We recently compiled a list of the 12 Best Dividend Stocks For Steady Growth. In this article, we are going to take a look at where Booz Allen Hamilton Holding Corporation (NYSE:BAH) stands against the other dividend stocks.

It’s well understood how crucial dividend growth stocks are for investors. Although dividend stocks have been moving at a slow pace recently, largely due to the AI stock boom, their long-term value remains undeniable. Investors appear to be increasingly drawn to dividend growth strategies, recognizing that the focus should now be on growth rather than just yield. The Dividend Aristocrat Index stands out as a strong investment opportunity, offering an average yield of about 2.4%, trading at roughly 23 times earnings, and projected to achieve an average annual earnings growth of 7% over the coming years.

Also read: 10 Best Dividend Aristocrats According to Wall Street Analysts

During the second quarter, US equity markets saw gains, driven by ongoing excitement around artificial intelligence technology, which led to a notable rise in growth stocks. Analysts believe that dividend-paying equities, supported by strong fundamentals, sustainable growth prospects, and solid balance sheets, are well-positioned to benefit from continued economic growth. The current market environment has somehow blurred the line between tech and dividend stocks, especially as major tech companies have introduced dividend policies this year. Whether these companies can continue to raise their payouts remains to be seen. However, the outlook for dividend growth appears promising. In the first quarter, US companies increased their cash reserves to a record $4.11 trillion, aided by a resilient economy and relatively high interest rates, which has accelerated the dividend growth process. According to S&P Dow Jones Indices, over 175 companies in the S&P 500 announced a dividend increase or initiated a dividend during the first half of 2024.

Another factor boosting the significance of dividend growth stocks is the upcoming Federal Reserve interest rate decision in September. Paul Baiocchi from SS&C ALPS Advisors considers this a prudent strategy, as he expects that the Fed will begin easing rates. The chief ETF strategist made the following comments while speaking at CNBC’s “ETF Edge”:

“Investors are moving back toward dividends out of money markets, out of fixed income, but also importantly toward leveraged companies that might be rewarded by a declining interest rate environment.”

He further said:

“You’re looking for dividends as part of the methodology, but you’re looking at dividends that are durable, dividends that have been growing, that are well supported by fundamentals.”

Various reports have indicated that while dividend growth companies may not deliver immediate rewards, they offer substantial long-term benefits. Nuveen, a financial planning firm based in Illinois, provided an optimistic outlook on dividend growth strategies this year, emphasizing their historical performance. The report suggested that companies focused on dividend growth possess valuable long-term characteristics and are well-positioned for strong relative performance in the year ahead. Over time, companies that consistently increase or initiate dividends have achieved higher annualized returns with lower volatility compared to other equity market segments. Although dividend growth companies may not outperform in every market environment, their robust risk-adjusted returns over extended periods make them an ideal foundation for any equity portfolio. With that, we will take a look at some of the best dividend stocks for steady dividend growth.

Our Methodology:

For this list, we screened for dividend stocks with a 5-year average dividend growth rate of above 10%. From that list, we picked stocks with dividend growth track record of at least 10 years. The stocks are ranked in ascending order of their annual average dividend growth in the past five years.

We also measured hedge fund sentiment around each stock according to Insider Monkey’s database of 912 funds as of Q2 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).

Booz Allen Hamilton Holding Corporation (NYSE:BAH)

5-Year Average Dividend Growth: 17.84%

Consecutive Years of Dividend Growth: 12

Booz Allen Hamilton Holding Corporation (NYSE:BAH) is a Virginia-based management and technology consulting company that provides a range of services to government agencies, corporations, and non-profit organizations. The stock has delivered a 21.5% return year-to-date, outperforming the market. The company began fiscal year 2025 with strong first-quarter earnings, showcasing its strategic and operational momentum. Management indicated that they are on track to meet their fiscal year guidance and multi-year investment goals. The company’s velocity, leadership, and technology, or VoLT, initiative continues to drive growth, propelling the company forward as it supports clients’ national priority missions with transformative technology solutions.

LVS Advisory highlighted the company’s business in its Q1 2024 investor letter. Here is what the firm has to say:

“We added Booz Allen Hamilton Holding Corporation (NYSE:BAH) to the growth portfolio in October 2023. I am highlighting Booz Allen this quarter because the exercise of comparing BAH to CACI serves as an interesting example of weighing the trade-offs between “quality” and “value” when picking stocks.

Booz Allen is a technology consulting firm specializing in government contracting. Founded in 1914, Booz Allen has a storied history partnering with the US Government which includes helping the US Navy prepare for World War II. These deep roots have helped engrain the Company into the fabric of Washington DC and provide a foundation for the business’ deep moat.” (Click here to read the full text)

Booz Allen Hamilton Holding Corporation (NYSE:BAH) overall returns also came in strong. The company reported revenue of $2.9 billion, which showed a 10.8% from the same period last year. Its net income also grew by 2.4% on a YoY basis to $165 million. The company also presented a positive outlook for its revenues for FY25, expecting it to grow between 8% to 11% during the period.

Booz Allen Hamilton Holding Corporation (NYSE:BAH) also saw an improvement in its cash position during the quarter. For fiscal year 2025, net cash from operating activities was $52.1 million, a significant turnaround from the $71.5 million net cash outflow in the previous year. Additionally, free cash flow for the first quarter of fiscal year 2025 was $19.7 million, compared to a negative $82.0 million in the prior year.

With a five-year average annual dividend growth rate of 17.84%, Booz Allen Hamilton Holding Corporation (NYSE:BAH) is one of the best dividend stocks on our list. Moreover, the company has raised its payouts for 12 years in a row. During the most recent quarter, it returned $66.4 million to shareholders through dividends. The company currently offers a quarterly dividend of $0.51 per share and has a dividend yield of 1.32%, as of August 23.

The number of hedge funds tracked by Insider Monkey owning stakes in Booz Allen Hamilton Holding Corporation (NYSE:BAH) grew to 47 in Q2 2024, from 41 in the previous quarter. These stakes are collectively valued at nearly $346 million.

Overall BAH ranks 4th on our list of the best dividend stocks for steady growth. While we acknowledge the potential of BAH as an investment, our conviction lies in the belief that some deeply undervalued dividend stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for a deeply undervalued dividend stock that is more promising than BAH but that trades at less than 7 times its earnings and yields nearly 10%, check out our report about the dirt cheap dividend stock.

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Disclosure: None. This article is originally published at Insider Monkey.