In this article, we will take a look at some of the best dividend aristocrat stocks to buy now.
Dividend stocks remain a popular choice among investors due to their ability to generate steady income. Experienced investors, including Warren Buffett, have long recognized their value, as evidenced by the significant presence of dividend-paying stocks in his portfolio. While often underestimated, dividends have played a crucial role in overall investment returns. Between 1960 and the end of last year, approximately 85% of the broader market’s total cumulative return stemmed from reinvested dividends and the benefits of compounding. Strategies centered around dividend-paying stocks offer the potential for greater stability, consistent income, and a safeguard against economic uncertainty, making them a strong choice for resilient portfolios.
With ongoing tariff uncertainty in the U.S. contributing to market volatility, investors are increasingly turning to dividend-focused strategies to strengthen portfolio stability. After a period dominated by growth stocks, interest in dividend investing has gained momentum. Over the six months leading up to January 31, 2025, US-listed dividend-focused exchange-traded funds (ETFs) recorded average monthly net inflows of nearly $3.3 billion, a sharp rise from the $107 million seen during the same period the previous year, according to a report by Franklin Templeton. Amid an uncertain global economic outlook, investors are seeking more stable assets to create balanced portfolios. Dividend stocks, particularly those with strong fundamentals, tend to provide steady and predictable cash flows. Since these cash flows play a key role in equity valuation models, determining the intrinsic or fair value of dividend-paying stocks is generally more straightforward compared to assessing the value of growth stocks.
READ ALSO: 14 Best Performing Dividend Stocks To Buy Now
Dividend stocks are attractive due to their ability to reduce volatility during market downturns while still providing meaningful growth potential. Historically, dividend-focused strategies have shown resilience across different regions and time periods. The Franklin Templeton report further highlighted that over the three years ending December 31, 2024, dividend-paying stocks experienced lower volatility and smaller maximum drawdowns compared to the broader market across global, US, and European segments. When inflation and interest rate concerns resurfaced last August, dividend stocks proved to be relatively stable in comparison.
Among dividend stocks, investors are more inclined to companies that have raised their payouts consistently. A report by Nuveen indicated that companies initiating or increasing dividends have historically performed well in the three years following an initial Federal Reserve interest rate hike. While the Fed began lowering rates in 2024, the report suggested that rate cuts would proceed at a slower pace in 2025 due to persistent inflationary pressures.
Given the higher interest rate environment, the report emphasized the importance of focusing on dividend-paying companies with strong fundamentals, solid balance sheets, healthy free cash flow, and management teams committed to sustainable dividend growth. In contrast, sectors with high yields but elevated debt levels could face challenges due to their sensitivity to interest rate changes.
Sam Stovall, chief investment strategist at CFRA, also noted that companies with a strong history of increasing dividend payments are typically well-capitalized and financially stable, making them less volatile than the broader market. He suggested that including such companies in an investment portfolio could help reduce fluctuations. Stovall also pointed out that dividend-paying firms generally experience lower volatility compared to those that do not offer dividends. Given this, we will take a look at some of the best dividend growth stocks to invest in.
Image by Nattanan Kanchanaprat from Pixabay
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.
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10. PepsiCo, Inc. (NASDAQ:PEP)
5-Year Average Dividend Growth Rate: 7.25%
PepsiCo, Inc. (NASDAQ:PEP) is frequently seen as a beverage company, which isn’t inaccurate since it offers a wide variety of drinks under its well-known brand. However, the company has a much broader reach, as it also produces and markets snacks and packaged food products. In fact, its snack segment may be even more compelling than its beverage division, considering that while PepsiCo holds the second-largest position in the non-alcoholic beverage market, it leads the salty snack category through its Frito-Lay business.
PepsiCo, Inc. (NASDAQ:PEP) delivered stable earnings in fiscal year 2024, posting $91.8 billion in revenue, a slight increase from $91.4 billion in the prior year. Operating profit climbed to $12.8 billion from $11.9 billion in FY23, while net income also rose to $9.6 billion. Looking ahead to 2025, the company expects organic revenue to grow at a low-single-digit rate, with mid-single-digit growth in core constant currency EPS.
PepsiCo, Inc. (NASDAQ:PEP) has a solid cash position. In FY24, the company generated $12.5 billion in operating cash flow. For FY25, it plans to return approximately $7.6 billion to shareholders through dividends. On February 3, the company announced a 5% increase in its annual dividend to $5.69 per share, marking its 53rd consecutive year of dividend growth, which makes it one of the best dividend aristocrat stocks on our list. The stock supports a dividend yield of 3.5%, as of March 9.
9. AbbVie Inc. (NYSE:ABBV)
5-Year Average Dividend Growth Rate: 7.46%
AbbVie Inc. (NYSE:ABBV) is an Illinois-based multinational pharmaceutical company that mainly focuses on developing and commercializing innovative treatments across various healthcare fields. The company is a major pharmaceutical company with a diverse portfolio spanning immunology, oncology, neurology, and eye care. It also holds a strong position in the aesthetics market, offering well-known cosmetic products such as Juvederm and Botox for skincare and anti-aging treatments. Since the beginning of 2025, the stock has gained more than 19%.
In the fourth quarter of 2024, AbbVie Inc. (NYSE:ABBV) reported $15.1 billion in revenue, marking a 5.6% increase from the previous year and surpassing analysts’ expectations of $14.87 billion. On a GAAP basis, the company posted a net loss of $0.02 per share, while adjusted diluted EPS came in at $2.16, slightly above the projected $2.13. For the full year, combined sales of Skyrizi and Rinvoq totaled $17.7 billion, reflecting a 51% surge fueled by rising global demand and market expansion. Excluding Humira, the company’s overall revenue grew 18% year-over-year, driven by strong performance in its neuroscience and oncology segments.
AbbVie Inc. (NYSE:ABBV) is a solid dividend payer, having raised its payouts for 52 consecutive years. The company’s quarterly dividend comes in at $1.64 per share and has a dividend yield of 3.06%, as of March 9. ABBV is among the best dividend aristocrat stocks to buy.
The number of hedge funds tracked by Insider Monkey owning stakes in AbbVie Inc. (NYSE:ABBV) grew to 84 in Q4 2024, from 68 in the previous quarter. These stakes are worth nearly $2.5 billion in total.
