but with a sustainable payout ratio of 46.35% at present, Texas Roadhouse may have the ability to raise the payout in line with earnings growth.

Welltower (WELL)

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Welltower (NYSE:WELL) is a real estate investment trust (REIT). This REIT owns a portfolio of senior living, post-acute care, and outpatient medical facilities. WELL currently has a forward dividend yield of 3.55%.

Affected by the Covid-19 pandemic, Welltower continues to struggle to move back towards prior levels of occupancy, revenue, and earnings. However, a massive tailwind could help Welltower return to its operational high-water mark, then go on to experience continued growth. That would be the “Grey Wave,” or the big expected increase in the U.S. senior citizen population.

As InvestorPlace’s Chris Markoch argued earlier this year, earnings could grow by an average of 38% over the next five years, in large part due to this trend. Besides propelling WELL stock to higher prices, this will also likely result in increased dividend payouts. With this in mind, consider WELL one of the best dividend-paying growth stocks.

On the date of publication, Thomas Niel 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.

Thomas Niel, contributor for InvestorPlace.com, has been writing single-stock analysis for web-based publications since 2016.

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