In this article, we will take a look at some of the best dividend growth stocks to buy and hold in 2025.
Dividend stocks had a challenging year in 2024 as investor interest largely shifted toward technology stocks. The Dividend Aristocrat Index, which monitors companies with at least 25 years of consecutive dividend growth, rose by just over 5% year-to-date, significantly trailing the nearly 26% return of the broader market. This underperformance isn’t unusual for dividend stocks, which often struggle to compete for attention against more dynamic market options. However, seasoned investors may recognize the enduring value and potential of dividend stocks over the long term.
Also read: 8 Best German Dividend Stocks To Invest In
Historically, dividends have played a significant role in the total returns of US stocks, accounting for nearly one-third of overall equity returns since 1926. Between 1980 and 2019, a period marked by declining interest rates, dividends contributed 75% to the broader market’s return. In an environment of falling interest rates, dividends become even more valuable by providing a steady cash flow when fixed-income investments may offer lower yields. Companies that initiate dividends rarely stop paying them and often increase payouts over time. In addition, offering a dividend can enhance a stock’s appeal to investors, potentially boosting its market value.
According to a report by Franklin Templeton, over the last decade, dividends for the broader market index have consistently increased, with an average annual growth rate of just over 7%. In favorable market conditions, dividends have boosted total returns. During challenging years, such as 2020 and 2022, when returns were low or negative, dividends played a more significant role in total returns, offering stability and strengthening portfolio resilience.
This resilience of dividend stocks is rooted in the robust financial health and strong balance sheets of the companies behind them. Analysts emphasize the importance of targeting high-quality dividend-paying firms when investing in this category. Ramona Persaud, who manages the Fidelity Equity-Income Fund and Fidelity Global Equity Income Fund, shares this perspective. She prioritizes investments in well-established companies with solid dividends and attractive valuations. Persaud noted that falling interest rates often create favorable conditions for dividend stocks, as their yields become more appealing compared to declining bond yields. She also highlighted that lower rates could broaden market gains, unlike the past two years, where growth was dominated by a small number of large-cap stocks. Here are some other comments from the analyst:
“Ideally, I look for a stock that has a combination of these factors. I can’t always get all 3, so I look for a good balance of them. If I can get higher quality at a cheaper price, and the company pays a compelling dividend, that’s when a stock is really interesting to me.”
High-quality companies also provide the benefit of consistent dividend growth. Investors view dividends as a long-term commitment, so companies that pay them must maintain profitability, generate returns, and ensure steady cash flow. This makes dividends an important measure of a company’s overall quality. Firms that regularly raise their dividend payments show that they are consistently generating profits, which may indicate greater resilience during economic or market downturns.
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Our Methodology:
For this article, we scanned the list of dividend aristocrats, which are the companies that have raised their payouts for 25 consecutive years or more. From that list, we picked 10 companies with the highest 5-year annual average dividend growth rates. The stocks are ranked in ascending order of their annual average dividend growth in the past five years. We also considered hedge fund sentiment around each stock in Insider Monkey’s database, as of the third quarter of 2024.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points. (see more details here).
10. PepsiCo, Inc. (NASDAQ:PEP)
5-Year Annual Dividend Growth Rate: 7.04%
PepsiCo, Inc. (NASDAQ:PEP) is an American multinational food, snack, and beverage company that offers a wide range of related products to its consumers. The company owns Frito-Lay, the largest producer of salty snacks globally, along with Pepsi, the second-largest nonalcoholic beverage brand, and Quaker Oats, a significant player in the packaged food sector. With its extensive global brand presence, strong marketing and innovation capabilities, and robust financial position, the company is well-positioned as an industry leader and consolidator. For instance, its recent acquisition of Siete Foods enhances its presence in the Mexican-American food segment, spanning salty snacks and packaged foods. In essence, PepsiCo is a solid consumer staples business, a sector renowned for its resilience during periods of economic uncertainty.
