In this article we present the list of 15 Best Large Cap Dividend Growth Stocks To Buy. Click to skip ahead and see the 5 Best Large Cap Dividend Growth Stocks To Buy.
Visa Inc. (NYSE:V), Thermo Fisher Scientific Inc. (NYSE:TMO), and JPMorgan Chase & Co. (NYSE:JPM) headline the group of large cap dividend growth stocks that would make a valuable addition to any dividend investor’s portfolio.
A lot of attention is paid to companies that have stellar long-term histories of growing their dividend payments annually. Companies that have done so for 25 consecutive years are crowned Dividend Aristocrats, and there are 65 such companies on the S&P 500. Then there are the Dividend Kings, which have raised their annual payouts for at least 50 consecutive years.
While those companies usually rank among the safest dividend stocks to own and are likely to continue growing their dividends at a modest pace in the years to come, many of them have relatively modest dividend growth rates in the single digits.
To find some of the fastest growing dividend stocks of large cap companies often requires looking outside those vaunted lists. These are large companies that in many cases are growing their earnings faster than some of the long-time stalwarts on those lists, which in turn allows them to grow their dividends at a faster rate than those dividend greybeards.
These stocks offer the potential for both share appreciation and strong double digit dividend growth over the long-term, which makes them a compelling mix of income and growth stock, and some of the most coveted top dividend stocks on the market.
The following list of best dividend growth stocks have all grown their dividends at a CAGR of at least 10% over the past five years, meaning their dividend payments are more than 50% higher than what they were just five years ago. We’ll look at these stocks’ payout rates, payout ratios, cash flow projections, and dividend history, among other things, as we seek to uncover which are stocks deserve a place in your dividend portfolio.
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Our Methodology
The following large-cap dividend growth stocks are ranked based on hedge fund sentiment. We follow a select group of hedge funds because Insider Monkey’s research has uncovered that their consensus stock picks can deliver outstanding returns.
All hedge fund data is based on the exclusive group of 900+ funds tracked by Insider Monkey that filed 13Fs for the Q2 2022 reporting period.
15 Best Large Cap Dividend Growth Stocks To Buy
15. United Parcel Service, Inc. (NYSE:UPS)
Number of Hedge Fund Shareholders: 38
5-Year Dividend Growth Rate: 11.3%
JPMorgan Chase & Co. (NYSE:JPM), Visa Inc. (NYSE:V), and Thermo Fisher Scientific Inc. (NYSE:TMO) are some of the best large cap dividend stocks with fast growing dividend payments. Another is United Parcel Service, Inc. (NYSE:UPS), which has grown its dividend at a CAGR of 11.3% over the last five years. Much of that growth came this year, when UPS jacked its quarterly dividend payments by nearly 50% to $1.52. UPS has a 12-year run of dividend growth going, in addition to a 21-year run of dividend payments.
UPS shares currently yield a solid 3.64% and the company’s dividend payments eat up just 43% of the company’s net income at present, so there’s plenty of room for continued growth. While slowing global growth could weigh on package volumes in the near term, UPS has been adept at cutting costs and paying down its debt, resulting in a more efficient company with a stronger balance sheet that will be able to weather any kind of recessionary storm.
Hedge fund ownership of United Parcel Service, Inc. (NYSE:UPS) sank during Q2, as there was a 24% drop in the number of smart money managers long the stock. That continued a longer trend, with the decline in ownership reaching 34% dating back to the third quarter of 2020. The Bill and Melinda Gates Foundation Trust, managed by Michael Larson, owned 740,689 shares of UPS as of June 30.
Mayer Capital likes United Parcel Service, Inc. (NYSE:UPS)’s growing profit and the company’s plans to distribute that profit to shareholders, as revealed in its Q2 2022 investor letter:
“UPS has been a beneficiary of the pandemic-related shift to e-commerce. Revenues increased 15% in the year, with strong leverage in the business boosting operating profit by al- most 67%. Management is focusing on a ‘Better not Bigger’ strategy for the business and divested the UPS Freight business early in the year. Mean- while, the company is expected to increase distributions to shareholders in 2022, from both dividends and share buybacks.”
14. Accenture plc (NYSE:ACN)
Number of Hedge Fund Shareholders: 61
5-Year Dividend Growth Rate: 10.7%
Accenture plc (NYSE:ACN) switched to quarterly dividend payments in the final quarter of 2019 and has since raised those payouts by 40% to $1.12. The tech consulting company has a 16-year streak of making dividend payments and a three-year run of dividend growth. Its payout ratio stands at just 37%, while ACN shares yield 1.56%.
