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Top Dividend Growth Stocks for Building Long-Term Wealth
While many investors pursue short-lived market trends, dividend growth investing offers dependable value. Specifically, elite dividend growth stocks, characterized by five-year dividend growth rates exceeding 6% and payout ratios below 75%, have consistently outperformed the benchmark S&P 500.
This outperformance highlights a key insight about exceptional companies. Businesses that manage to grow dividends faster than 6% annually, while keeping their payout ratios conservative, enjoy two vital advantages: enhanced earnings potential and disciplined capital allocation. Importantly, these traits often indicate companies protected by strong economic moats, pricing power, and regulatory barriers that rivals find hard to breach.
Robust Investment Opportunities
For investors wanting to build wealth or generate consistent passive income, the following seven blue-chip dividend stocks meet these criteria. Each company pairs elite dividend growth with strong balance sheets and leading market positions, promising long-term wealth accumulation.
American Express: A Financial Powerhouse
American Express (NYSE: AXP) operates a closed-loop payment network and offers premium financial services. This credit card leader presents a modest 1.09% dividend yield, backed by a conservative payout ratio of 20.4%, which allows room for future increases.
Over the past decade, the company has achieved a 10.8% annualized dividend growth rate, demonstrating its commitment to returning capital to shareholders. Priced at 19.8 times forward earnings, it trades at a slight discount to the S&P 500’s 20.7 times. Thus, American Express stands as a value stock offering double-digit dividend growth within the expanding digital payments sector.
Visa: The Global Payment Leader
Visa (NYSE: V) operates the largest payment processing network in the world, linking consumers, merchants, and financial institutions across over 200 countries. With a dividend yield of 0.65% and a payout ratio of 22.3%, Visa’s model supports long-term sustainability.
The company has recorded a remarkable 17.4% annual dividend growth rate over the past decade, showcasing its focus on enhancing shareholder value. At 31.5 times forward earnings, Visa trades at a premium compared to the broader market, justified by its consistent growth and exceptional profitability within the expanding digital payments landscape.
Costco: Retail Excellence with Subscription Focus
Costco (NASDAQ: COST) utilizes a membership warehouse model to achieve consistent revenue and a customer retention rate exceeding 90%. The company offers a 0.51% dividend yield, supported by a conservative payout ratio of 27%, ensuring stability.
With a 10.1% annual dividend growth rate over the last decade, Costco demonstrates its steady commitment to rewarding shareholders. However, it does command a premium valuation at 48.7 times forward earnings. This is due to exceptional operational execution and ongoing market share gains across various economic conditions.
Target: Resilient Retailer with Strong Dividends
Target (NYSE: TGT) stands out in retail through exclusive brand partnerships and strategic store placements nationwide. The company provides a substantial 4.5% dividend yield, supported by a payout ratio of 50.1% that balances reinvestment with shareholder returns.
Its 8% annual dividend growth rate over the last decade reflects management’s dedication to shareholder value. Trading at 10.5 times forward earnings, Target offers compelling value with a mix of income and consistent growth, even amid fierce competition in retail.
S&P Global: The Leader in Financial Intelligence
S&P Global (NYSE: SPGI) provides essential financial intelligence through credit ratings and data services that inform global markets. With a 0.73% dividend yield and a conservative payout ratio of 29%, the company is positioned for future growth.
Its 11.9% annual dividend growth rate over the last decade highlights a strong commitment to increasing returns to shareholders. Priced at 30.8 times forward earnings, S&P Global commands a premium for its leadership in credit ratings and recurring revenue streams.
Nvidia: Driving the AI Revolution
Nvidia (NASDAQ: NVDA) is renowned for its advanced graphics and computing solutions that power AI and next-generation applications. Although it offers a minimal 0.03% dividend yield with a low 1.16% payout ratio, Nvidia prioritizes reinvestment for growth.
With a remarkable 16.7% annual dividend growth rate over the last decade, Nvidia reflects a balanced approach focused on capital appreciation. Priced at 31.4 times forward earnings, it represents a compelling option for investors interested in technology’s future.
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Nvidia’s Premium Valuation Highlights Semiconductor Market Dominance
Nvidia commands a notable premium over the benchmark S&P 500, supported by its stronghold in AI computing, data center acceleration, and advanced graphics technology. These segments are pivotal in driving the next computing revolution.
ASML: Dominating Semiconductor Equipment Manufacturing
ASML (NASDAQ: ASML) is a leader in manufacturing advanced lithography systems essential for producing sophisticated semiconductor chips used across computing, mobile, and AI applications. The company boasts a respectable 1.12% dividend yield, backed by a conservative 28.5% payout ratio. This strategy allows for flexibility in future investments.
Over the past decade, ASML has achieved an impressive annual dividend growth rate of 24.7%, leading among its peers. This growth underscores management’s commitment to enhancing shareholder value. Trading at 28 times forward earnings, ASML’s stock reflects a premium valuation compared to the broader market. The company’s dominant market position and ongoing innovations justify this valuation, solidifying its role in the global chip supply chain.
Assessing American Express as an Investment Option
Before investing in American Express, consider the following:
The Motley Fool Stock Advisor analyst team has identified what they believe are the 10 best stocks for investors right now, and American Express does not appear on the list. The selected stocks are poised for significant returns in the coming years.
For example: If you had invested $1,000 in Netflix after it made the list on December 17, 2004, your investment would be worth $642,582 today. Similarly, an investment of $1,000 in Nvidia on April 15, 2005, would now be valued at $829,879.
The Stock Advisor boasts an impressive average return of 975%, significantly outperforming the S&P 500’s 172% returns. Stay informed about the latest top listings by joining the Stock Advisor.
*Stock Advisor returns as of May 12, 2025
George Budwell holds positions in Costco Wholesale, Nvidia, Target, and Visa. The Motley Fool has positions in and recommends ASML, Costco Wholesale, Nvidia, S&P Global, Target, and Visa. The Motley Fool maintains a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