PepsiCo, Inc. (NASDAQ:PEP) reported strong earnings for the third quarter of 2024, with revenues surpassing $23.3 billion. Although the company faced headwinds, including weaker results in North America, product recall challenges at Quaker Foods North America, and geopolitical disruptions in certain international markets, it demonstrated resilience. Through efficient cost management, the company sustained profitability while continuing to invest strategically to enhance its market position. In the past 12 months, the stock has fallen by nearly 10%.
Amid these persistent challenges, PepsiCo, Inc. (NASDAQ:PEP) has revised its outlook for organic revenue growth, now expecting a modest low-single-digit increase, down from its earlier estimate of approximately 4%. Nonetheless, the company remains dedicated to shareholder returns, planning to distribute $8.2 billion through dividends and share repurchases in 2024. In addition, the company has been growing its payouts for 52 consecutive years, which makes it one of the best dividend aristocrat stocks on our list. Currently, it offers a quarterly dividend of $1.355 per share and has a dividend yield of 3.55%, as of December 29.
At the end of Q3 2024, 58 hedge funds tracked by Insider Monkey held stakes in PepsiCo, Inc. (NASDAQ:PEP), compared with 65 in the previous quarter. The overall value of these stakes is over $4.44 billion. With over 7.8 million shares, Fisher Asset Management was the company’s leading stakeholder in Q3.
9. AbbVie Inc. (NYSE:ABBV)
5-Year Annual Dividend Growth Rate: 7.69%
AbbVie Inc. (NYSE:ABBV) is an American pharmaceutical and biotech company. It stands out among major pharmaceutical companies for its effective execution of a well-structured pipeline strategy, a key factor that makes its stock worth considering. In the past 12 months, the stock has surged by nearly 15%.
According to analysts, over the next few years, two blockbuster drugs, Skyrizi and Rinvoq, are poised to play a central role in AbbVie Inc. (NYSE:ABBV)’s portfolio. In the third quarter, these two drugs generated over $4.8 billion in revenue. By 2027, they are projected to achieve annual sales exceeding $27 billion, spanning various indications, including rheumatology, dermatology, psoriatic conditions, and inflammatory bowel diseases. Overall, the company posted revenue of $14.46 billion in Q3 2024, representing a 4% increase from the same period in the previous year. The Immunology Portfolio generated over $7 billion, also growing 4% year-over-year. In August, the company finalized an $8.7 billion cash acquisition of Cerevel Therapeutics, a neuroscience-focused pharmaceutical company. This acquisition bolstered its pipeline with promising drug candidates, including emraclidine, a potential therapy for schizophrenia.
AbbVie Inc. (NYSE:ABBV) is popular among income investors because of its 52-year streak of dividend growth. Moreover, its five-year annual average dividend growth rate comes in at 7.69%. The company pays a quarterly dividend of $1.64 per share and has a dividend yield of 3.69%, as of December 29.
Insider Monkey’s database of Q3 2024 showed that 68 hedge funds held stakes in AbbVie Inc. (NYSE:ABBV), up from 67 a quarter earlier. The stakes are worth nearly $2.6 billion. With over 1.7 million shares, AQR Capital Management was the company’s leading stakeholder in Q3.
8. A. O. Smith Corporation (NYSE:AOS)
5-Year Annual Dividend Growth Rate: 8.01%
A. O. Smith Corporation (NYSE:AOS) is a Wisconsin-based manufacturing company that specializes in residential and commercial water heaters for its consumers. In November, the company finalized its purchase of Pureit, a business previously owned by Unilever PLC, for roughly $120 million. This acquisition supports the company’s growth strategy by expanding its premium water treatment product range and strengthening its distribution network.
