10 Dividend Growth Stocks To Fill Out Your Portfolio

Photo by Adam Śmigielski on Unsplash

If you’re looking to add a great dividend growth stock to your portfolio let me tell you why you should consider one of the 10 stocks on today’s list.

In my opinion, all 10 of these companies are of high quality, they have a proven track record and the potential to deliver above average long-term returns.

Let me tell you who these companies are and why I like them.

1. Visa (V)

Track Record.

• Return since inception (CAGR) +20.26%

• Revenue growth - last 5 years (CAGR) +9.41%

• Levered FCF growth - last 5 years (CAGR) +11.42%

• Dividend growth rate - last 5 years (CAGR) +15.77%

• Gross Profit Margin - 97.8%

• Return on Invested Capital - 25.28%

• Payout Ratio 22.12%

• Dividend Yield 0.80%

Visa has rewarded long term shareholders with a market beating long-term return. The company has an exceptionally high gross profit margin and a generates a robust return on its invested capital. Investors can expect to see above average dividend growth from this modest dividend yielder.

I find Visa a very attractive buy below $300 with the stock currently priced around $268. Given the attractive valuation I expect Visa to deliver a market beating total long-term return of approximately 17% (CAGR).

2. Qualcomm (QCOM)

Track Record.

• Return since inception (CAGR) +20.57%

• Revenue growth - last 5 years (CAGR) +8.16%

• Levered FCF growth - last 5 years (CAGR) +5.62%

• Dividend growth rate - last 5 years (CAGR) +5.56%

• Gross Profit Margin - 55.89%

• Return on Invested Capital - 24.48%

• Payout Ratio 41.11%

• Dividend Yield 2.09%

Qualcomm has delivered a total return nearly double that of the S&P 500 since its inception. The company is well positioned to benefit from the AI boom that will likely continue in the future. While AI is still in its infancy we may continue to see amplified volatility in the sector, but from a long-term perspective the catalysts for above average growth are quite promising. Qualcomm has strong margins and generates a very healthy return on its invested capital.

While the company hasn’t been a dividend growth machine for quite some time now, it does sport a pretty attractive dividend yield relative to alternative semiconductors. It also has the potential to deliver exceptional long-term capital appreciation and should continue to payout higher dividends for years to come.

I find Qualcomm a very attractive buy below $180 with the stock currently priced around $174. Given the attractive valuation I expect Qualcomm to deliver a market beating total long-term return of approximately 16% (CAGR).

3. Nike (NKE)

Track Record.

• Return since inception (CAGR) +15.05%

• Revenue growth - last 5 years (CAGR) +5.6%

• Levered FCF growth - last 5 years (CAGR) +14.68%

• Dividend growth rate - last 5 years (CAGR) +11.01%

• Gross Profit Margin - 44.68%

• Return on Invested Capital - 24.35%

• Payout Ratio 38.61%

• Dividend Yield 1.98%

Nike is having a rather rough year, while the overall market has risen this popular shoe company is down nearly 23%. Zooming out further the stock is down more than 50% since its all-time high in late 2021. However, despite this pullback the company has still delivered a market beating CAGR above 15% since its inception. Fundamentally the company still looks quite strong and it’s valuation has only improved as the stock continued its descent. While its not pleasant to watch your investment dwindle in value I believe the stock still presents a good long-term opportunity.

I find Nike a very attractive buy below $150 with the stock currently priced around $84. Given the attractive valuation I expect Nike to deliver a market beating total long-term return of approximately 15% (CAGR).

4. Starbuck’s (SBUX)

Track Record.

• Return since inception (CAGR) +19.36%

• Revenue growth - last 5 years (CAGR) +6.95%

• Levered FCF growth - last 5 years (CAGR) -7.51%

• Dividend growth rate - last 5 years (CAGR) +9.63%

• Gross Profit Margin - 27.61%

• Return on Invested Capital - 15.37%

• Payout Ratio 63.65%

• Dividend Yield 2.96%

While it would have been much more advantageous to snap up Starbuck’s before it announced its new CEO and the share price spiked last week, I think the stock still looks attractive from a long-term perspective. Year-to-date the share price is still down 3%, over the past 12-months the share price is also down 3% and to for that matter the past 5 year price return is also minus 3%. This means the company is valued around the same price it was prior to the pandemic.

I pass several Starbuck’s on my way to work each morning and the drive-thru line is always packed. The company has a strong business model, a loyal customer base and with the right leadership it has the potential to deliver above average returns in the future.

I find Starbuck’s a very attractive buy below $115 with the stock currently priced around $93. Given the attractive valuation I expect Starbuck’s to deliver a market beating total long-term return of approximately 15% (CAGR).

5. Zoetis (ZTS)

Track Record.

• Return since inception (CAGR) +17.55%

• Revenue growth - last 5 years (CAGR) +8.08%

• Levered FCF growth - last 5 years (CAGR) +6.32%

• Dividend growth rate - last 5 years (CAGR) +22.71%

• Gross Profit Margin - 70.01%

• Return on Invested Capital - 23.6%

• Payout Ratio 31.55%

• Dividend Yield 0.94%

Zoetis has entrenched itself well in an industry that is expected to grow well into the future. The company has delivered exceptional long-term returns and fundamentally has very healthy metrics. It’s dividend yield may not be very appealing but that can be offset by above average dividend growth and capital appreciation.