Not only did Accenture pay out $2.5 billion in dividends during its fiscal 2022, it also repurchased $4.1 billion worth of shares, so the company is richly rewarding shareholders with its growing earnings (up 22% year-over-year to $10.71 during FY22).
Hedge fund ownership of Accenture plc (NYSE:ACN) jumped by 23% during Q1 to hit an all-time high and remained flat during Q2. Hedge funds have been steadily buying into the company in greater numbers, as evidenced by the five straight quarters of ownership growth the stock experienced between Q2 2020 and Q3 2021. Rajiv Jain’s GQG Partners opened a new stake in ACN during Q2, buying 1.35 million shares.
Aristotle Capital Management, which owns 628,965 shares of Accenture plc (NYSE:ACN) as of June 30, believes the company is well positioned to capitalize on the growing trend towards digital transformation, as detailed in the fund’s Q2 2022 investor letter:
“Accenture plc (NYSE:ACN) provides management and technology consulting services and solutions. The company delivers a range of specialized capabilities and solutions to clients across all industries and around the world. Accenture offers a portfolio of management consulting, strategy, digital, technology, interactive and business operations services to some of the leading companies and government organizations.
We see digital transformation strategies remain a key initiative for global enterprises and believe Accenture is well-positioned. The company’s IT service and solutions business has an attractive mix to capitalize on digital transformation strategies. We have a positive view on Accenture’s historical success in Mergers & Acquisitions (M&A), which supports the company’s growth through talent acquisition as well as niche technology bolt-ons.”
13. Abbott Laboratories (NYSE:ABT)
Number of Hedge Fund Shareholders: 61
5-Year Dividend Growth Rate: 12.1%
Abbott Laboratories (NYSE:ABT) is in the midst of a nine-year run of dividend growth, highlighted by a 25% raise to its quarterly dividend in 2021. The company’s dividend history is complicated by its split with AbbVie however, which necessitated a lower subsequent payout. The company is otherwise considered a Dividend King, with a 50-year streak of dividend growth.
The medical device manufacturer pays out just 33% of its net income in dividends, and its shares carry a 1.89% yield. While Abbott’s adjusted diluted EPS fell by 17.9% to $1.15 during Q3, analysts believe the company can grow that figure by 11% over the next five years, which could sustain continued double digit growth in the company’s dividend.
Abbott Laboratories (NYSE:ABT) has consistently remained among the second tier of most popular stocks among hedge funds, routinely hovering around the top 50. Several big money managers have large stakes in the company, including Ken Fisher’s Fisher Asset Management and Ray Dalio’s Bridgewater Associates.
Another fund with a big stake in the company is Ric Dillon’s Diamond Hill Capital which discussed its bullish stance on Abbott Laboratories (NYSE:ABT) in the fund’s Q3 2022 investor letter:
“Also among our bottom contributors were health care products manufacturer Abbott Laboratories (NYSE:ABT), global pharmaceutical company Pfizer, media and technology giant Alphabet, and insurance company American International Group (AIG).
Abbott has been working through a recall of its infant formula brand Similac in the US, which has continued to pressure its share price. Although the recall will impact near-term revenues, we are not concerned about any long-term impacts. We remain optimistic about the company given it is one of the highest quality names in health care, in our view, with a talented management team that makes smart capital allocation decisions. Abbott also has leading health care and consumer franchises with a particularly strong competitive position in its medical device business. The company continues to launch innovative products in key strategic areas (such as diabetes, structural heart, and diagnostics), which should help drive not only revenue growth but margin expansion.”
12. Oracle Corporation (NYSE:ORCL)
Number of Hedge Fund Shareholders: 69
5-Year Dividend Growth Rate: 12.2%
Oracle Corporation (NYSE:ORCL) has an eight-year run of dividend growth ongoing, which included a 33% hike to its quarterly payments in the second quarter of 2021. The company’s payout ratio is a miniscule 26%, so there’s no shortage of future dividend growth opportunities. ORCL shares currently yield 1.65%. Oracle has a growing cloud business that is proving to be a cash cow for the company, which is expected to pull in $5.01 per share in earnings during its current fiscal year ended May 2023.
There has been a rise in hedge fund ownership of Oracle Corporation (NYSE:ORCL) for six straight quarters, with a 31% increase during that time. Gavin Baker’s Atreides Management opened a position in ORCL during Q2, while Steve Cohen’s Point72 Asset Management did so during Q1.