A. O. Smith Corporation (NYSE:AOS) reported mixed earnings in the third quarter of 2024. It posted revenue of $902.6 million, which showed a 3.7% decline from the same period last year. The revenue decline was attributed to reduced sales in China and lower water heater volumes in North America. Net earnings totaled $120 million, marking an 11% drop. Sales in China and water heater volumes in North America fell short of expectations during the third quarter. Weak consumer demand in China, along with reduced pre-buy activity and softened order demand driven by lead times in North America, continued throughout the quarter, resulting in lower-than-anticipated sales and profitability.
That said, A. O. Smith Corporation (NYSE:AOS) grabbed investors’ attention because of its strong cash position and solid dividend history. In the first nine months, the company generated nearly $360 million in operating cash flow and its free cash flow for the period came in at $282.5 million. On October 8, the company declared a 6% increase in its quarterly dividend to $0.34 per share. This marked the company’s 32nd consecutive year of dividend growth, which makes AOS one of the best dividend aristocrat stocks on our list. The stock offers a dividend yield of 1.99%, as of December 29.
As of the close of Q3 2024, 29 hedge funds in Insider Monkey’s database owned stakes in A. O. Smith Corporation (NYSE:AOS), compared with 33 in the previous quarter. The consolidated value of these stakes is more than $1 billion.
7. Roper Technologies, Inc. (NASDAQ:ROP)
5-Year Annual Dividend Growth Rate: 10.15%
Roper Technologies, Inc. (NASDAQ:ROP) ranks seventh on our list of the best dividend aristocrat stocks. The Florida-based company manufactures and distributes industrial equipment. The company has a history of strategically reinvesting capital in acquisitions that drive growth through a thoughtful and disciplined approach. Over recent years, it has achieved consistent growth in revenue and earnings, with revenue rising from $4.8 billion in 2021 to $6.2 billion in 2023. With ample capacity for mergers and acquisitions and a robust pipeline of promising opportunities, the company is well-equipped to continue executing its strategic and methodical investment strategy.
Roper Technologies, Inc. (NASDAQ:ROP) reported solid earnings in the third quarter of 2024. The company posted revenue of $1.76 billion, up 13% from the same period last year. It reported a 6% rise in GAAP net earnings, reaching $368 million, while adjusted net earnings grew by 7% to $499 million. Moreover, during the quarter, the company completed its acquisition of Transact Campus, which has since been integrated with its CBORD business. This acquisition strengthens its portfolio by adding another high-quality vertical software business, presenting significant value-creation opportunities for shareholders.
NZS Capital, LLC made the following comment about ROP in its Q3 2024 investor letter:
“In the quarter we added American Tower, the telecom infrastructure company, as a resilient position and promoted Roper Technologies, Inc. (NASDAQ:ROP) to resiliency. Roper provides vertical market software. Our exposure to AI at a portfolio level did not change much, but American Tower and Roper diversified the exposure in the resilient part of our portfolio. We trimmed Microsoft and Nvidia and added back to Lam Research, Cadence and Lattice on more attractive valuations provided by the market rotation.”
Roper Technologies, Inc. (NASDAQ:ROP) also demonstrated a solid cash position in Q3 2024. The company’s operating cash flow of $755 million grew by 17% on a YoY basis. Its free cash flow amounted to $719 million, also up by 15% from the prior-year period. This strong cash has enabled the company to grow its dividends for 33 years in a row. Currently, it pays a quarterly dividend of $0.825 per share and has a dividend yield of 0.63%, as of December 29.
Roper Technologies, Inc. (NASDAQ:ROP) was included in 40 hedge fund portfolios at the end of Q3 2024, up from 38 in the previous quarter, according to Insider Monkey’s database. The stakes held by these funds have a total value of more than $2.2 billion.
6. T. Rowe Price Group, Inc. (NASDAQ:TROW)
5-Year Annual Dividend Growth Rate: 10.29%
T. Rowe Price Group, Inc. (NASDAQ:TROW) is a Maryland-based asset management company that offers a wide range of related products and services to its consumers. The company declared that its assets under management increased to $1.67 trillion in November, from $1.61 trillion in October. It is focused on building its own ETF business and has been branching out into high-demand sectors like alternative investments. With no long-term debt on its balance sheet, it also has considerable flexibility to make adjustments as needed. In the past year, the stock has surged by over 7.4%.
