15 stocks with a history of dividend growth are expected to deliver once again this year

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Broadcom (AVGO), Caterpillar (CAT) and Eli Lilly (LLY) are among the 15 Club stocks with a streak of annual dividend growth that Wall Street expects to continue in their current fiscal years. Long-term investors should look to own companies with a history of dividend growth instead of chasing stocks with high yields, Morgan Stanley strategists said in a note to clients this week. Jim Cramer agrees, calling the firm’s research “really smart.” He added, “This idea of the dividend growers, I find terrific.” Indeed, stocks that have increased their dividend payouts for at least 25 straight years — a group known as Dividend Aristocrats — have routinely outperformed the S & P 500 over time, Morgan Stanley pointed out. “These equities show relative resilience through uncertain market environments,” the strategists said. “While high-yielding stocks can look attractive in the short-term, our work suggests that they tend to offer more volatile, mean-reverting return profiles.” The note’s reference to high-yielding stocks means those with high annual dividend yields, which in some cases can indicate a riskier profile . Jim and the Club have long emphasized the benefits of owning stocks with healthy dividend payments — and reinvesting those distributions to boost long-term total returns. However, Morgan Stanley’s note made us curious to screen our portfolio for stocks with strong dividend growth track records that are expected to persist. Here are the criteria we used to arrive at our 15-stock list: For all 36 companies in Jim’s Charitable Trust, the portfolio used by the Club, we looked at the per-share dividend payouts in their six most-recent completed full fiscal years, according to FactSet. Only companies that reported growth in those per-share payouts in each period made the cut. To help us project which stocks will keep their dividend growth streaks alive, we also examined analyst estimates for total per-share payouts in their current fiscal year. Companies that were excluded at this stage include Pioneer Natural Resources (PXD) due to lower year-over-year oil prices. The 15-stock list includes four Dividend Aristocrats: Procter & Gamble (PG), Emerson Electric (EMR), Stanley Black & Decker (SWK) and the aforementioned Caterpillar. One thing to keep in mind with Stanley Black & Decker, though, is the magnitude of its payout growth has slowed since last year, as the toolmaker works through its Covid housing boom hangover , as well as supply-chain and inventory woes. Still, we’re believers in its turnaround story, and expect its dividend going forward will be fine. Here are the 11 remaining steady dividend growers that analysts expect will continue doing so in their current fiscal years, including Broadcom and Eli Lilly, which were referenced earlier. Apple (AAPL) Broadcom Costco Wholesale (COST) Eli Lilly Honeywell International (HON) Humana (HUM) Linde (LIN) Microsoft (MSFT) Morgan Stanley (MS) Oracle (ORCL) Starbucks (SBUX) To be sure, we don’t necessarily own all 15 of these companies for their dividends, because we’re not seeking only to maximize our income. For example, while our longtime investment in Apple has been quite successful, the stock currently only has a 0.54% annual dividend yield, based on Tuesday’s stock prices. On the other hand, the dividend is a bit more coveted in positions such as Morgan Stanley and Procter & Gamble — which carried 4.24% and 2.6% yields, respectively, on Tuesday. Bottom line In any case, dividend growth over time is certainly welcome and can help increase total investment return, assuming the distributions are reinvested instead of taking cash. As we discussed in detail earlier this year, reinvesting dividends is a powerful tool to boost wealth generation over time. For the Club, however, Jim’s Trust donates all dividend income and capital gains to charity each year. (See here for a full list of the stocks in Jim Cramer’s Charitable Trust) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.

People walk along Wall Street outside the New York Stock Exchange, May 3, 2023.

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Broadcom (AVGO), Caterpillar (CAT) and Eli Lilly (LLY) are among the 15 Club stocks with a streak of annual dividend growth that Wall Street expects to continue in their current fiscal years.