Dividends offer income and increase your total return on stocks. And, this income will grow with the best dividend growth stocks to buy in April.
When choosing, consider two critical factors. First, candidates must be in stable industries that guarantee earnings growth in any economic environment. While some cyclical companies might pay high yields currently, these dividends are prone to cuts when earnings fall during a downturn.
Secondly, the following three companies already have a strong dividend record. For starters, their forward dividend yield is above 2% and each has recorded over 10 consecutive years of dividend growth. Even better, they have grown their dividends by more than 10% annually over the last five years.
Given their stellar dividend growth, these stocks are a great source of portfolio income. You can buy them today below the 21 times earnings in which the market is trading.
NextEra Energy (NEE)
This regulated utility with a growing renewable energy business has a 3.25% forward dividend yield. Additionally, NextEra Energy (NYSE:NEE) has increased its dividend for 28 consecutive years.
Also, the utility has achieved a 10.8% five-year dividend growth rate and this record is likely to continue. First, it owns Florida Power & Light Company, the largest electric utility in the U.S. As a regulated utility with a monopoly position in Florida, it charges prices that allow a good earnings return on capital.
Secondly, it’s the largest producer of renewable energy from solar and wind through NextEra Energy Resources. NextEra has some of the best sites for renewable power generation on its portfolio. Moreover, it has entered into purchase power agreements with terms exceeding 20 years. These contracts include escalator clauses that guarantee the renewable business will earn good returns.
Given the stability of its regulated utility business in Florida and the growth from the renewable business, NextEra presents as one of the best dividend growth stocks to buy. With a payout ratio below 60%, ample room for future dividend growth exists.
Mondelez International (MDLZ)
Snacking is a favorite pastime for many people, regardless of their financial situation. That’s why Mondelez International (NASDAQ:MDLZ) continues to be a stable revenue grower. At 20 times forward earnings and a forward dividend yield of 2.4%, it’s a no-brainer buy.
Mondelez is a huge international player, with 70% of its sales from outside the U.S. Notably, the snack company has some of the most popular brands and garners significant shelf space in retail stores.
Indeed, its dominant position is undisputed. According to management, it has a 17% market share in biscuits and a 13% share in confectionery. Its leading brands have supported steady demand growth and market share gains. As a result, over the last 5 years, revenue grew at a compounded annual growth rate of 6.7%.
Impressively, the company has achieved volume growth while raising prices. This highlights consumers’ affinity for its top brands, such as Oreo and Cadbury. Also, Mondelez has achieved impressive profits, with operating margins exceeding 15% in the last five years.
As of this writing, Mondelez International has a 48% payout ratio. Management expects 3%- 5% organic sales growth in fiscal year 2024. Moreover, they forecast adjusted EPS to grow at a high single-digit rate, meaning the 10-year dividend growth record will be extended.
Target (TGT)
Target (NYSE:TGT) is one of the retailers that has managed to fight off competition from Amazon (NASDAQ:AMZN) and grow. By creating a fulfilling in-store experience and a broad assortment of essentials, home goods and apparel, it maintains customer interest. At the same time, it has built its omnichannel fulfillment capabilities to cater to the online shopper.
Indeed, Target has established itself as one of the leading retailers in the U.S. Although fiscal year 2023 sales declined 1.6%, they were still 37% above fiscal year 2019 levels.
Even more impressive is Target’s dividend record. The retailer is a dividend aristocrat that has grown its dividend for 55 consecutive years. As earnings have grown, it has upped its dividend growth, increasing the dividend by 11.5% annually over the last five years. As of this writing, it yields 2.47% and has a low payout ratio of 48.8%.
Fundamentally, the stock is also attractive at current levels. It has resolved most of the shrink and inventory issues it experienced over the past two years. Fiscal year 2023 GAAP EPS of $8.94 rose significantly from $5.98 in fiscal year 2022. And management expects even more improvements in 2024.
On the date of publication, Charles Munyi did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
