Dividends are nice. But do you know what's even nicer? Fast-growing dividends. That's especially true with inflation eroding the purchasing power of your money.
The good news for income investors is that several great stocks on the market continue to steadily increase their dividend payouts. Here are three top dividend growth stocks to buy in 2024.
1. AbbVie
With a dividend yield of 4%, AbbVie (ABBV -4.58%) certainly attracts the attention of many income investors. However, that juicy yield doesn't tell the full story about just how attractive the big drugmaker's dividend program really is.
AbbVie belongs to the elite group of stocks known as Dividend Kings. To qualify for membership, a company must have 50 consecutive years of dividend increases. AbbVie's streak currently stands at 52 years. We're not talking about puny dividend hikes. Since spinning off from Abbott in 2013, AbbVie has grown its dividend by more than 287%. Over the last five years, the company's dividend has increased by nearly 45%.
The main knock against AbbVie is that its revenue and earnings are declining -- along with its share price. Why? The company's top-selling drug, Humira, now faces biosimilar competition. But that's not a reason to stay away from this dividend growth stock.
AbbVie expects to return to strong growth in 2025. It already has two successors to Humira on the market (Rinvoq and Skyrizi). These two drugs should generate greater combined annual sales than Humira did at its peak. In addition, AbbVie has several other growth drivers, notably including migraine drugs Qulipta and Ubrelvy.
2. Bank of America
You won't get as big of a dividend yield with Bank of America (BAC -0.21%) as you will with AbbVie. However, the big bank's dividend currently yields over 2.8%, which isn't bad at all. BofA also isn't a Dividend King as AbbVie is.
What you will get with Bank of America, though, is a strong recent track record of dividend growth. The company has boosted its dividend payout by 60% over the last five years. At that pace, your dividend income will double every seven or so years.
You also get a highly innovative leader in the financial services industry by buying BofA stock. Don't take my word for it. Just look at a few of the accolades the company received in 2023: best bank in North America, best consumer digital bank in the U.S., best national private bank, the world's best digital bank. And that's just the tip of the iceberg.
Some might worry that the potential for lower interest rates in 2024 could hurt Bank of America. I have two responses. First, rate cuts are double-edged swords that also help big banks like BofA by spurring economic growth. Second, it's best to take a long-term view rather than only look at the short term. Bank of America is well-positioned for success in the years ahead. I expect it to deliver solid returns, and -- more importantly for income investors -- growing dividends.
3. Lowe's
There's another Dividend King in addition to AbbVie that I rank as a top dividend growth stock to buy in 2024. Lowe's (LOW -0.04%) has increased its dividend for 51 consecutive years. With a dividend payout ratio of roughly 33%, the home improvement retailer appears to be in a great position to keep that streak going.
Granted, Lowe's dividend yield of just under 2% isn't going to fire up too many investors. Here's something that might, though: The company has increased its dividend by a whopping 129% over the last five years.
Lowe's valuation looks quite attractive as well. Shares trade at a forward price-to-earnings multiple of 16.2. By comparison, the S&P 500's forward P/E is nearly 21.4.
The potential for interest rate cuts in 2024 could also provide a tailwind for the housing market. That could directly benefit Lowe's as homeowners spruce up their existing homes before buying a new house. Over the longer term, I expect the stock to continue delivering market-beating total returns just as it has done in recent years, albeit not in 2023.