First Eagle Investments, which owns the largest stake in Oracle Corporation (NASDAQ:ORCL) as of June 30 among the funds tracked by Insider Monkey, discussed the company’s strong operations in the First Eagle Investments Global Fund’s Q2 2022 investor letter:
“Oracle is one of the world’s largest independent enterprise software companies and has been reinventing itself for the cloud-computing environment, a transition pursued primarily through investments in organic research and design and smallish, well-priced acquisitions. That said, Oracle in June closed its largest-ever deal with the acquisition of Cerner, a designer of software to store and analyze medical records and other healthcare data.
Oracle took on additional debt to finance this all-cash acquisition and as a result plans to moderate its stock-buyback program to focus on debt reduction. Despite the weak quarter for the stock, Oracle’s operations remain strong; it reported better- than-expected results for its most recent quarter and issued upbeat guidance for the coming fiscal year.”
11. Eli Lilly and Company (NYSE:LLY)
Number of Hedge Fund Shareholders: 70
5-Year Dividend Growth Rate: 12.9%
Eli Lilly and Company (NYSE:LLY) shares have one of the lowest yields among this group of growth stocks at just 1.09%, but there’s nonetheless a lot to like about the future of the pharmaceutical giant’s dividend payments, which have been experiencing accelerating growth over the past few years. LLY grew its dividend by 14.7% in 2020, followed by a 14.8% hike in 2021, and a 15.3% increase this year. The company’s payout ratio is 44%.
Eli Lilly boasts a promising pipeline of more than 20 candidates that could fuel future earnings growth and dividend increases. The company’s diabetes medicine Mounjaro alone could be a game changer, with analysts projecting as much as $25 billion in annual sales for the treatment at its peak.
Hedge fund ownership of Eli Lilly and Company (NYSE:LLY) jumped by 32% during Q2 to hit an all-time high. There are now twice as many smart money managers long the stock as there were five years earlier. Ken Fisher’s Fisher Asset Management owns 5.93 million LLY shares as of June 30, while Paul Marshall and Ian Wace’s Marshall Wace LLP opened a new stake in the company during Q2.
Baron Funds is bullish on Eli Lilly and Company (NYSE:LLY)’s diabetes drug Mounjaro, as it discussed in the fund’s Q3 2022 investor letter:
“In pharmaceuticals, our largest investment is in Eli Lilly and Company (NYSE:LLY). Lilly’s new diabetes drug Mounjaro is off to a strong start. In addition, Mounjaro may be approved for obesity next year. In clinical trials, Mounjaro delivered up to 22.5% average weight loss in adults with obesity and has the potential to be a top-selling drug. Lilly also has a drug in development for Alzheimer’s disease in the same class as Lecanemab, a drug being developed by Biogen and Eisai that slowed the rate of cognitive decline in a late-stage clinical trial. Lilly is not facing any significant near-term patent expirations and we think the company should be able to grow revenue and earnings at attractive rates through the end of the decade and beyond.”
10. AbbVie Inc. (NYSE:ABBV)
Number of Hedge Fund Shareholders: 71
5-Year Dividend Growth Rate: 17.3%
AbbVie Inc. (NYSE:ABBV) has a nine-year run of dividend growth going since its split from Abbott Labs and its dividend has been picking up steam at a rapid pace. The company grew its quarterly payments by 50% between Q4 2017 and Q4 2018, and the dividend has risen by more than 50% on top of that since. The next payment of $1.41 is scheduled for November 15 to shareholders of record as of October 14, and the company’s first payment of 2023 will rise again, to $1.48. ABBV shares yield just over 4%.
While AbbVie is set to lose the exclusivity on its blockbuster drug Humira next year, the company already has two growing successors on its heels in the form of Rinvoq and Skyrizi, which grew revenue by 56% and 85% respectively during Q2. AbbVie also has a deep and promising pipeline in facial aesthetics treatments, a market that’s expected to grow at a CAGR of 14% through 2028.
The number of funds long AbbVie Inc. (NYSE:ABBV) has ticked down for the past two quarters, falling by 14% during that period. David Harding’s Winton Capital Management and Anna Nikolayevsky’s Axel Capital Management sold off their ABBV stakes during Q2. Arrowstreet Capital, lead by the team of Peter Rathjens, Bruce Clarke, and John Campbell, held the largest Abbvie stake on June 30 among the funds tracked by Insider Monkey’s database.
