Dividend stocks can be worth investing in, even if they don't offer big yields. That's particularly the case when it comes to companies that regularly raise their payouts. Although your initial yield may be low, you can be collecting much more in dividends over the years if you invest in dividend growth stocks.
A couple of impressive dividend growth stocks are Zoetis (ZTS +1.00%) and Mastercard (MA 4.25%). Both companies doubled their quarterly dividend payments in the past five years.
1. Zoetis
Zoetis is a healthcare company that makes vaccines and medication for livestock and companion animals. It's a good type of business to invest in since demand for the types of products it makes is likely to remain strong as the population expands and the need to care for livestock and companion animals increases as well.
NYSE: ZTS
Key Data Points
From $5.3 billion in revenue in 2017, Zoetis' sales top line grew to $8.1 billion in 2022. This year, the company anticipates operational revenue growth of between 6% and 8% and for its earnings to rise at a similar rate.
At 0.9%, the stock doesn't offer much of a yield today and that is well below the S&P 500's average of 1.5%. But the company has grown its payout aggressively, with today's quarterly per-share dividend of $0.38 being nearly three times what the company was paying shareholders just five years ago.
ZTS Dividend data by YCharts
The great news for investors is that with a payout ratio of only 30%, there's still plenty of room for Zoetis to keep bumping up its payouts for the foreseeable future. The company doesn't need any spectacular growth to be able to raise its dividend. While the yield may be low right now, it may not stay that way for long.
The only negative about the stock right now is that it's trading at a hefty 39 times earnings and nearly 18 times its book value. It may be a pricey stock to own, but if you're willing to hang on to it for years, it could still prove to be a worthwhile investment, especially given its growing dividend.
2. Mastercard
Credit card company Mastercard runs a business that I think will never struggle with demand. It's an industry leader and consumers have grown accustomed to using credit cards -- whether it's for the sake of accumulating points or simply out of necessity to help make ends meet. And the company is also trying to make it easier for consumers to make payments, announcing plans last year for biometric payment methods that will allow a consumer to pay with their hands or face.
NYSE: MA
Key Data Points
In a span of five years, Mastercard's revenue increased by 78% to $22.2 billion in 2022. And during that time, net income has more than doubled to just under $10 billion. Mastercard has also doubled its dividend during that stretch, although its yield remains even lower than Zoetis' at right around 0.6%.
MA Dividend data by YCharts
Mastercard's payout ratio is incredibly low at 20%, however, and so it wouldn't be surprising for the credit card company to also continue raising its payouts in the future.
At 40 times earnings, Mastercard isn't a cheap stock to own. It's another investment that may take a while to pay off, but the potential is there for investors to earn a great return -- both from the dividend growth and the opportunities within the industry that could send the company's earnings (and valuation) higher in the years ahead.
