Income investors are typically faced with a trade-off when picking dividend stocks. On the one hand, high-yield dividend stocks provide strong starting income at the cost of reduced future growth. On the other hand, high growth stocks often come with starting yields lower than the S&P 500 index.
Fortunately, some stocks offer the best of both worlds. Here are three dividend-paying stocks with solid growth prospects and yields that are double to triple the S&P 500's to consider purchasing right now.
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1. BlackRock
The first dividend stock to think about buying today is BlackRock (BLK -0.73%). With a current market capitalization of $109 billion and over $10 trillion in assets under management (AUM) at the end of 2021, BlackRock is comfortably the largest asset manager in the world.
As an asset manager, BlackRock generates its revenue and earnings from investment advisory fees that are linked to the company's AUM. Analysts believe that BlackRock will deliver 11% annual earnings growth through the next five years because corporate earnings and global stock markets will march higher over time.
And the stock's dividend has room to grow. BlackRock's dividend payout ratio was 42.2% in 2021. This enables the stock to retain more than half of its profits to repay debt, complete acquisitions, and execute share buybacks to drive future earnings growth. That's why I believe the stock can continue to hand out low double-digit annual dividend growth for the foreseeable future. Coupled with a market-topping 2.7% dividend yield, this makes BlackRock an excellent dividend growth stock.
Best of all, BlackRock trades at a forward price-to-earnings (P/E) ratio of 17.4. This is slightly below the 18.9 forward P/E ratio of the S&P 500 index. Simply put, BlackRock is an above-average quality stock priced at a below-average valuation.
2. Prudential Financial
The next dividend stock to contemplate purchasing now is the $43 billion (by market cap) insurer and asset manager Prudential Financial (PRU 0.17%). Prudential had more than $1.7 trillion in AUM at the end of 2021.
Like BlackRock, an investment in Prudential is a bet that global equity markets will advance higher over time. This will create an upward trajectory in the company's revenue and earnings as well.
What sets Prudential apart from BlackRock, however, is that it also is a life and disability insurer. Due to increasing demand for its asset management services and insurance products, analysts are forecasting that Prudential will produce 4% annual earnings growth over the next five years.
With a dividend payout ratio of 31.2% in 2021, the stock's dividend should keep up or grow slightly faster than its earnings. This is why I believe Prudential will hand out 4% to 5% annual dividend increases in the next several years. Factoring in the stock's market-crushing 4.2% dividend yield, this is an enticing mix of income and growth potential.
And all of this can be acquired by income investors at a lowly forward P/E ratio of 9.5, which is significantly lower than the broader market's valuation.
3. U.S. Bancorp
The final dividend stock to consider buying today is the $75 billion (by market cap) regional bank U.S. Bancorp (USB 1.04%). With $567 billion in total assets and over 2,250 banking offices in 26 U.S. states, U.S. Bancorp is among the largest regional banks in the country.
With inflation reaching a fresh 40-year high of 8.5% in March, the Federal Reserve will need to raise interest rates several more times this year and likely next year. This should translate into a meaningful growth catalyst for U.S. Bancorp, which is why analysts are anticipating 10% annual earnings growth for the next five years.
And because U.S. Bancorp's dividend payout ratio was a sustainable 34.5% in 2021, this should set up at least high single-digit annual dividend growth over the medium term. For a stock with a market-beating 3.6% dividend yield, this is an admirable dividend growth outlook.
Yield-hungry investors can snatch up shares of U.S. Bancorp at a forward P/E ratio of just 11.9, which makes it an interesting Buffett-backed stock to buy.