T. Rowe Price Group, Inc. (NASDAQ:TROW) reported mixed results for the third quarter of 2024. While its revenue reached $1.8 billion, marking a 7% increase from the same period last year, it fell short of analysts’ expectations by over $61 million. On a positive note, the company’s net income rose by 33.1%, reaching $603 million, up from $453 million a year earlier. The firm’s equity ETFs performed well, with strong sales pipelines and a reduction in net outflows compared to initial forecasts. In addition, its strategic focus on alternative investments, such as private credit, is expected to offer significant diversification benefits.
T. Rowe Price Group, Inc. (NASDAQ:TROW), one of the best dividend aristocrat stocks, currently offers a quarterly dividend of $1.24 per share. The company has been rewarding shareholders with 38 consecutive years of dividend growth. As of December 29, the stock has a dividend yield of 4.29%.
As per Insider Monkey’s database of Q3 2024, 26 hedge funds held stakes in T. Rowe Price Group, Inc. (NASDAQ:TROW), compared with 28 in the previous quarter. These stakes are collectively valued at over $422.5 million.
5. NextEra Energy, Inc. (NYSE:NEE)
5-Year Annual Dividend Growth Rate: 10.51%
NextEra Energy, Inc. (NYSE:NEE) ranks fifth on our list of the best dividend aristocrat stocks. The Florida-based renewable energy company posted strong earnings recently. In the third quarter of 2024, the company reported revenue of $7.57 billion, a 5.6% increase from the previous year. The company had another strong quarter in renewable energy and storage development, adding about 3 gigawatts (GW) to its project backlog for the second consecutive quarter. Over the past four quarters, it has secured roughly 11 GW in new projects.
Madison Investments made the following comment about NextEra Energy, Inc. (NYSE:NEE) in its Q3 2024 investor letter:
“The top contributors in the quarter were NextEra Energy, Inc. (NYSE:NEE), Oracle Corporation, Progressive Corporation, Equifax Inc., and United Healthcare. NextEra has continued to perform well given its strong position in the renewable energy space, increasing demand for power, its transmission capabilities, as well as a tailwind from lower interest rates.”
In addition to its strong foundation, NextEra Energy, Inc. (NYSE:NEE) has developed one of the largest portfolios of solar and wind power assets worldwide. This segment has gained from the shift away from polluting carbon fuels towards cleaner, renewable energy sources. Given the long-term nature of the power transition, the company is poised for continued growth over the coming decades. In the past 12 months, the stock has delivered a nearly 19% return to shareholders.
NextEra Energy, Inc. (NYSE:NEE) announced a quarterly dividend of $0.515 per share on October 18, which fell in line with its previous dividend. In 2024, the company stretched its dividend growth streak to 28 years. Moreover, the company has raised its payouts at an annual average rate of over 10.5% in the past five years. The stock supports a dividend yield of 2.86%, as of December 29.
Of the 900 hedge funds tracked by Insider Monkey at the end of Q3 2024, 69 funds held stakes in NextEra Energy, Inc. (NYSE:NEE), compared with 73 in the previous quarter. The consolidated value of these stakes is more than $2.47 billion. Rajiv Jain’s GQG Partners was the company’s leading stakeholder in Q3.
4. Target Corporation (NYSE:TGT)
5-Year Annual Dividend Growth Rate: 11.30%
Target Corporation (NYSE:TGT) is a Minnesota-based retail corporation that operates a chain of hypermarkets and discount department stores. The company has shown consistent improvement in operating income over the past year and maintains a strong financial position. Despite having relatively high debt, its cash, cash equivalents, and short-term investments easily cover short-term liabilities. The company’s increasing cash reserves and an interest coverage ratio of 11.6 further strengthen its financial stability. Target’s liquidity is supported by a clean balance sheet, free of intangible assets, and a solid return on invested capital (ROIC) of 11.5%. Operationally, its EBITDA margin of 8.4% exceeds the industry average, while its efficient inventory management is reflected in a strong inventory turnover ratio and healthy inventory levels.
