Insane Dividend Growth Is Possible for Investors Who Own These 3 Stocks

Dividend investing is tricky business. On the one hand, investors looking for yield are enticed to consider the highest-yielding names in a given group. That said, as a stock’s overall dividend yield rises, its risk profile inherently rises. Any time an investor sees a company with a double-digit yield or something outside of what most would consider to be a “normal” range, it’s probably a company that’s at risk of a dividend cut or further downside. That’s what the market is saying at least.

That said, investors looking for high yields do have the option of investing capital today in companies that continue to grow their dividends over time. A company that pays a 5% yield today, for example, that grows its dividend at a 7% annual rate will see its distributions double roughly every decade. So, in theory, an investor who locks in such a yield in a company that fits this profile could be generating a 10% dividend a decade down the road, a 20% dividend yield two decades from now, and so on. That is, so long as such a company continues to raise its distribution by that same amount each and every year (not guaranteed).

With that in mind, let’s dive into three top dividend growth stocks I think long-term investors can buy and bank on higher distributions over time. 

Fortis (FTS)

It should be no surprise to most readers that I’m going to once again go back to the well with one of my favorite dividend growth stocks in the market right now, Fortis (NYSE:FTS | FTS Price Prediction). 

Fortis is a Canada-based utilities giant, serving more than three million customers in Canada, the U.S. and the Caribbean. Delivering electricity and natural gas to a wide gamut of residential and commercial clients, Fortis has built a fortress balance sheet and a dividend growth profile most investors are after.

In fact, for 51 consecutive years Fortis has raised its dividend in the 5%-7% range. That’s the kind of dividend growth I’m after personally. And that’s not even touching on the company’s growth prospects moving forward.

For those who believe the AI revolution is the real deal, and we’re going to need a lot more power to support this buildout, Fortis is a great way to play this trend over the long-term. 

Citigroup (C)

Next on this list of dividend growth stocks that long-term investors should consider is banking giant Citigroup (NYSE:C). 

Over the course of the past decade, Citigroup’s dividend has increased by 50%. That’s impressive, and given the impressiveness of Citigroup’s underlying fundamentals and its recent earnings (which showed blowout record revenue and earnings for the third quarter), 

With the company bringing in exactly $1 billion more than analysts estimated (at $22.09 billion versus estimates of $21.09 billion), and with the company’s EPS coming in at $2.24 compared to expectations of $1.90, this is a company that’s clearly firing on all cylinders. With services and banking revenues surging alongside capital markets, Citigroup has become one of the best performers in the financials sector that’s worth considering.

There are many ways to play the rise of AI and various innovations within the capital markets. Right now, Citigroup is perhaps my top pick in this sector for investors looking for solid underlying performance and capital appreciation, alongside very robust dividend growth over time. 

Broadcom (AVGO)

Perhaps the most intriguing pick on this list of companies is Broadcom (NASDAQ:AVGO). That’s partly because Broadcom currently pays investors a dividend yield of only 0.7%.

That said, over the course of the past decade, Broadcom has managed to increase its dividend by 34% over the course of the past decade. 

And the good news for investors in this stock is just how astronomical its growth has been over the course of the past decade. Indeed, one decade’s worth of dividend growth is one thing, but Broadcom’s stock chart shown above highlights just how powerful of a catalyst AI has been for the chip maker.

Currently, the market appears to be considering a future in which multiple semiconductor makers can be winners. If that’s the case, Broadcom certainly looks like a solid pick right now.