These 3 Outstanding Dividend-Growth Stocks Could Fund Your Retirement

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Dividend-growth investing remains one of the most reliable paths to building lasting wealth in the stock market. The appeal of steady, rising income streams is particularly compelling for retirement planning. After all, traditional fixed-income investments often struggle to keep pace with inflation, making dividend-growth stocks an essential component of a well-designed retirement strategy.

While many investors chase high yields, the truly successful focus on companies that can sustain and grow their payouts over decades. This approach provides two key benefits: growing income to help maintain purchasing power during retirement and the potential for long-term capital appreciation as these companies reinvest in their businesses.

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The key lies in identifying businesses with conservative payout ratios, proven track records of distribution growth, and durable competitive advantages that protect their market positions. These characteristics help ensure the sustainability of dividend payments through various economic cycles.

More specifically, a conservative payout ratio below 50% provides a safety buffer during challenging times. Meanwhile, a multidecade history of annual increases demonstrates management’s commitment to shareholder returns.

Let’s examine three outstanding dividend-growth stocks that exemplify these crucial qualities, making them ideal candidates for a retirement portfolio.

Target (NYSE: TGT) is a dividend powerhouse with 53 consecutive years of payout increases. The retail giant currently sports an attractive 3.43% yield, along with a conservative 47.5% payout ratio. Target’s dividend has grown at a healthy 10.7% annual rate over the past five years, which is one of the fastest growth rates among big-box retailers.

The company’s shares trade at just 13 times forward earnings, well below the benchmark S&P 500‘s multiple of almost 24 at current levels. This sharp discount appears particularly compelling, given Target’s strong brand, extensive store network, and sophisticated supply-chain capabilities. What’s more, the stock’s 9.3% year-to-date decline through Dec. 2, 2024 has pushed Target’s valuation below historical averages:

TGT PE Ratio Chart
TGT Price-to-Earnings Ratio (P/E) data by YCharts.

Parker-Hannifin (NYSE: PH) has built an extraordinary 68-year streak of consecutive dividend increases. While Parker-Hannifin’s current 0.93% yield appears modest, the company sports a low 28% payout ratio and 13.9% five-year dividend growth rate that together signal substantial room for future hikes.

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