We recently published a list of the 12 Best Dividend Kings to Buy For Safe Dividend Growth. In this article, we are going to take a look at where Parker-Hannifin Corporation (NYSE:PH) stands against other best dividend kings.
The importance of dividend stocks cannot be denied, even in today’s market environment, which is dominated by AI stocks. The S&P Dividend Aristocrats Index, which tracks the performance of companies with at least 25 consecutive years, is down by over 4% since the start of 2025, compared with a much harsher decline of 13% in the broader market.
Dividend stocks become increasingly popular when companies grow their payouts regularly. Historically, dividend growth stocks have performed better than their peers and have shown less volatility. The dividend growth track records, backed by solid fundamentals, offer reliable investment options to income investors. According to a report by Nuveen, dividend growth stocks have outperformed other asset classes with less risk. The report revealed that companies with strong dividend growth streaks delivered an annual average return of over 10% between 1973 to 2024, as compared to a 4.2% return of non-dividend paying stocks. During this period, dividend cutters delivered a nearly -2% return.
Though dividend stocks also do not come with a promise and can also fluctuate, these stocks have made significant contributions to the market’s overall return over the decades. According to a report by Hartford Funds, dividends and reinvested dividends represented nearly 40% of the market’s return from 1930 to 2024, with capital appreciation making up the rest. The report also highlighted their significance when the economy was in the trenches. The data mentioned that during the 1940s, 1960s, and 1970s, the total returns were lower than 10%, however, dividends represented a larger portion of the market’s performance.
According to Jerome Powell, inflation in the US is likely to ramp up because of the President’s sweeping tariffs. Here are some comments from Powell:
“We face a highly uncertain outlook with elevated risks of both higher unemployment and higher inflation. While tariffs are highly likely to generate at least a temporary rise in inflation, it is also possible that the effects could be more persistent.”
While this presents an overall uncertain environment for an investment landscape, dividend investors are in the catbird seat, as dividend stocks have historically been successful in protecting capital against inflation. WisdomTree reported that from 1957 through 2023, dividends have grown by an average of 5.7%, compared with a 3.67% growth in inflation. The report also mentioned that over the past 68 years, dividend payouts have only decreased in six years, and in just one of those years, they dropped by more than 5%. In comparison, stock prices experienced declines in 18 years during the same period, with the worst drop exceeding 40% and an average decline of more than 11%. Stock prices have proven to be more than twice as volatile as the underlying dividend cash flows. This is because market sentiment often causes short-term fluctuations in stock prices, whereas dividend cash flows, which reflect the company’s long-term value, are less volatile. Given this, we will take a look at some of the best dividend kings for safe dividend growth.
A robotic arm in a factory demonstrating the application of motion control technologies.
Our Methodology
For this article, we scanned the list of dividend kings, which are the companies that have raised their payouts for 50 years or more. From that list, we picked 12 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.
At Insider Monkey, we are obsessed with hedge funds. 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 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
Parker-Hannifin Corporation (NYSE:PH)
5-Year Average Annual Dividend Growth Rate: 13.12%
Parker-Hannifin Corporation (NYSE:PH) is an Ohio-based manufacturing company that specializes in motion and control technologies. The company operates through two main segments: Diversified Industrial and Aerospace Systems. Its product range spans from basic industrial components to advanced aerospace technologies. It supplies these offerings to original equipment manufacturers as well as a broad base of customers around the globe.
Parker-Hannifin Corporation (NYSE:PH) is well-regarded for its robust dividend payouts and strong cash flow generation. For FY24, it reported a 20% increase in year-to-date operating cash flow, reaching a record $2.1 billion, or 14.6% of sales, compared to $1.8 billion in the previous year. It also saw significant improvements in adjusted segment operating margins, with the Aerospace Systems segment delivering particularly strong results. This strong financial performance has contributed to the record operating cash flow. Looking ahead, the company expects a 50% increase in free cash flow and plans to double its dividend over the next five years, providing shareholders with higher payouts annually, which is expected to positively impact the stock’s value.
Parker-Hannifin Corporation (NYSE:PH) pays a quarterly dividend of $1.63 per share and has a dividend yield of 1.26%, as of April 4. The company holds one of the longest dividend growth streaks in the market, spanning 68 years. Moreover, its five-year average annual dividend growth comes in at over 13%.
Overall, PH ranks 3rd on our list of the best dividend kings for safe dividend growth. While we acknowledge the potential of PH 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 time frame. If you are looking for a deeply undervalued dividend stock that is more promising than PH but that trades at 10 times its earnings and grows its earnings at double digit rates annually, check out our report about the dirt cheap dividend stock.
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Disclosure: None. This article is originally published at Insider Monkey.