I find Zoetis a very attractive buy below $195 with the stock currently priced around $183. Given the attractive valuation I expect Zoetis to deliver a market beating total long-term return of approximately 13.5% (CAGR).

6. NetEase (NTES)

Track Record.

• Return since inception (CAGR) +24.05%

• Revenue growth - last 5 years (CAGR) +15.4%

• Levered FCF growth - last 5 years (CAGR) +18.58%

• Dividend growth rate - last 5 years (CAGR) +43.3%

• Gross Profit Margin - 61.92%

• Return on Invested Capital - 27.51%

• Payout Ratio 39.4%

• Dividend Yield 2.86%

The gaming industry has been booming and NetEase has a robust portfolio of popular games. Strong margins should continue to drive free cash flow growth and a robust long-term return for the company.

I find NetEase a very attractive buy below $110 with the stock currently priced around $93. Given the attractive valuation I expect NetEase to deliver a market beating total long-term return of approximately 14% (CAGR).

7. ResMed (RMD)

Track Record.

• Return since inception (CAGR) +22.54%

• Revenue growth - last 5 years (CAGR) +12.44%

• Levered FCF growth - last 5 years (CAGR) +22.9%

• Dividend growth rate - last 5 years (CAGR) +5.06%

• Gross Profit Margin - 57.38%

• Return on Invested Capital - 17.31%

• Payout Ratio 27.65%

• Dividend Yield 0.99%

The healthcare sector is bound to expand well into the future as the world population ages and life expectancy continues to increase. ResMed is a targeted healthcare business targeting sleep and respiratory care with additional cloud-based software applications. The company has proved that they deliver exceptional results and expand their market share in this growing industry. I believe the business has the potential to see its above average results continue in the future.

I find ResMed a very attractive buy below $360 with the stock currently priced around $224. Given the attractive valuation I expect ResMed to deliver a market beating total long-term return of approximately 20% (CAGR) or more.

8. FactSet Research Systems (FDS)

Track Record.

• Return since inception (CAGR) +18.3%

• Revenue growth - last 5 years (CAGR) +8.97%

• Levered FCF growth - last 5 years (CAGR) +16.87%

• Dividend growth rate - last 5 years (CAGR) +8.56%

• Gross Profit Margin - 53.26%

• Return on Invested Capital - 16.08%

• Payout Ratio 29.55%

• Dividend Yield 1.05%

FactSet caters to the investment community by providing financial data, analytics and technology solutions. This is a very lucrative industry to operate in with high barriers to entry for competitors. FactSet has a track record that proves it can deliver exceptional results and I believe it has the potential to keep running at the same above average rate in the long-run.

I find FactSet a very attractive buy below $420 with the stock currently priced around $412. Given the attractive valuation I expect FactSet to deliver a market beating total long-term return of approximately 12% (CAGR).

9. Graco (GGG)

Track Record.

• Return since inception (CAGR) +18.21%

• Revenue growth - last 5 years (CAGR) +5.38%

• Levered FCF growth - last 5 years (CAGR) +6.62%

• Dividend growth rate - last 5 years (CAGR) +10.3%

• Gross Profit Margin - 53.52%

• Return on Invested Capital - 24.36%

• Payout Ratio 33.85%

• Dividend Yield 1.29%

Graco is a global leader in paint sprayers with a very long history and a very shareholder friendly track record. The company has a very wide moat and fundamentally continues to look very appealing.

I find Graco a very attractive buy below $83 with the stock currently priced around $82. Given the attractive valuation I expect Graco to deliver a market beating total long-term return of approximately 14% (CAGR).

10. MarketAxess Holdings (MKTX)

Track Record.

• Return since inception (CAGR) +15.15%

• Revenue growth - last 5 years (CAGR) +10.88%

• Levered FCF growth - last 5 years (CAGR) +3.56%

• Dividend growth rate - last 5 years (CAGR) +9.44%

• Gross Profit Margin - 62.5%

• Return on Invested Capital - 19%

• Payout Ratio 41.95%

• Dividend Yield 1.26%

It’s been a rough year to MarketAxess with the stock down more than 20% year-to-date and down more than 50% since its post-pandemic surge. The company operates as a trading platform for fixed income products. The recent lackluster price compression is a results of a decline in commissions revenue and elevated expenses. However, despite these headwinds MarketAxess is a leader in its industry and has continued to entrench itself well in its industry. The company has also gained marketshare through select acquisitions and is well positioned to see it’s long-term historical growth continue in the future.

I find MarketAxess a very attractive buy below $275 with the stock currently priced around $233. Given the attractive valuation I expect MarketAxess to deliver a market beating total long-term return of approximately 13.5% (CAGR).

A word of caution

As always, please do your own due diligence before making any investing decisions. My opinion and valuation figures for these 10 stocks may not pan out as expected. There are no guarantees in the stock market!

Have a great rest of your day!