Three Equity Investments with Increasing Dividends at a Faster Pace than Inflation Rate
If you're searching for a top dividend stock to invest in, you should pay attention to a few key factors. Primarily, you want to see if the stock consistently boosts its payout and how rapidly this happens. This can help ensure that inflation doesn't erode your dividend income over time and shows investors how dedicated the company is to raising the dividend.
Three strong dividend-paying stocks worth considering are UnitedHealth Group (UNH, 0.93%), Broadcom (AVGO, -0.74%), and Costco Wholesale (COST, 1.09%). Let's dive deeper into why these stocks are ideal choices for income-focused investors.
1. UnitedHealth Group
UnitedHealth Group is a renowned health insurance provider that pays investors a relatively low dividend yield of 1.6%. However, it's the growth of this dividend that makes holding UnitedHealth Group stock particularly attractive.
As a rapidly growing business, UnitedHealth Group benefits from more individuals utilizing their healthcare insurance and through expansion and acquisitions. Despite a profit margin of less than 4%, it generated an impressive $390 billion in revenue over the past 12 months, resulting in profits exceeding $14 billion.
Over the previous decade, UnitedHealth Group has been aggressive in boosting its quarterly per-share dividend from a mere $0.375 in 2014 to $2.10 today. This impressive growth represents an increase of nearly 500%, averaging roughly 19% per annum – even surpassing the recent elevated inflation rates. With an already low payout ratio of 52%, UnitedHealth Group's dividend growth potential remains promising.
2. Broadcom
Broadcom has experienced strong investor interest due to its opportunities in the semiconductor industry, plus its potential as a solid dividend stock. While the current yield of 1.2% might not seem inline with the S&P 500 average, Broadcom's recent remarkable 120% surge in stock value would have drastically increased the yield if not for this increase.
Last month, Broadcom increased its dividend by 11% to $0.59 per quarter. Ten years ago, it was paying just $0.035, resulting in a 1,600% surge in the dividend over that time frame. This averages around 33% per year. Admittedly, the rate of increase has decelerated as evidenced by the most recent rise, but it demonstrates Broadcom's focus on dividend growth.
The prospects for Broadcom continue to be favorable due to artificial intelligence and hyperscalers investing heavily in operations, which is likely to continue driving dividend growth for the foreseeable future.
3. Costco Wholesale
Rounding out this list of dividend growth stocks is Costco Wholesale, which might have the lowest yield of 0.5%, but it offers compelling dividend growth and occasional special dividend payments. These rare but aggressive moves can significantly increase an investor's overall dividend income.
Costco paid a special dividend of $15 per share in January 2024. While no such dividend is pending at present, shareholders can expect an increase in the payout later this year. Costco's current quarterly per-share dividend of $1.16 has risen by over 227% from the $0.355 it commanded in late 2014, yielding an average annual increase of roughly 12.7%.
Costco continues to perform well economically, with quarterly comparable-store sales growing by more than 5%, and e-commerce showing impressive growth of 13%. For income-focused investors, this remains an outstanding long-term dividend stock.
- The consistent dividend growth of Broadcom and Costco Wholesale, in addition to UnitedHealth Group, makes them attractive investments for finance-savvy individuals looking to maximize their dividend income. Broadcom's dividend surge of 1,600% over the past decade, with an average annual increase of 33%, is a testament to its commitment to financially rewarding shareholders. Similarly, Costco Wholesale's dividend has increased by over 227% since 2014, averaging roughly 12.7% per year, and its occasional special dividend payments further add to its dividend allure. This strategic approach to allocating their financial resources to dividend growth showcases these companies' dedication to dividend investors, making them potential top choices for individuals involved in investing money and seeking elevated dividends, such as those from Broadcom and Costco, in their finance portfolios.
