When it comes to building a passive income stream, dividends are a popular choice among investors. Not only do they provide a consistent source of income, but they also offer a way to benefit from an investment in multiple ways. When considering dividend-paying stocks, it is important to focus on those that have a history of increasing their payouts. These stocks reflect a company’s commitment to rewarding shareholders and their ability to generate consistent profits. In this article, we will take a closer look at three dividend growth stocks that not only have a strong history of increasing dividends but also sport a favorable Zacks Rank, making them attractive investments for passive income seekers.
Aflac is an American insurance company that specializes in supplemental insurance. It is a member of the elite Dividend Aristocrats group, which signifies companies that have increased their dividends for at least 25 consecutive years. This demonstrates Aflac’s commitment to rewarding shareholders. Currently ranked as a Zacks Rank #1 (Strong Buy), Aflac has seen positive earnings estimate revisions across all timeframes. Aflac’s dividend yield is a solid 2.2% annually, with a sustainable payout ratio of 30% of its earnings. Over the past five years, the company’s dividend has grown at an impressive annualized rate of 12%. These factors make Aflac an attractive choice for investors seeking dividend growth and stability.
Caterpillar (CAT): A Global Leader in Construction and Mining Equipment
Caterpillar is a world-leading manufacturer of construction and mining equipment. It is another member of the elite Dividend Aristocrats group, emphasizing its commitment to increasing dividends over time. Caterpillar is currently ranked as a Zacks Rank #1 (Strong Buy), with positive earnings expectations in recent months. The company’s dividend yield is currently 1.9% annually, and its payout has grown at a 7.4% annualized rate over the past five years. What sets Caterpillar apart is its favorable valuation, with earnings projected to climb 40% in the current year on higher revenues. With a forward earnings multiple below its historical median and industry average, Caterpillar presents an attractive opportunity for dividend growth investors.
Applied Materials (AMAT): Providing Manufacturing Solutions to the Semiconductor Industry
Applied Materials is a leading provider of manufacturing equipment, services, and software for the semiconductor industry. Ranked as a Zacks Rank #2 (Buy), Applied Materials has experienced positive earnings expectations across all timeframes. While the company’s current dividend yield is 0.9%, it has maintained a sustainable payout ratio of 16% of its earnings. What makes Applied Materials an interesting choice for dividend growth investors is its impressive five-year annualized dividend growth rate of 6.5%. Additionally, the company’s trailing twelve-month return on equity is above the industry average, reflecting its efficient use of assets to generate profits. With its positive growth trajectory, Applied Materials offers both dividend growth potential and capital appreciation opportunities for investors.
Bottom Line: Consistent Dividend Growth and Favorable Ranks Make These Stocks Attractive Choices
Investing in companies that consistently increase their dividend payouts is a smart strategy for passive income seekers. The three stocks mentioned above, Aflac (AFL), Caterpillar (CAT), and Applied Materials (AMAT), not only have a strong track record of increasing dividends but also have favorable Zacks Ranks. These stocks provide an opportunity to earn passive income while benefiting from potential capital appreciation. By investing in dividend growth stocks like these, investors can build a reliable and growing source of income over time.
Disclaimer: The views and opinions expressed in this article are solely those of the author and do not reflect the views of Nasdaq, Inc.