3 Stocks Raising Their Dividends 4% to 19%

Key Points in This Article:

• Dividend growth investing prioritizes stocks with consistent payout increases, offering rising income and inflation protection for long-term stability.

• Companies with low payout ratios and strong cash flows, like those boosting dividends, provide sustainable income and reduced volatility in uncertain markets.

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Dividend growth investing offers a powerful strategy for building long-term wealth, blending a life of steady income with capital appreciation. By targeting companies that consistently increase dividends, investors secure a rising cash flow that combats inflation while benefiting from the stability of financially sound firms.

These stocks exhibit lower volatility, providing a buffer against economic uncertainties like tariff upheavals or recessions. At the same time, reinvesting dividends amplifies returns through compounding, transforming modest investments into significant nest eggs over decades. Moreover, firms prioritizing dividend growth signal strong management and sustainable earnings, which helps foster investor confidence.

In today’s market landscape, dividend growth investing remains a cornerstone for those seeking reliable income and growth. Below are three stocks with impressive track records of paying dividends that recently announced increases ranging from 4% to as much as 19% from the year-ago period.

Lowe’s (LOW)

Leading home improvement retailer Lowe’s (NYSE:LOW) announced a 4.3% dividend increase last week that raised its quarterly payout to $1.20 from $1.15 per share. This marks the big box store’s 63rd consecutive year of annual dividend hikes, solidifying its Dividend King status with a 2% annual yield.

First-quarter sales dipped 2% year-over-year, hitting $20.9 billion, due to soft DIY demand and bad weather, but adjusted earnings of $2.92 per share beat estimates. Lowe’s 33% payout ratio and its ability to grow free cash flow 22% annually over the past five years ensure its dividend’s sustainability.

The retailer has regularly used stock buybacks — over $42 billion worth in the last half decade — and its Total Home strategy that targets Pro customers and online growth (sales in these segments grew by mid-single-digit percentages), bolsters Lowe’s long-term value.

LOW stock trades at 17 times next year’s earnings and less than twice sales, making the home improvement store an attractive and reliable dividend growth stock to buy.

Taiwan Semiconductor Manufacturing (TSM)

Taiwan Semiconductor Manufacturing (NYSE:TSM) is the world’s largest pure-play foundry, and it announced an 18.8% dividend increase last month that raised its quarterly payout to $0.82 per ADR, yielding 1.3%.

Benefiting from AI chip demand from big customers like Nvidia (NASDAQ:NVDA) and Apple (NASDAQ:AAPL), first-quarter revenue surged 39% to $25.5 billion, with earnings of  $2.12 per share, up 58% from last year. TSM’s $4.2 billion in dividends paid in 2024 with a 35% payout ratio, reflects sustainability, supported by 17% annual growth in FCF over the past decade.

Among the levers the foundry can pull going forward are demand for its 5 nanometer and 3 nanometer wafer, with the former representing 36% of revenue and the latter 22% it is also expanding production in Arizona and Japan, while targeting 60%  compound annual capacity growth for 3 nm wafers by 2026, 80% growth for CoWoS, and SoIC capacity should double.

With TSM’s pricing power and trading at 18 times next year’s earnings, its stock is cheap for a solid long-term income play for 2025.

Northrop Grumman (NOC)

The third stock announcing a dividend hike is Northrop Grumman (NYSE:NOC), a leading aerospace and defense contractor that announced a 12% dividend increase on May 20, raising its quarterly payout to $2.31 per share and yielding 1.3%.

First-quarter sales fell 7% to $9.5 billion due to two fewer days in the period and Northrop winding down its space systems business. Earnings of $3.32 per share badly missed estimates of $6.26 per share, a 47% difference, after taking a $477 million loss on the ramp up of the  B-21 program. However, demand for its products is strong and the long-term outlook remains bright.

Having paid down $1.5 billion of long-term debt and returning almost $800 million to shareholders through share repurchases and dividends, the payout is supported by a 53% FCF payout ratio. Growth levers include a record $92.8 billion backlog and $10.8 billion in net contract awards, allowing Northrop to reaffirm its 2025 guidance for sales and free cash flow. It expects $42 billion to $42.5 billion in revenue this year, a 3% increase at the midpoint, and $2.85 billion to $3.25 billion in FCF, up 17% year-over-year.

Northrop Grumman trades at 17 times earnings estimates and less than twice sales, which, when coupled with NOC’s dividend growth, strong backlog, and steady cash flows, it make it another reliable income stock for growth.

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