Dividend growth investing is a timeless strategy that marries steady income with long-term wealth creation, making it a cornerstone for savvy investors.
Unlike chasing high yields or speculative gains, it focuses on companies that consistently raise dividends, signaling financial strength, disciplined management, and resilience across market cycles. These stocks offer a one-two punch: cash payouts to reinvest and capital appreciation as earnings climb.
In an uncertain market, dividend growth stocks are a beacon of stability that can turn modest grubstakes into substantial nest eggs over decades.
Numerous studies have proved the strategy’s superiority. The Hartford Funds found stocks on the S&P 500 that grew their dividends over the 50-year period between 1973 and 2023 averaged 10.2% annual returns, trouncing those that didn’t pay a dividend (4.3%) and those that paid one but didn’t raise it (9.2). And they did so with less risk.
A simple $100 investment in dividend growth stocks turned into $14,118 compared to $843 for non-payers. The index itself returned only $4,439. That’s because they tend to hoard cash, dodge debt traps, and thrive in downturns. Investing in dividend growth isn’t just income, but rather a proven path to outperformance.
The following three dividend dynamos just hiked their payouts by double-digit rates and deserve a spot in your portfolio today.
Walmart (WMT)
Walmart (NYSE:WMT) is the first dividend growth stock you should consider buying as it blends a stellar payout history with resilience in a tough market. At $85 per share, it’s a buy for income and stability seekers.
Walmart’s dividend growth is legendary with 52 consecutive years of hikes since 1974, earning it Dividend King status. Its latest bump announced last month raised the annual payout 13% to $0.94 per share from $0.83, the biggest leap in over a decade. This reflects confidence in its cash flow, with a 38% payout ratio leaving room for more.
Fourth-quarter revenue hit $180.6 billion, up 4% and beating estimates despite tariff fears and consumer slowdowns. Adjusted earnings of $0.66 per share topped analyst forecasts of $0.64 per share, with e-commerce surging 16%. In a challenging market, Walmart’s $15.1 billion free cash flow and 5% sales growth signal strength. Considering its dividend streak and earnings consistency, WMT stock is a winning dividend dynamo.
Domino’s (DPZ)
The second dividend growth stock to buy is Domino’s (NYSE:DPZ). Its payout history might not be as long as Walmart’s but it is a knockout nevertheless: 12 straight years of hikes since 2013, rocketing from $0.20 per share every quarter to $1.74 per share, a 20% compound annual growth rate. The latest boost represents a hefty 15% jump and proves it still has the dough to keep rewarding shareholders.
Since 2010, has a total return north of 4,000%, meaning $10,000 invested in DPZ stock would be worth $410,740 today. A similar investment in the S&P 500 would be worth just $67,300.
Domino’s recent fourth-quarter earnings report showed revenue fell short of analyst expectations, $1.49 versus $1.54 billion, but it still enjoyed a 5.2% increase in global retail sales. Adjusted earnings of $4.89 per share also missed estimates of $4.96 per share, yet free cash flow soared 12% to $725 million yearly, shrugging off a tough market. Moreover, international same-store sales grew 2.7%, marking 31 years of gains despite macro headwinds.
In a choppy economy, Domino’s churns out cash and market share. Its 35% payout ratio also leaves room for more hikes making DPZ stock a tasty treat for income investors.
Diamondback Energy (FANG)
Diamondback Energy (NASDAQ:FANG) is the third dividend growth stock for your portfolio. Its payout history has been a gusher since it began paying a dividend in 2018, seven straight years of growth that zoomed from $0.125 per share each quarter to $1.00 per share today, a 34% compound annual growth rate.
The latest hike, an 11% bump, shows it still has the wherewithal to keep shareholders in the green, even tossing in a $4.29 variable payout for a 5% total yield. In total, the energy stock paid a total of $6.21 per share in base and variable dividends in 2024.
In the fourth quarter, Diamondback Energy saw revenue of $3.71 billion handily outstrip analyst estimates of $3.55 billion while adjusted earnings of $3.64 per share easily topped $3.35 per share forecasts. Oil output also spiked 74% to 475,924 barrels daily as the Permian Basin pure play shone through a challenging oil market. With $1.26 billion in free cash flow, it was able to pile on cash profits despite oil price swings.
The energy market is in a state of flux, with West Texas Intermediate down below $68 a barrel, but Diamondback’s 26% payout ratio ensures the payout is safe. You can buy FANG stock today for $150 per share, its lowest price in over a year, as cash flows and dividend growth make it a standout.
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