Wayne Gretzky probably had no idea just how often one statement he made would be quoted through the years. The legendary hockey player once said, "I skate to where the puck is going to be, not where it has been."
Dividend investors can take Gretzky's principle to heart. The best dividend stocks to buy are often the ones whose dividends are the most likely to grow in the future. With this in mind, here are my picks for the 24 top dividend growth stocks to buy and hold in 2024 (listed alphabetically by sector).
Consumer goods
I've lumped the consumer cyclical and consumer defensive sectors into one category for convenience. Several consumer-related stocks have delivered strong dividend growth in recent years and should keep the trend going. (All yields are as of this writing.)
| Stock | Dividend Yield | 5-Year Dividend Growth |
|---|---|---|
| 1. Hershey | 2.49% | 65.1% |
| 2. Lowe's Companies (LOW 1.36%) | 2.02% | 129.2% |
| 3. McDonald's | 2.29% | 43.9% |
| 4. Target | 3.17% | 71.9% |
Data source: Yahoo! Finance, YCharts.
Of this group, I especially like Lowe's. Its dividend yield isn't overly impressive. However, the company has delivered strong dividend growth. That isn't just the case over the last five years; Lowe's is a member of the elite group known as Dividend Kings with 51 consecutive years of dividend increases.
NYSE: LOW
Key Data Points
Lowe's ranks as the second-largest home improvement retailer. Its market leadership and scale of operations give it an advantage over smaller players.
I think that its long-term growth prospects look great. Homeownership in the U.S. is rising despite a housing shortage and the median age of homes in the country is now over 40 years. These factors bode well for the home improvement industry -- and for Lowe's, in particular.
Energy
You could argue that the dividend growth for the energy stocks I've included on the list isn't that great. And you'd be right.
| Stock | Dividend Yield | 5-Year Dividend Growth |
|---|---|---|
| 5. Enterprise Products Partners (EPD 0.45%) | 7.54% | 18.4% |
| 6. ExxonMobil | 3.92% | 15.9% |
Data source: Yahoo! Finance, YCharts.
So why did I pick these two stocks? I like their consistency. Enterprise Products Partners has increased its dividend for 25 consecutive years. ExxonMobil has increased its dividend for 41 consecutive years. My view is that the attractive dividends offered by the two companies will keep getting better and better for investors who buy and hold.
Enterprise Products Partners could be the better choice for income investors. Its yield is much higher, for one thing. More importantly, the midstream energy provider isn't as vulnerable to oil and gas price fluctuations. Enterprise generates solid cash flow from its 50,000-plus miles of pipeline regardless of what commodity prices are.
This stability shows up in the company's track record. Enterprise Products Partners' cash flow per unit increased during the financial crisis of 2007 and 2008 and declined only modestly during the oil price collapse of 2014-2017 and the COVID-19 lockdowns in 2020 and 2021.
Financial services
It's easy to find stocks in the financial services sector with strong dividend growth. My favorites are:
| Stock | Dividend Yield | 5-Year Dividend Growth |
|---|---|---|
| 7. American Express | 1.33% | 54% |
| 8. Bank of America (BAC 0.32%) | 3.02% | 60% |
| 9. Mastercard | 0.62% | 100% |
| 10. Visa | 0.78% | 108% |
Data source: Yahoo! Finance, YCharts.
American Express, Mastercard, and Visa are credit card giants with strong moats. Bank of America, though, looks like an especially good pick right now.
The company's dividend yield is quite attractive. So is its valuation: BofA shares currently trade at under 10 times expected earnings. That's on the low end of the bank's historical valuation range.
Another reason why Bank of America is a great stock to buy and hold for the long term, in my view, is the company's continual innovation. It's not surprising to me at all that BofA was named the best consumer digital bank in the U.S. and the most innovative bank in North America last year.
If that's not compelling enough, perhaps Warren Buffett's backing for BofA will be. The stock ranks as the second-largest holding in Berkshire Hathaway's portfolio. Buffett added even more to Berkshire's stake in Bank of America last year.
Healthcare
Income investors have liked the healthcare sector for a long time. They still should. That's especially the case with the following great stocks:
| Stock | Dividend Yield | 5-Year Dividend Growth |
|---|---|---|
| 11. AbbVie | 3.83% | 44.9% |
| 12. Johnson & Johnson | 2.97% | 32.2% |
| 13. KenVue | 3.81% | N/A |
| 14. Eli Lilly (LLY 1.65%) | 0.83% | 101.6% |
| 15. UnitedHealth Group | 1.43% | 108.9% |
Data source: Yahoo! Finance, YCharts. N/A = not available.
