Dividend growth stocks can be powerful wealth-creating machines. Over the last 50 years, the average dividend grower in the S&P 500 has delivered a 10.2% annualized total return, according to Ned Davis Research and Hartford Funds. That's well above the returns of stocks with no change in their dividend policy (6.8%) and non-dividend payers (4.3%).
Oil giant ConocoPhillips (COP +2.86%) has a grand ambition for its dividend. The oil company aims to rank among the top 25% of dividend growers in the S&P 500. With its dividend already yielding 3.3% -- nearly three times higher than the S&P 500's roughly 1.1% yield -- it's the ultimate dividend growth stock to buy with $1,000 right now. At that investment level, ConocoPhillips would generate over $33 in dividend income in the first year.
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A high-octane dividend growth machine
ConocoPhillips has been a dividend growth machine in recent years. It has increased its ordinary base dividend payment every year for the past decade. The company has delivered sizable raises over the past few years (8% in 2025, 34% in 2024, and 14% in 2023). Additionally, it has made several variable dividend payments, which it made permanent via the big dividend boost in 2024.
The company expects to continue growing its dividend, aiming to deliver dividend growth within the top 25% of companies in the S&P 500. It has certainly achieved that goal in recent years, considering that the S&P 500 has delivered 5% compound annual dividend growth over the past five years.
NYSE: COP
Key Data Points
Ample fuel to continue increasing the dividend
ConocoPhillips remains in a strong position to continue delivering high-octane dividend growth. The oil giant has abundant low-cost oil and gas resources. It can currently generate enough cash to cover its capital expenditures at an average oil price in the mid-$40s. Adding in the dividend bumps that up by about $10 per barrel. With crude prices currently in the $60s, the company is generating significant excess free cash, which it's using to repurchase shares.
The oil company expects its breakeven level will fall significantly in the coming years as it completes its current slate of long-term capital projects. It's investing in several liquefied natural gas (LNG) projects and the Willow Oil project in Alaska. These projects will help add an incremental $6 billion to its annual free cash flow by 2029, assuming oil averages around $60 a barrel. That's a meaningful amount, considering it produced $6.1 billion in free cash flow through the first nine months of last year. It will help bring the company's already low breakeven level down to the low $30s by 2029, further supporting its ability to increase its dividend.
A high yield plus a high growth rate
ConocoPhillips offers investors a high-yielding dividend that it expects to grow at an above-average rate in the coming years. That should give the oil stock the fuel to produce robust total returns for investors. This income and growth combo makes ConocoPhillips the ultimate dividend growth stock to buy right now.
