We recently compiled a list of the 10 Best Dividend Growth Stocks to Buy and Hold in 2025. In this article, we are going to take a look at where Roper Technologies, Inc. (NASDAQ:ROP) stands against the other dividend growth stocks.
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.
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).
A software engineer hunched over a laptop writing code, embodying the companies technical expertise.
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.
Overall ROP ranks 7th on our list of the best dividend growth stocks to buy and hold in 2025. While we acknowledge the potential of ROP as an investment, 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 ROP but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