Baron Funds also discussed AbbVie Inc. (NYSE:ABBV) in its Q3 2022 investor letter, in which it expressed optimism about the company’s drug pipeline:
“AbbVie Inc. (NYSE:ABBV) is a drug developer best known for Humira, an immunosuppressant that is the best selling drug of all time. Given outsized key product risk (patent cliff and generic launches beginning in 2023), AbbVie has broadened its pipeline, highlighted by its Allergan acquisition. Shares fell on results that missed consensus and indications that legacy franchises were outperforming newer product launches, calling into question AbbVie’s long-term strategy. With promising assets in the pipeline and its robust cash flow profile, we believe AbbVie will grow well into the future.”
9. NIKE, Inc. (NYSE:NKE)
Number of Hedge Fund Shareholders: 72
5-Year Dividend Growth Rate: 11.1%
NIKE, Inc. (NYSE:NKE) has a 32-year streak of paying dividends and a nine-year run of dividend growth. Since the company’s stock split in 2016, its quarterly dividend payments have grown from $0.16 to $0.305. NKE shares yield a modest 1.3%, but with the company’s growing margins thanks to its digital initiatives and 34% payout ratio, it’s likely that will continue to push higher in the future. In the near term, Nike’s margins are being pressured by a glut of inventory, but sales rose by 10% in the company’s fiscal Q1 when adjusting for currency, which outpaced Nike’s sales growth from FY22.
Hedge funds were buying into NIKE, Inc. (NYSE:NKE) during Q2 as the stock continued its descent, as there was a 9% uptick in smart money ownership of the company. Billionaire Ken Fisher’s Fisher Asset Management owns the largest NKE stake as of June 30, holding 8.54 million shares. Terry Smith’s Fundsmith LLP sold off 24% of its large Nike position during Q1 and owns 6.73 million shares as of June 30.
The RiverPark Large Growth Fund suffered from NIKE, Inc. (NYSE:NKE) shares’ underperformance during Q3, being one of the fund’s top detractors, as outlined in its Q3 2022 investor letter:
“Nike: NKE shares were a top detractor this quarter on higher inventory balances leading to lower-than-expected gross margins for the next couple of quarters. The company reported 1Q23 sales and EPS beats, but freight costs, markdowns, and the strong dollar weighed on gross margins. Nike continues to expect low double-digit currency-neutral sales growth, but the strong dollar will reduce overall sales growth and discounted inventory will further reduce gross margins for the year.
Nike is, by far, the leading athletic footwear, apparel, and equipment company in the world with over $46 billion in revenue, $6 billion in 2021 annual free cash flow, and over $4 billion of excess cash. After working through its near-term currency and gross margin issues, we expect the company to return towards management’s guidance of at least 10% annual revenue growth, and return to its accelerating profit growth, as longer-term we expect margins to be materially aided by rising average sales prices (from both increased pricing and a mix shift to more premium products), the company’s deep innovation pipeline, a secular shift from the company’s traditional wholesale channels to a more direct-to-consumer approach (now 35% of revenues up from 16% ten years ago), and a more streamlined supply chain. We believe that the continued global secular growth trend towards active wear will continue to aid Nike’s top-line growth, while we expect the combined gross and operating margin improvements from its initiatives will drive long-term mid-teens or higher annual EPS growth for the foreseeable future.”
8. The Home Depot, Inc. (NYSE:HD)
Number of Hedge Fund Shareholders: 80
5-Year Dividend Growth Rate: 17%
The Home Depot, Inc. (NYSE:HD) has one of the highest dividend growth rates on this list over the last five years, having more than doubled its dividend payments during that time. The company has a 12-year run of dividend growth and a 45% payout ratio that makes future raises appear to not be an issue. HD shares currently yield 2.54%. Home Depot has a strong balance sheet and should be able to weather any weakness in the housing market, as evidenced by its performance during the financial crisis, when it was still generating a profit during the housing market’s darkest days.
Hedge fund ownership of The Home Depot, Inc. (NYSE:HD) has jumped for the three straight quarters, increasing by 34% during that time, even as funds have been selling out of the company’s rival Lowe’s Companies, Inc. (NYSE:LOW) in droves. Richard Chilton’s Chilton Investment Company owns one of the most bullish stakes in HD among the funds tracked by Insider Monkey’s database, holding 753,813 shares as of June 30, giving the fund 5.76% 13F exposure to the stock.
