Ivanna Hampton: Welcome to Investing Insights, I’m your host Ivanna Hampton. A dividend-paying streak sends a strong signal. It shows that a company has grown its earnings enough to support dividend increases and reflects the firm’s commitment to returning cash via dividend as opposed to share repurchases. Morningstar DividendInvestor newsletter has highlighted more than a dozen companies that have pulled it off for five straight years. I spoke with the newsletter’s editor, David Harrell, about this year’s class of dividend growers.
Thanks for being here, David.
David Harrell: It’s great to be back.
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What Qualifies a Dividend Stock to Be on the DividendInvestor’s Annual Dividend Growers List?
Hampton: Well, you researched which dividend-paying stocks qualified for a spot on DividendInvestor’s annual dividend growers list. This is where we got the story, everybody. Let’s start with the criteria.
Harrell: Sure. So I was looking, first of all, for stocks that had increased their per share dividend payout by at least 10% for five consecutive calendar years. So the version we did for that issue, we were looking at 2020, 21, 22, 23, and 24, at least 10% a year. I did not penalize companies that may have paid a special dividend, you know, an extra 50 cents somewhere in there and then not done that the following years. I didn’t think that was fair. So I was really looking only at their regular dividend payout. But then I was also looking for firms that either had a wide or narrow economic moat rating from Morningstar equity analysts, a low or medium uncertainty rating, and then also had a current yield of at least 1%. So it ended up being a short list, but with the caveat that there are probably some other firms out there that would meet the 10% a year criteria. But because I was limiting it to Morningstar Equity Analysts coverage list, anything that’s not covered by Morningstar was not going to make this list.
13 Elite Companies With Fast-Growing Dividends
Hampton: And 13 companies made this unique list. Who are they, and are there any newcomers?
Harrell: Sure. It included some well-known names like Mondelēz International, the snack food manufacturer, brands like Chips Ahoy, Snap-on Tools, Domino’s Pizza, and UnitedHealth, which has obviously been in the news lately. Some of the new names included Accenture, Elevance Health, MSCI, SBAC Communications, and Zoetis.
- Accenture ACN
- Broadcom AVGO
- Domino’s Pizza Inc DPZ
- Elevance Health ELV
- Mondelēz Global MDLZ
- Motorola Solutions MSI
- MSCI MSCI
- NextEra Energy NEE
- SBA Communications SBAC
- Snap-on SNA
- SS&C Technologies SSNC
- UnitedHealth Group UNH
- Zoetis ZTS
Why These Companies Failed to Make the Dividend Growers List in 2025
Hampton: And this year’s list is slightly smaller than last year’s list. Talk about the companies that failed to make the cut this year and why.
Harrell: Sure. Some of the companies did not make the list again because they didn’t meet that 10% hurdle. Companies like Analog Devices ADI, Goldman Sachs GS, Home Depot HD, Nike NKE, and Tractor Supply TSCO, they all had good dividend raises in 2024, but not quite enough to meet that 10% hurdle. Then there were a few others that got knocked off for other reasons. Kroger KR, for example, raised its dividend by at least 10% in 2024, but Morningstar analysts downgraded its moat rating from a narrow to none, so it got kicked off the list. NXP Semiconductors NXPI held its dividend flat for all of 2024, so it’s off the list. And American Tower AMT, which is a cellular tower operator, it actually had a great dividend story. It had been increasing its dividend every quarter for its entire history. But then in 2024, it brought its dividend rate down. So it’s off the list, although it has since restored its dividend to where it was before.
Which Companies Were ‘Near Misses’ for the Dividend Growers List?
Hampton: But those stocks appear on your other list, the near misses, correct?
Harrell: Right. So it’s a slightly longer list that I compile, the near misses. And these are firms that were just one factor away. So maybe they don’t have a moat rating or they have a single year in which they had missed the 10% hurdle. However, if they had a dividend decrease, then that kicks them out entirely.
Hampton: Name some of the near misses.
Harrell: Sure. Well, some of them that I just mentioned that got kicked off the list. So Nike, Home Depot, eBay EBAY, Dollar General DG, Dick’s Sporting Goods DKS. Those are all firms that are on that near-miss list this year.
- Analog Devices ADI
- Goldman Sachs GS
- Home Depot HD
- Nike NKE
- Tractor Supply TSCO
- Kroger KR
- NXP Semiconductors NXPI
- American Tower AMT
- eBay EBAY
- Dollar General DG
- Dick’s Sporting Goods DKS
Why Are Higher-Yielding Dividend Stocks Absent?
Hampton: So the average yield among the dividend growers is just 1.8%. Why are companies with higher dividend yields not on the list?
Harrell: Sure. So like you said, it’s a relatively modest yield, 1.8%. While that is higher than the yield of the overall market, it is below sort of the yield that a lot of investors who are looking for current income are seeking, but I wasn’t really surprised to see that. And this really comes down to the math because if you think about it. A company that has grown its dividend 10% a year for five consecutive years. That compounds out to 61%. So they’ve raised their dividends by 61% over the past five years. In general, the higher-yielding firms, firms that are yielding 3-plus, 4-plus, or even 5-plus percent, are already paying out a fairly large portion of their earnings each year as dividends. So they have a little less room to grow. So I really wasn’t surprised to see that the average yield was under 2%.
Why Dividend Growth Investing Can Benefit Investors With a Longer Time Horizon
Hampton: Now, a typical income investor may shun dividend stocks with such low yields. Who should consider adding dividend growers to their portfolio? And what’s to gain?