In addition, in the first nine months of 2024, Target Corporation (NYSE:TGT) generated $4.07 billion in operating cash flow and ended the quarter with $3.4 billion in cash and cash equivalents. During this time, it returned $516 million to shareholders in the form of dividends. Its quarterly dividend comes in at $1.12 per share for a dividend yield of 3.31%, as of December 29. TGT is one of the best dividend aristocrats on our list as the company holds a 53-year track record of consistent dividend growth. In the past five years, the company has raised its payouts at an annual average rate of 11.3%.
In the third quarter of 2024, Target Corporation (NYSE:TGT) reported revenue of $25.7 billion, marking a modest 1.06% increase from the same period last year. However, this result missed analysts’ expectations by $231.8 million. For the fourth quarter, the company expects comparable sales to stay steady, with projected GAAP and adjusted earnings per share (EPS) between $1.85 and $2.45. For the full year, Target expects GAAP and adjusted EPS to range from $8.30 to $8.90.
With a collective stake value of nearly $1.4 billion, 49 hedge funds tracked by Insider Monkey held positions in Target Corporation (NYSE:TGT) at the end of Q3 2024. With nearly 3 million shares, Diamond Hill Capital was the company’s leading stakeholder in Q3.
3. Automatic Data Processing, Inc. (NASDAQ:ADP)
5-Year Annual Dividend Growth Rate: 11.84%
Automatic Data Processing, Inc. (NASDAQ:ADP) is an American management services company that offers payroll processing, tax administration, and human capital management services to its consumers. The company leverages its cloud-based software and solutions to help businesses concentrate on growth while managing the complexities of workforce logistics. Operating in 140 countries, ADP processes payroll for one in every six U.S. workers and 16 million workers globally. This broad client base has established the company as a leader in its field, offering operational efficiency and valuable economic insights derived from its aggregated workforce data. These insights, such as wage benchmarks, provide businesses with competitive intelligence, enhancing the overall value of ADP’s services. In the past year, the stock has surged by over 27%.
In fiscal Q1 2025, Automatic Data Processing, Inc. (NASDAQ:ADP) posted solid earnings, with revenue reaching $4.8 billion, a 7% increase from the previous year. The company’s revenue and margin performance exceeded expectations, fueled by strong growth in new business bookings, high client revenue retention, and a rise in interest revenue from client funds.
In addition to its strong earnings, Automatic Data Processing, Inc. (NASDAQ:ADP)’s cash position has also grabbed investors’ attention. The company ended the quarter with over $2.1 billion available in cash and cash equivalents. Its total assets exceeded $49.5 billion. Its operating cash flow surged to $824.4 million in Q1, up from $326.5 million in the same period last year. In addition, its trailing twelve-month levered free cash flow reached $2.6 billion.
In November this year, Automatic Data Processing, Inc. (NASDAQ:ADP) achieved its Dividend King status, having raised its payout for the 50th consecutive year. Moreover, its 5-year average annual dividend growth rate comes in at 11.84%. The company pays a quarterly dividend of $1.54 per share for a dividend yield of 2.08%, as of December 29.
According to Insider Monkey’s database of Q3 2024, 49 hedge funds were bullish on Automatic Data Processing, Inc. (NASDAQ:ADP), compared with 52 in the previous quarter. The stakes held by these funds are worth over $3.5 billion in total.
