When it comes to dividend-growing stocks, there is never a bad time to buy. These will keep you comfortable during a recession or a pandemic and will also give you tax advantages in case of qualified dividends. Additionally, investing in them promises a mix of capital appreciation and dividend growth, something investors will crave heading into the forthcoming presidential cycle.
Furthermore, with the state of the markets the way they are, there are plenty of tailwinds to take advantage of. Interest rates are going to reduce this year; there is plenty of traction in tech-led stock thanks to Nvidia (NASDAQ:NVDA), and inflation is weakening. Under these circumstances, there is no time like the present to invest in the best dividend-growing stocks to buy.
We will profile three names that operate in diverse sectors, ranging from retail to consumer discretionary to oil and gas, with a 53-year track record of raising distributions. The second is a legacy oil and gas player pivoting towards renewables. The last name we will dive into is a coffeehouse giant looking to regain its mojo after geopolitical tensions and sluggish consumer spending in China caused a hiccup in its plans.
Target (TGT)
Target (NYSE:TGT) starts this list of dividend-growing stocks to buy with a 21% YTD return and a forward yield of around 3%.
The retail corporation has hiked dividends for 53 years running, including a 20% rise in 2022. As a result, it cements its name as a Dividend King, with a three-year dividend growth rate at a healthy 18%, exceptional when juxtaposed against the 5% sector median number.
The dividend is safe since Target’s cash flow payout ratio is under 30%. Nine out of the past twelve quarters, or 75% of them, had favorable profit surprises.
Despite discretionary spending issues and theft, net income for the fourth quarter rose by nearly 58% to $1.38 billion. This was due, in large part, to improvement in traffic trends and curbside pickup. In addition, Target’s profits surged due to improved inventory management and lower expenses associated with the supply chain, freight, and e-commerce fulfillment.
With the help of new labels like Gigglescape and partnerships with high-end design houses like Diane von Furstenberg, the company hopes to draw in more customers thanks to reasonable costs. Recent efforts include the introduction of the affordable private brand Dealworthy and a new paid membership program called Target Circle 360.
The initiatives further build Target’s reputation as a forward-thinking enterprise. Internet sales accounted for almost one-fifth of overall sales in the fourth quarter, distinguishing it in the retail space.
Analyst estimates point to almost 8% upside for the stock.
Chevron (CVX)
Chevron (NYSE:CVX) stock is on a mini rally of sorts, with shares up 5% this year, offering a yield of nearly 4% to potential investors.
As a whole, CVX is doing well in this market due to a tightening of the global crude market, which is leading to an increase in oil prices. It exceeded analysts’ Q4 profit projections and raised dividends. However, Chevron’s profit was $21.3 billion, a considerable decline from 2022 earnings from oil production and gasoline refining.
The oil giant is also postponing development plans in its oil and gas production sector due to cost and timeline concerns.
On the bright side, Dividend Aristocrat Chevron declared an 8% rise in dividends and returned a record $26.3 billion to shareholders through buybacks and dividends despite a 40% decline in full-year earnings due to lower commodity prices, currency changes, and a $3.7 billion write-down.
Furthermore, oil and gas production soared to 3.12 million barrels daily in 2023, the company’s highest-ever output of natural gas and oil. The Permian basin’s output is anticipated to increase by 10%, and global output is expected to increase by 4% to 7%.
The company is also focusing on advancing energy solutions such as natural gas while leveraging robotic technology to increase the efficiency of its energy production processes.
Analyst upside for CVX is more than 12% based on a target price of $175.87.
Starbucks (SBUX)
For Starbucks (NASDAQ:SBUX), it’s new territory, as the coffee manufacturer missed revenue and profit projections for the first quarter of the fiscal year. The stock dropped on the miss, and the slashed guidance for full-year sales. Yet this is a tempting entry opportunity for value-seeking investors wishing to buy dividend-growing stocks.
The latest financials can be taken as an anomaly. CEO Laxman Narasimhan said the underwhelming results were largely due to a perceived mishandling of its response to geopolitical tensions and a more circumspect consumer mindset in China. In response, Starbucks intends to introduce additional drink options and use social media and marketing to address U.S. consumer attrition.
Company executives label the issues as “transitory.” The numbers support this narrative since Starbucks was on a three-quarter streak of beating analyst estimates before the latest financials.
In the meantime, the sales, EBITDA, EPS, and FCF three-year growth rates are 16%, 35%, 54%, and 221%, respectively. Every metric surpasses the majority of its sector. Starbucks also boasts a 13-year record of dividend increases. Additionally, its dividend growth rate over a ten-year period is around 17%, comfortably above the industry median of approximately 8%.
Starbucks is also in the middle of a huge shift, having launched the “Triple Shot Reinvention with two pumps,” under which the brand is looking to expand to 55,000 stores globally by 2030, unlocking $3 billion in savings over three years.
Starbucks, according to analysts covering the stock, holds almost 20% upside based on a target price of $107.58.
On the publication date, Faizan Farooque did not have (directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.