Investing in high-yielding dividend stocks can be an excellent way to generate recurring income. But an even better option for investors is to target high-yielding stocks that also grow their dividend payments. In those situations, your dividend income will rise over time, which can be incredibly valuable in helping to offset the effects of inflation.
Three dividend growth stocks that can be excellent long-term buys are Coca-Cola (KO 0.91%), Verizon Communications (VZ 2.15%), and ExxonMobil (XOM 1.63%). Here's a closer look at what makes these stocks so appealing for dividend investors.
NYSE: KO
Key Data Points
Coca-Cola
There are few brands in the world as strong as Coca-Cola. The company's soft drinks are staples in homes not just in the U.S. but all over the world. Even though the business may not be a growth machine, it's still generating some solid results. For 2024, the company is expecting organic revenue growth of around 10% as raising prices due to inflation hasn't adversely impacted its operations.
When the company reports earnings later this month, it's also probable that Coca-Cola will extend its dividend growth streak to 63 years. Last year, it bumped up its dividend by 5.4% and there's virtually no reason to expect that its streak is going to end anytime soon. The big question mark is really how much of an increase it will be. The company's payout ratio is a tad high at around 80% of earnings so management may want to be a bit conservative this time around, especially with the threat of a trade war and tariffs potentially impacting its business in future quarters.
For long-term investors, however, this still looks like a solid business to invest in for the long haul. The stock's dividend yields an attractive rate of 3.1%, which is more than double the S&P 500 average of 1.2%.
NYSE: VZ
Key Data Points
Verizon Communications
You can collect an even higher yield with Verizon stock, which today is paying 6.9%. Investors haven't been all that excited with the business given its modest growth and with high interest rates making capital-heavy companies such as Verizon less appealing, especially given their high debt loads.
But even if interest rates don't drastically come down this year, the business is still solid and the dividend can rise higher. Coming off a year of single-digit growth in 2024, Verizon is also projecting that for 2025, its wireless service revenue will grow by more than 2%. More importantly, Verizon is also expecting strong free cash flow of at least $17.5 billion for the year, which is well above the less than $12 billion it pays out in dividends over the course of a full year.
In September 2024, Verizon announced it was increasing its dividend for an 18th consecutive year, raising the payout by a relatively modest 1.9%. But with such a high yield already, investors arguably don't need a huge increase to the payout for the dividend to still be an attractive one to hang on to.
NYSE: XOM
Key Data Points
ExxonMobil
Oil and gas giant ExxonMobil has been a solid dividend stock to own for years. The industry behemoth has increased its annual dividend for 42 straight years. Today, its dividend yields 3.6%, making this another above-average dividend growth stock to hold in your portfolio.
There will inevitably be volatility in the business due to fluctuating commodity prices and their impact on its earnings. But the company's ability to continually raise its dividend for decades amid a myriad of industry and economic conditions is a testament to Exxon's overall size and strength. And with the business still investing into growing its operations and trying to become more efficient, there's little reason to be concerned; Exxon is targeting an annual earnings growth rate of 10% through to 2030.
Although the company's diluted earnings per share fell by $0.20 during the last three months of 2024, at $1.72 that's still far higher than the rate of the company's current quarterly dividend -- $0.99. And with more growth ahead for Exxon, more rate hikes could be coming for investors in the future.