Note that there's no figure for KenVue's five-year dividend growth. The company spun off from Johnson & Johnson last year. However, my take is that any positives about J&J's dividend carry over to KenVue as well.
You might be surprised that Eli Lilly made the list with its puny dividend yield. However, the drugmaker's dividend is growing by leaps and bounds, a trend that I expect will continue well into the future.
NYSE: LLY
Key Data Points
More important than its dividend, though, are Lilly's overall growth prospects. Some analysts project that the company's tirzepatide products (Mounjaro for type 2 diabetes and Zepbound for weight loss) could achieve peak annual sales of more than $50 billion.
Those aren't Lilly's only key growth drivers, though. The company's lineup includes multiple products with fast-growing sales, including autoimmune-disease drug Olumiant and cancer drugs Verzenio, Retevmo, and Tyvyt.
As icing on the cake, Lilly could soon launch another potentially big winner -- donanemab. The U.S. Food and Drug Administration is scheduled to announce its approval decision on the drug in treating early Alzheimer's disease later in the first quarter.
Industrials
I only chose a couple of stocks from the industrials sector. However, investors have a lot to like about their dividends.
| Stock | Dividend Yield | 5-Year Dividend Growth |
|---|---|---|
| 16. Lockheed Martin (LMT 1.63%) | 2.76% | 43.2% |
| 17. United Parcel Service | 4.19% | 68.9% |
Data source: Yahoo! Finance, YCharts.
Both Lockheed Martin and UPS lagged behind the overall market last year. I like the two companies' dividend track records, though.
I'm particularly bullish about Lockheed Martin. In addition to its dividend program, the aerospace and defense company is committed to stock buybacks. Its board of directors increased the share repurchase authorization by $6 billion in October 2023.
Lockheed Martin's revenue growth has been lackluster. However, the company has a huge backlog that bodes well for its growth prospects in the future.
Real estate
Real estate investment trusts (REITs) continue to be a great source of income. There are many good REITs on the market, but I think four especially stand out.
| Stock | Dividend Yield | 5-Year Dividend Growth |
|---|---|---|
| 18. American Tower | 3.32% | 88.9% |
| 19. Innovative Industrial Properties (IIPR +1.86%) | 7.86% | 304.4% |
| 20. Mid-America Apartment Communities | 4.42% | 53.1% |
| 21. Public Storage | 4.07% | 50% |
Data source: Yahoo! Finance, YCharts.
Innovative Industrial Properties (IIP) really jumps out among this group. Not only does the cannabis-focused REIT offer an exceptionally high dividend yield, but it also has increased the dividend by a staggering amount in recent years.
NYSE: IIPR
Key Data Points
The main knock against IIP is that the stock hasn't performed all that well compared to the broader market. This is primarily a factor of the headwinds facing the cannabis industry, particularly a supply/demand imbalance that has driven cannabis prices down.
I suspect that the worst is over, though. IIP has weathered the storm relatively well despite some of its tenants experiencing financial difficulties. This stock comes with more risk than most of the others on the list, but it could also offer greater rewards if and when the U.S. cannabis market rebounds.
Technology
Tech stocks usually aren't known for their dividends. However, several stand out, in my view, for their dividend growth.
| Stock | Dividend Yield | 5-Year Dividend Growth |
|---|---|---|
| 22. Broadcom | 1.9% | 98.1% |
| 23. Microsoft (MSFT 0.60%) | 0.77% | 63% |
| 24. United Microelectronics | 7.54% | 515.3% |
Data source: Yahoo! Finance, YCharts.
United Microelectronics has an ultra-high dividend yield and jaw-dropping dividend growth over the last five years. But I especially like Microsoft right now despite its relatively low dividend yield.
For one thing, I'm confident that Microsoft's dividend will continue to grow. The tech giant's dividend payout ratio is a super-low 26%. This gives Microsoft considerable room to boost its dividend in the future.
The bigger plus for me, though, is that Microsoft is a top leader in nearly every hot technology under the sun. Artificial intelligence (AI) notably stands out with the company's partnership with OpenAI. Microsoft is also a major player in cybersecurity, gaming, quantum computing, and more.
Valuation could be a concern for some investors. Microsoft stock trades at nearly 35 times forward earnings. However, I think the company's long-term growth prospects make it worthy of consideration.