Ric Dillon’s Diamond Hill Capital, which owns 1.26 million The Home Depot, Inc. (NYSE:HD) shares as of June 30, believes the company is poised to take market share in the professional customer segment, as revealed in the fund’s Q2 2022 investor letter:
“The Home Depot, Inc. (NYSE:HD) is a high-quality operator in the home improvement industry. Macroeconomic concerns, particularly the rise in mortgage rates, caused the share price to pull back and trade at a greater discount to our estimate of intrinsic value. We believe Home Depot is well positioned to continue gaining share due to its premium real estate locations, strong operations and recent investments in its supply chain. We like Home Depot’s exposure to the professional customer and believe in its ability to take market share in this segment as we believe home improvement spending has the potential to remain resilient in upcoming years.”
7. Danaher Corporation (NYSE:DHR)
Number of Hedge Fund Shareholders: 82
5-Year Dividend Growth Rate: 12%
Danaher Corporation (NYSE:DHR) has raised its quarterly dividend payments by 79% since 2017 and the company’s payout ratio still stands at a miniscule 9%, so similar growth over the next five years is certainly a possibility. DHR shares do sport a tiny yield of 0.40%, but expect that to rise in the years to come.
The life sciences company’s sales are slowing rapidly as Covid testing numbers decline, with 2023 revenue growth expected to be just 0.5%. However, longer-term the company has several strong segments that are growing at double-digit rates which will eventually become more visible once Covid testing numbers stabilize or decline enough to no longer offset those gains.
Hedge fund ownership of Danaher Corporation (NYSE:DHR) hit an all-time at the end of 2021, with the stock ranking among the 30 most popular stocks among hedge funds for the first time. The number of funds long DHR has since dipped by 9%. Ken Fisher’s Fisher Asset Management and Dan Loeb’s Third Point are among the company’s biggest smart money backers.
The Cooper Investors Global Equities Fund is bullish on Danaher Corporation (NYSE:DHR)’s spinoff of its Environmental & Applied Solutions group, as detailed in the fund’s Q3 2022 investor letter:
“Spin-offs have been a valuable source of uncorrelated return for the portfolio since inception, whether investing in them directly or retaining ownership stakes in the spun-off assets of existing holdings. During the quarter Danaher announced the spin of its Environmental & Applied Solutions group (EAS) expected to close in late 2023. Danaher have been masters of the spin over the last decade and once again this one appears to make sense for both parties. The parent becomes a pure-play life sciences and diagnostics business with higher growth, margins and returns plus more M&A firepower. EAS, with leading positions in water quality through assets like Hach, ChemTreat and Trojan will, as a standalone business, have a more focused M&A strategy and represent an attractive water-related exposure for ESG focused funds. The spinco will still operate with the highly regarded Danaher Business System though (like ‘Fortive Business System’) we expect this to get rebranded while still delivering outstanding financial results.”
6. UnitedHealth Group Inc. (NYSE:UNH)
Number of Hedge Fund Shareholders: 91
5-Year Dividend Growth Rate: 17.7%
Closing out the first part of our list is UnitedHealth Group Inc. (NYSE:UNH), which has been growing its dividend at an impressive rate for several years, pushing its yield up to 1.2%. Its quarterly dividend payments have more than doubled since 2017, including growing by 13.8% earlier this year to $1.65. The managed care insurer grew adjusted diluted EPS by 28.1% year-over-year in Q3 to $5.79, and has significant secular tailwinds that should allow it to continue growing earnings and expanding its margins. With a payout ratio of just 29%, UNH is well positioned to pay out heftier dividends in the years to come.
UnitedHealth Group Inc. (NYSE:UNH) hit triple digits in hedge fund ownership for the first time in Q4 2018 and reached an all-time high of 110 in Q2 of 2021. Ownership of the stock has dipped by 17% in the four quarters since then. Rajiv Jain’s GQG Partners owns the largest UNH stake among the funds tracked by Insider Monkey’s database, holding 3.11 million shares on June 30. Boykin Curry’s Eagle Capital Management owns 2.87 million shares.
Carillon Tower Advisers noted that the defensive aspects of UnitedHealth Group Incorporated (NYSE:UNH)’s managed care business helped the company perform well relative to the market in Q2, as discussed in the fund’s Q2 2022 investor letter:
“UnitedHealth Group Incorporated (NYSE:UNH) reported solid quarterly results and raised 2022 guidance modestly. Additionally, managed care is another industry that is viewed as defensive in the current environment, which helped support UnitedHealth and its peer group.”
Thermo Fisher Scientific Inc. (NYSE:TMO), JPMorgan Chase & Co. (NYSE:JPM), and Visa Inc. (NYSE:V) are among the top large cap dividend growth stocks. Check them out by clicking the link below.
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Disclosure: None. 15 Best Large Cap Dividend Growth Stocks To Buy is originally published at Insider Monkey.