Harrell: Sure. Well, you know, there are a handful. NextEra Energy NEE, for example, is yielding more than 3%. But I think it really comes down to what you’re looking for for your portfolio and what are these dividend increases signaling. So, like you said, if you’re looking primarily for current income, some of these names aren’t necessarily going to be that appealing to you. But think about where do dividends come from? Dividends come from earnings. So companies who are increasing their dividends at a healthy rate are generally firms that are seeing their earnings grow year after year. And so there’s a lot of research into this idea of dividend growth investing as an investment strategy, not for current income, but rather companies that are showing strong dividend growth are companies with strong earnings growth, and that can be reflected in stock prices.
Is Double-Digit Dividend Growth Sustainable for Companies?
Hampton: And you brought this up earlier. Another part of the criteria was a 10% or more increase in the dividend payout over five years. Is that sustainable for a company in the long term? And what trends have you seen?
Harrell: Well, it’s a fairly high bar, although it sort of depends on your starting point. But I was looking at aggregate earnings growth for the overall market as measured by the S&P 500 going back to 1989. What I noticed there was if you look at year over year earnings growth, there were only two periods in which we saw five years of consecutive double-digit earnings growth. So, any company that’s going beyond five years in this sort of dividend streak, if that is being supported by the earnings, they’re sort of an outlier in their ability to do so. And again, just the very fact that of Morningstar’s coverage list, only 13 firms made this list. But the other thing to consider in terms of, and this is pivoting back to dividends, not earnings, is what is the starting point for the current dividend payout? So we take a firm like Nvidia NVDA, which is actually a dividend stock. Most people wouldn’t think of it as that. But it has a very minuscule dividend. The yield is currently 0.03%. So that’s a company that could easily be growing its dividend by double digits for decades and still have a very low payout ratio. But that’s clearly not how that firm is choosing to allocate its capital.
Which Companies Are on Track to Appear on Next Year’s Dividend Growers’ List?
Hampton: That was a good example, David. I appreciate that. So some dividend-paying stocks appear on track to make next year’s dividend growers list. Can you talk about these companies that are sending early signals?
Harrell: Sure. There are several companies that are on the list right now or that were on the list through 2024 that are likely to make the list next year. So NextEra Energy and Snap-on have made dividend increases that should keep them on the list next year provided that they meet the other criteria—the moat and yield and the uncertainty rating that would put them on the list again next year. And then there’s a company that’s on the near missed list, I believe, Otis Worldwide OTIS, which was spun off from what is now RTX in 2020, has had really strong dividend growth. So if it continues with another year of 100-plus percent dividend growth, that would land on our list for next year as well.
- Otis Worldwide OTIS
- RTX Corp RTX
What Investors Need to Know Before Investing in Dividend Stocks
Hampton: What do you think investors need to know before buying dividend stocks?
Harrell: Well, I think it really comes down to, you know, it’s the same criteria for any stock that you buy. And the number-one thing is, what is the current price of the stock relative to its intrinsic value by some measure such as the Morningstar Fair Value Estimate. So that would be at the top of my list. And then, what are you looking for from this investment? Are you looking for current income? If that’s the case, what are the prospects for dividend growth? And how sustainable is that dividend? Will the company be able to continue to pay it out year after year if you are looking for growth? And I think something to keep in mind here is the Morningstar Economic Moat Rating. Obviously, no dividend is guaranteed, and having a wide moat does not guarantee that dividend. But we’ve seen strong correlation between moat ratings and dividend sustainability, particularly in times of economic stress. So what I have seen is that wide-moat firms were the least likely to cut their dividends, and no-moat firms were far more likely to cut their dividends than narrow-moat or wide-moat companies.
Undervalued Dividend Growers Stock Picks
Hampton: That’s good to know. Which dividend growers on your list do Morningstar stock analysts think are undervalued today?
Harrell: Sure. So I was looking at the list of 13 yesterday, and there were five stocks that are currently trading at enough of a discount to their Morningstar fair value estimate that would place them in 4-star territory. The first three were Mondelez International MDLZ, SBA Communications SBAC, SS&C SSNC, And then the final two were a couple healthcare firms, Elevance Health ELV, which is trading at more than a 30% discount to its fair value estimate.
And the final one, which is at the largest discount, is UnitedHealth UNH. But there’s a couple things to consider there. First of all, Morningstar analysts have reduced their fair value estimate due to some of the controversies at the firm right now, and describe the earnings as perhaps being very uncertain at this point. They have not yet cut their projections—or they have not—they’re not yet predicting a dividend cut, but when you look at their cash flow model, they are basically saying the dividend will likely be flat in this calendar year and the next two calendar years. So it seems to me very unlikely that UnitedHealth would remain on the dividend growers list next year if they’re unable to continue their dividend growth.
Hampton: Thank you for that list. And for everyone listening and watching, you should know that we are recording this episode on Wednesday, May 28, because we were throwing around yesterday and today, and I want everyone to be in the know.
Harrell: OK.
Hampton: Thank you, David, for coming to the table and discussing this year’s class of dividend growers.
Harrell: OK. Thanks for having me.
Hampton: That wraps up this week’s episode. Thanks for watching and making this show part of your day. Subscribe to Morningstar’s YouTube channel to see new videos about investment ideas, market trends, and analyst insights. Thanks to senior video producer Jake VanKersen and associate multimedia editor Jessica Bebel. I’m Ivanna Hampton, lead multimedia editor at Morningstar. Take care.
The author or authors do own shares in any securities mentioned in this article. Find out about Morningstar's editorial policies.
Correction: In an earlier version of this podcast, a section about companies included on the DividendInvestor’s DividendGrowers list and a follow-up question about companies that weren’t included were inadvertently cut during production. The episode has been updated to restore this information.
