Dividend-paying companies can form the bedrock of a diversified investment portfolio. That's because the best dividend stocks can provide you with a powerful way to protect and grow your wealth. They can also deliver a steadily growing stream of cash income along the way.
If that sounds appealing, read on to learn about two of the most attractive dividend growth stocks available in the market today.
The farming equipment leader
Conflict in Europe is wreaking havoc on supply chains that were already under pressure from pandemic-related challenges. That's fueled a surge in commodity prices. But while input cost inflation is taking a toll on many companies' profit margins, Deere (DE -1.24%) is likely to benefit from rising food prices.
Higher prices for corn, wheat, and other grains are boosting profits for farmers. That's allowing them to invest in new equipment to further improve the efficiency and profitability of their farming operations. That's where Deere comes in.
Deere is imbuing increasingly advanced technology into its equipment that enables farmers to boost yields, reduce fertilizer usage and waste, and achieve sustainability goals. This technological prowess is widening Deere's lead over its less tech-focused rivals. It's also strengthening its brand and pricing power -- at a time when U.S. food production is becoming only more vital due to major shortages in international markets.
Business, in turn, is booming. Deere's revenue jumped 24% to $44 billion in fiscal 2021, which ended on Oct. 31, while its net income soared 117% to $6 billion. Looking ahead, management expects Deere's net profits to grow to as much as $7.1 billion in fiscal 2022.
With its profits surging, Deere has ramped up its capital returns to shareholders. Its stock currently yields a modest 1%, but that's largely a function of its strong share price appreciation of over 400% in the past 10 years. Deere has more than doubled its dividend payout over the past decade, and investors can expect plenty more increases in the coming years.
The railroad titan
Union Pacific (UNP -1.75%) is another dividend stalwart that can add ballast to your portfolio during these challenging times. The company operates one of the largest railroad networks in the U.S. -- at a time when rail-based shipping services are becoming an increasingly vital component of the country's supply chain.
Strict regulations and intense homeowner opposition make it difficult to build new freight railways. Union Pacific's railroad network, in turn, has become nearly irreplaceable. That gives it a powerful competitive advantage and strong pricing power.
The ability to raise prices without overly denting shipping volumes has allowed Union Pacific to grow its sales and profits during the pandemic. Its revenue rose 12% year over year to $21.8 billion in 2021, while its operating income climbed 15% to $9.3 billion. Better still, Union Pacific's earnings per share, which were boosted by $7.3 billion in stock buybacks, grew an even more impressive 21% to $9.95.
Looking ahead, shipping volumes should increase as the pandemic subsides and the economy recovers. That, combined with additional efficiency gains, should lead to more profit and dividend growth ahead. Thus, the railroad giant should have little difficulty extending its incredible streak of 123 straight years of dividend payments -- and its shares already yield a solid 2%.