2. Nordson Corporation (NASDAQ:NDSN)
5-Year Annual Dividend Growth Rate: 14.55%
Nordson Corporation (NASDAQ:NDSN) is an Ohio-based multinational company that designs and produces dispensing equipment used for applying adhesives, sealants, coatings, and other materials. The company is expanding its business through strategic acquisitions, such as its purchase of ARAG in August last year, which has helped the company enter the rapidly growing precision agriculture sector. In May of this year, Nordson acquired Atrion Corporation for approximately $800 million, broadening its medical portfolio into new markets and therapies. This acquisition complements the company’s existing customer base and is expected to have a positive impact on its future performance. With these growth initiatives in place, Nordson is well-positioned to continue growing its earnings, free cash flow, and dividends for the foreseeable future.
Nordson Corporation (NASDAQ:NDSN) posted solid earnings in the third quarter of 2024, with revenues reaching $661.6 million, a 2% increase from the same period last year. Net income for the quarter was $117 million. The Advanced Technology Solutions segment saw growth from the previous quarter, fueled by steady improvements in order entries within the electronics sector. Strong operational execution across the company led to solid gross margins and an impressive 31% EBITDA margin.
Moreover, Nordson Corporation (NASDAQ:NDSN) reported a strong cash position in the latest quarter, ending with over $165.3 million in cash and cash equivalents, compared to $115.6 million in the same period last year. The company’s operating cash flow for the quarter was $460 million. It has a strong dividend history, having raised its payouts for 61 consecutive years. The company currently pays a quarterly dividend of $0.78 per share and has a dividend yield of 1.48%, as of December 29.
As of the end of Q3 2024, 18 hedge funds tracked by Insider Monkey held stakes in Nordson Corporation (NASDAQ:NDSN), down from 21 in the previous quarter. These stakes have a total value of over $68.3 million.
1. Lowe’s Companies, Inc. (NYSE:LOW)
5-Year Annual Dividend Growth Rate: 16.9%
Lowe’s Companies, Inc. (NYSE:LOW) is an American retail company, specializing in home improvement. The stock has surged by over 11.5% in the past 12 months, grabbing investors’ attention. According to analysts, the continued demand for construction, repair, and remodeling supplies offers a strong basis for ongoing growth, as long as the company continues to prioritize customer needs. However, Lowe’s is currently experiencing the effects of a sluggish economy. In the most recent quarter, the company reported revenue of $20.17 billion, a decrease of almost 2% compared to the same period last year. Despite this, earnings slightly exceeded expectations, even excluding storm-related activity. Growth in Pro sales, strong online performance, and smaller outdoor DIY projects helped support the results.
Madison Investments also highlighted this in its Q3 2024 investor letter. Here is what the firm has to say:
“In the third quarter, the top five individual contributors to performance relative to the benchmark were Parker-Hannifin Corporation, Fiserv, Lowe’s Companies, Inc. (NYSE:LOW), Brookfield Corporation, and Progressive Corporation. Despite operating in very different sectors, Lowe’s Companies and Brookfield Corporation are both expected to benefit from the economic activity spurred on by declining interest rates. The Federal Reserve’s decision to lower interest rates sparked investor enthusiasm for both companies during the quarter, even as their sales and profits continue to moderate. For Lowe’s, sales remained weak in the latest quarter as most measures of the housing market remain sluggish. However, if interest rates come down and mortgages become more affordable, activity should return to the housing market which will boost Lowe’s business.”
Lowe’s Companies, Inc. (NYSE:LOW) is favored by income investors as the company holds a 59-year track record of consistent dividend growth. In addition, it has raised its payouts at an annual average rate of nearly 17% in the past five years, which makes LOW one of the best dividend aristocrat stocks on our list. Its quarterly dividend comes in at $1.15 per share for a dividend yield of 1.85%, as of December 29.
At the end of the third quarter of 2024, 60 hedge funds in Insider Monkey’s database owned stakes in Lowe’s Companies, Inc. (NYSE:LOW), falling from 62 in the previous quarter. The total value of these stakes is over $2.2 billion.
Overall, Lowe’s Companies, Inc. (NYSE:LOW) ranks first on our list of the best dividend aristocrat stocks. While we acknowledge the potential for LOW to grow, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than LOW but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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