Dividend stocks have been a key driver of U.S. stock market returns for over a century. In fact, dividends have accounted for a whopping two-thirds of the market's total returns since 1900. Among dividend stocks, those that consistently raise their payouts to shareholders have also proven to be superior performers, relative to most other asset classes, over the long term.
These "dividend growers" are typically high-quality businesses that can deliver solid revenue growth and robust free cash flows in various economic conditions. Here are two all-star dividend growers that have a proven track record of delivering above-average returns for long-term shareholders.
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One of pharma's fastest dividend growers
AbbVie (ABBV -4.58%) is an immunology powerhouse. The company's flagship medication, Humira, has been the gold standard for many years in terms of effectiveness and safety for a variety of indications, and now AbbVie is in the process of expanding its immunology footprint with the successful launches of Rinvoq and Skyrizi.
AbbVie projects that these new additions to its immunology portfolio will generate a combined $27 billion in sales by 2027. If this forecast holds, the drugmaker should be able to easily overcome the loss of patent protection for Humira, along with the declining sales of some of its key oncology assets.
What makes AbbVie a standout dividend growth? Since 2014, the drugmaker has boosted its annual dividend distribution at a compound annual growth rate of 13.9%. That's one of the fastest rates, both within the large-cap pharmaceutical space and the landscape of blue chip dividend stocks more broadly.
Now, AbbVie does have a hefty payout ratio of 217% at the moment, and it is working through a revenue trough stemming from Humira's patent expiration. But the company's status as a Dividend King (a company with a 50-year-plus track of dividend increases) and management's commitment to the program should reassure investors worried about a reduction to the payout.
A wide moat benchmark and financial ratings business
S&P Global (SPGI 0.07%) is a leading provider of credit ratings, benchmarks, and data analytics for the global financial markets. Despite its low profile in the financial media, the company has delivered stellar returns to its shareholders over the past 10 years, thanks to its strong competitive position in the benchmarks industry, its diversified and growing revenue streams from credit ratings and data analytics, and its disciplined capital allocation strategy.
Digging deeper, the company is poised to deliver 12.4% top-line growth throughout 2024 and 2025. That's a blistering revenue growth rate for a company with a $143.8 billion market cap.
SPGI Total Return Level data by YCharts
One of S&P Global's key features as an investing vehicle is its potent dividend program. It sports an impressive 10-year dividend growth rate of 11.7%, a reasonable payout ratio of 46%, and a wide economic moat, due to the high switching costs and network effects associated with many of its business segments.
This ensures that the company will continue to generate high returns on invested capital and free cash flow for years to come. Therefore, S&P Global is an excellent choice for investors who are looking for a reliable dividend grower with a solid growth outlook and a durable business model.
