3 Dividend Growth Stocks for Long-Term Investors

Dividend growth stocks hold considerable appeal for long-term investors because they offer regular income and show potential for capital appreciation as dividends increase over time. Amid this backdrop, it could be wise to keep track of dividend stocks, The Home Depot, Inc. , AbbVie Inc. , and McDonald's Corporation , for long-term growth.

The dividend growth rate is the annualized percentage rate of growth that a particular stock's dividend undergoes over a period of time. Typically, these stocks come from well-established companies with stable earnings, predictable cash flows, and a strong commitment to rewarding shareholders. These companies also seek to increase the dividends paid to their investors on a regular basis.

Historically, companies with strong dividend growth records have shown stability and less volatility than their non-dividend counterparts. The appeal of dividend growth stocks often lies in their resilience, especially during economic downturns.

These stocks also provide a dual advantage for growth-focused investors: while they enjoy income from dividends, they also stand to benefit from share price appreciation. The income produced by dividends may be an essential complement to a strong capital appreciation strategy, as it may limit volatility and contribute to total return over time.

Additionally, on a per share basis, S&P 500 Q3 2024 dividend payments set a record, as payments increased 2.2% to $18.68 per share from Q2 2024's $18.28 and were up 8.3% from Q3 2023's $17.26 payment. Investing in companies with sustainable dividend growth can help augment total returns and reduce volatility while providing a growing income stream.

Given these factors, let’s delve deeper into the fundamentals of top dividend growth stocks: HD, ABBV, and MCD.

The Home Depot, Inc. (HD)

HD operates as a home improvement retailer worldwide. It offers various building materials, home improvement products, lawn and garden products, and décor items, as well as facilities maintenance, repair, and operations products.

On September 12, the company declared a quarterly dividend of $2.25 per share. With 14 years of consecutive dividend growth, HD pays an annual dividend of $9, which translates to a yield of 2.22% at the current share price. Also, the company’s dividend payouts have increased at CAGRs of 11.6% and 11.1% over the past five and three years, respectively.

On June 18, HD completed its acquisition of SRS Distribution, Inc., a leading residential specialty trade distribution company, for a total of approximately $18.25 billion. This acquisition should accelerate HD’s growth and establish it as a leading specialty trade distributor across multiple verticals.

HD’s net sales for the second quarter ended July 28, 2024, and increased marginally year-over-year to $43.18 billion. Meanwhile, its gross profit improved by 1.8% from the prior year’s value to $14.42 billion. The company’s net earnings stood at $4.56 billion, while its EPS came in at $4.60.

According to the fiscal year 2024 guidance, HD forecasts total sales to range between 2.5% to 3.5% and the operating margin rate to be between 13.5%-13.6%. The company also expects 12 new stores.

Street expects HD’s revenue for the fiscal fourth quarter (ending January 2025) to increase 10.8% year-over-year to $38.55 billion. Its EPS for the same period is expected to register a 6.7% growth from the prior year, settling at $3.01. In addition, it surpassed the consensus EPS estimates in each of the trailing four quarters, which is promising.

The stock has gained 37.2% over the past year and 19.8% over the past six months to close the last trading session at $405.90.

HD’s stance is apparent in its POWR Ratings. The stock has a B grade for Stability and Sentiment. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.

Among the 57 stocks in the B-rated Home Improvement & Goods industry, it is ranked #31. Click here to see the additional HD ratings (Growth, Value, Momentum, and Quality).

AbbVie Inc. (ABBV)

ABBV is a global, diversified, research-based biopharmaceutical company engaged in the manufacture and sale of medications and therapies. It offers a comprehensive product portfolio across Immunology, Oncology, Neuroscience, Eye Care, Aesthetics, and Other Specialties.

Buoyed by strong financial performance, the company declared its shareholders a quarterly dividend of $1.64 per share, payable February 14, 2025, to common shareholders of record at the close of business on January 15, 2025.

ABBV pays an annual dividend of $6.56, which translates to a yield of 3.29% at the current share price. Its four-year average dividend yield is 3.93%. Moreover, the company’s dividend payouts have increased at a CAGR of 7.7% over the past five years.

On October 28, ABBV announced its acquisition of Aliada Technologies, a biotechnology company advancing therapies using a novel blood-brain barrier (BBB)-crossing technology to address challenging central nervous system (CNS) diseases. This acquisition should help ABBV strengthen its position in the market by bringing ALIA-1758 to patients with Alzheimer's disease.

For the third quarter that ended on September 30, 2024, ABBV’s net revenue increased 3.8% year-over-year to $14.46 billion, while the company’s operating earnings reported $3.83 billion, indicating a 68% growth from the prior-year quarter. ABBV’s adjusted net earnings came in at $5.33 billion, up marginally year-over-year, while its attributable earnings per share grew by 1.7% from the year-ago value to $3.

Looking ahead, ABBV forecasts full-year 2024 and raises its adjusted EPS to range between $10.90 and $10.94, from the prior forecast of $10.67 and $10.87.

The consensus revenue estimate of $14.81 billion for the fiscal fourth quarter (ending December 2024) represents a 3.5% increase year-over-year. The consensus EPS estimate of $2.98 for the current quarter indicates a 6.7% improvement year-over-year. The company has an impressive surprise history; it surpassed the consensus revenue in each of the trailing four quarters.

Shares of ABBV have gained 40.5% over the past year and 24.3% over the past six months to close the last trading session at $199.50.

ABBV’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of A, which translates to a Strong Buy in our proprietary rating system.

It has a B grade for Growth, Value, Stability, Sentiment, and Quality. Out of 160 stocks in the Medical - Pharmaceuticals industry, ABBV is ranked #2. Click here to see ABBV’s rating for Momentum.

McDonald's Corporation (MCD)

MCD operates and franchises restaurants under the McDonald’s brand internationally. The company offers food and beverages, including hamburgers and cheeseburgers, chicken sandwiches, fries, shakes, desserts, sundaes, cookies, pies, soft drinks, coffee, and other beverages.

On September 25, demonstrating its commitment to returning value to shareholders, the company declared the 48th consecutive quarterly dividend of $1.77 per common share. This dividend will be paid on December 16, 2024, to shareholders on record as of December 2, 2024.

MCD pays an annual dividend of $7.08, which translates to a yield of 2.37% at the current share price. Its four-year average dividend yield is 2.2%. Moreover, its dividend payouts have increased at CAGRs of 8.9% and 7.6% over the past three and five years, respectively.

In the fiscal third quarter that ended on September 30, 2024, MCD’s total revenues and others increased 2.5% year-over-year, amounting to $6.87 billion. Its net income came in at $2.26 billion, and its earnings per share stood at $3.13.

Analysts expect MCD’s revenue for the first quarter (ending March 2025) to increase 1.9% year-over-year to $6.29 billion, while its EPS for the same period is expected to grow 3.5% from the prior year’s period to $2.79.

Over the past year, the stock has surged 11.8%, closing the last trading session at $298.97.

MCD’s fundamentals are reflected in its POWR Ratings. The stock has a B grade for Stability and Quality. It is ranked #10 out of 41 stocks in the Restaurants industry.

Beyond what is stated above, we’ve also rated MCD for Growth, Value, Momentum, and Sentiment. Get all MCD’s ratings here.

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HD shares closed at $405.90 on Friday, up $6.46 (+1.62%). Year-to-date, HD has gained 19.37%, versus a 27.04% rise in the benchmark S&P 500 index during the same period.