If you’re looking for top dividend stocks to buy, you may be tempted to look at which high-yielding stocks are the safest ones to own. However, a better option may be to focus on dividend growth stocks. These are good investments to consider for a couple of reasons. The first is that these businesses prioritize dividend growth (which means your recurring income will rise), and the second is that it usually means their operations are also growing and in strong financial shape.
Some dividend growth stocks can mask their lackluster operations by just incrementally increasing their payout every year by just a single percentage point or less for the sake of keeping their dividend streaks going. However, the stocks listed here have made generous rate hikes.
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Visa (NYSE: V), UnitedHealth Group (NYSE: UNH), and FedEx (NYSE: FDX) have all increased their dividend payments by more than 90% in just five years. Here’s a closer look at why they can be excellent buy-and-hold income stocks.
You might overlook Visa as a possible dividend stock due to its modest yield of just 0.8%. But if not for the stock’s impressive 70% gains over the past five years, the yield would be higher than it is today. Visa has simply done an excellent job of growing its business (and its dividend) over the years.
The need for credit cards isn’t going away anytime soon, as more business is being done online. With Visa being a leading credit card provider, it’s in a prime position to continue to benefit from the industry’s growth. The company is coming off yet another stellar performance in its most recent fiscal year (ended Sept. 30) as net revenue rose by 10% to $35.9 billion and net income increased by an even higher rate of 14% as Visa’s bottom line totaled $19.7 billion.
With such strong margins and continued growth, it’s little wonder the company has been generous with its dividend hikes. In five years, Visa has nearly doubled its quarterly dividend from $0.30 to $0.59 today. For buy-and-hold investors, Visa is a no-brainer stock for both its terrific growth prospects and its rising dividend.
If you want a bit of a higher yield today, UnitedHealth Group’s 1.4% payout may be more appealing than Visa’s. It’s paying slightly more than the S&P 500 average yield of 1.2%.
The health insurance giant has been facing headwinds due to rising medical expenses. However, it has still been a terrific growth company as it has expanded operations through acquisitions, including LHC Group last year and Change Healthcare the year before that. It’s still eyeing more growth, but the Justice Department is currently trying to block its attempt to acquire home health company Amedisys. Investors, however, shouldn’t be surprised if there are more acquisitions in UnitedHealth’s future.
