Dividend growth stocks offer long-term investors the best of both perspectives. You receive a steady income from your investments while having the potential to outperform the market. Growth stocks without dividends mean you only earn a return on your investment when you sell shares. Dividend income stocks have high yields but don’t offer much in returns beyond dividend payments.
Investors can choose from some of the best dividend growth stocks to buy. Here are three to consider.
Broadcom (AVGO)
Broadcom (NASDAQ:AVGO) is a top semiconductor stock at the center of the artificial intelligence (AI) boom. The stock is up by 109% over the past year and has gained 337% over the past five years.
VMware has also contributed to the company’s growth. Revenue increased by 34% year-over-year (YoY) in the first quarter of fiscal 2024. The corporation anticipates generating $50.0 billion in revenue in fiscal 2024.
The company’s semiconductor solutions segment only increased by 4% YoY, but the 153% YoY surge in infrastructure software revenue was more encouraging. It’s a testament to how much the VMware acquisition has already strengthened Broadcom’s underlying business.
The corporation also had enough funds to buy back $8.29 billion worth of its stock. Despite the impressive gains, Broadcom offers a respectable 1.59% dividend yield. The company hiked its quarterly dividend from $4.60 to $5.25 per share in 2023, a 14.1% YoY increase. Those types of increases are common for the tech giant.
Cintas (CTAS)
Not every growth story revolves around a tech company. Cintas (NYSE:CTAS) offers business and safety supplies. The firm recently announced earnings that sent its stock soaring up 8%. Revenue increased by 9.9% YoY in the third quarter of fiscal 2024. Meanwhile, net income jumped by 22.0% YoY.
Cintas also increased its dividend by 17.1% YoY and paid an aggregate quarterly cash dividend of $137.6 million to shareholders. The annual dividend per share is currently $5.40. Cintas has maintained a compounded annual growth rate of 20.46% over the past five years for its dividend.
The dividend yield is only 0.79% at the moment, but investors get a company that regularly outperforms the stock market. Shares are up by 50% over the past year and 236% over the past five years. Profit margin expansion can help the company deliver higher returns for shareholders and give the firm an opportunity to continue with its dividend hikes.
American Express (AXP)
American Express (NYSE:AXP) is another dividend growth stock that combines a respectable yield with a solid growth rate and stock gains. The dividend yield currently stands at 1.23% for the $164 billion corporation. Shares trade at a 20 P/E ratio and have gained 106% over the past five years.
American Express makes money from credit and debit card transactions. As more people use their credit cards and make more expensive orders, American Express stands to benefit. That scenario played out in the fourth quarter of 2023. Revenue increased by 11% YoY while net income grew by 23% YoY.
The fintech firm’s guidance suggests the company will achieve a growth rate in the mid-teens for EPS and 10% revenue growth for several years. American Express currently projects that those growth rates will continue beyond 2026. The company hiked its dividend by 17% in 2024. The quarterly dividend payment is currently $0.70 per share.
On this date of publication, Marc Guberti held a long position in AVGO. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.