Dividend growth investing is a strategy that can help you achieve financial independence -- a state in which your monthly passive income is equal to or greater than your monthly expenses. Building a balanced portfolio with dividend income coming in every month is a surefire way to reach financial independence in the long run.
If you're looking to build a dividend growth stock portfolio or want to strengthen your existing portfolio, here are three quality dividend growth stocks that could be a good place to start.
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1. AbbVie: Fully prepared to build a bright future
Unfortunately, illnesses such as cancer and autoimmune conditions (like rheumatoid arthritis and inflammatory bowel diseases) will eventually impact most people at some point in their lives. The good news is that pharmaceutical companies such as AbbVie (ABBV -2.77%) are working to improve patients' quality of life.
The company generated $58.1 billion in total net revenue in 2022, which makes it one of the largest drugmakers in the world. AbbVie's top-selling drug, arthritis-fighting Humira, will face significant competition from biosimilar drugs as the year unfolds. But with its latest generation of immunology drugs like Skyrizi and Rinvoq, the company looks poised to rebound from its anticipated decline in net revenue and non-GAAP (adjusted) diluted earnings per share (EPS) starting in 2024.
Income investors will appreciate the stock's well-covered and market-beating 3.7% dividend yield, which is double the S&P 500 index's 1.6% yield. AbbVie's dividend is typically paid in the middle of the middle month of each quarter (February, May, August, and November). Investors can scoop up shares of AbbVie at a forward price-to-earnings (P/E) ratio of 14.3, which is only slightly above the drug manufacturing industry's average forward P/E of 13.6.
2. Vici Properties: Assets that provide timeless memories to tenants' customers
There's a quote attributed to Mark Twain that supports the idea of investing in real estate: "Buy land, they're not making it anymore." Whether you're a seasoned investor or a complete novice, you intuitively know that location is everything. And with nearly 50 properties that are known worldwide, Vici Properties (VICI 0.46%) owns some of the most valuable and irreplaceable land in the world. This includes the likes of Caesars Palace Las Vegas (operated by Caesars Entertainment) and MGM Grand Las Vegas (operated by MGM Resorts International).
A recent third-party research study found that nearly three-quarters (74%) of consumers value experiences more highly than possessions. Coupled with the high name recognition of Vici Properties' gaming facilities, this explains how the company has collected 100% of rent due from tenants since its formation in 2017.
Vici Properties currently offers income investors a 4.8% dividend yield. The company's generous dividend is also secure, with the payout ratio clocking in at 76%. Its dividend is paid in the first week of the quarter (January, April, July, October). Yield-focused investors can pick up shares of the stock at a reasonable valuation: Its forward ratio of price to adjusted funds from operations per share is 15.4.
3. Broadcom: A blue chip tech giant
Laptops, smartphones, modern cars, and medical equipment couldn't function without one key component: microchips. And Broadcom (AVGO 2.11%) is one of the world's largest semiconductor companies that produces these chips on a large-scale basis.
Rising consumption of consumer electronics devices around the world is a major growth catalyst for the global semiconductor market. This is why market researcher Fortune Business Insights expects the global semiconductor market to grow by 12.2% annually from $573.4 billion in 2022 to $1.4 trillion in 2029. As a result, analysts believe that Broadcom's earnings will rise by 9.4% annually over the next five years.
Paired with a 2.9% dividend yield, that provides a nice combination of starting income and growth potential. Although its fiscal year ends in October, Broadcom's dividend is paid at the end of each calendar quarter (March, June, September, December). Investors can snatch up shares of the stock at a forward P/E of 14.5, which is less than the 19.1 average forward P/E of the semiconductor industry.
