Introduction
Investors looking for the best of both worlds—dividend income and capital appreciation—should focus on growth dividend stocks. These companies not only pay dividends but also increase them consistently while delivering strong earnings and revenue growth. In this article, I’ll highlight 10 of the best growth dividend stocks that are worth buying and holding for the long term.
What Makes a Great Growth Dividend Stock?
To identify the best growth dividend stocks, I considered the following factors:
- Strong earnings and revenue growth
- Consistent dividend growth above inflation
- Low payout ratios to support future increases
- Industry leadership and durable competitive advantage
- Reasonable valuation for long-term investing
1. Microsoft Corporation (MSFT)
- Why Buy & Hold? A technology leader with a dominant position in software and cloud computing.
- Dividend Yield: 0.8%
- 5-Year Dividend Growth Rate: 10%
- Payout Ratio: 28%
- Growth Potential: Azure and AI expansion.
2. Apple Inc. (AAPL)
- Why Buy & Hold? A global tech giant with a loyal customer base and strong ecosystem.
- Dividend Yield: 0.6%
- 5-Year Dividend Growth Rate: 9%
- Payout Ratio: 16%
- Growth Potential: Services and wearables segment.
3. Broadcom Inc. (AVGO)
- Why Buy & Hold? A semiconductor powerhouse with high-margin enterprise software.
- Dividend Yield: 2.3%
- 5-Year Dividend Growth Rate: 28%
- Payout Ratio: 52%
- Growth Potential: AI-driven chip demand.
4. Visa Inc. (V)
- Why Buy & Hold? A global leader in digital payments benefiting from secular trends.
- Dividend Yield: 0.8%
- 5-Year Dividend Growth Rate: 17%
- Payout Ratio: 21%
- Growth Potential: Global transition to cashless payments.
5. Mastercard Inc. (MA)
- Why Buy & Hold? A duopoly leader in electronic transactions with strong pricing power.
- Dividend Yield: 0.6%
- 5-Year Dividend Growth Rate: 17%
- Payout Ratio: 21%
- Growth Potential: Digital and cross-border payments.
6. Texas Instruments Inc. (TXN)
- Why Buy & Hold? A dividend-growth semiconductor stock with strong margins.
- Dividend Yield: 3.2%
- 5-Year Dividend Growth Rate: 17%
- Payout Ratio: 58%
- Growth Potential: Industrial and automotive chip demand.
7. Home Depot Inc. (HD)
- Why Buy & Hold? A home improvement retailer with consistent earnings growth.
- Dividend Yield: 2.3%
- 5-Year Dividend Growth Rate: 14%
- Payout Ratio: 52%
- Growth Potential: Housing market strength and renovation trends.
8. NVIDIA Corporation (NVDA)
- Why Buy & Hold? A dominant AI and GPU leader with explosive growth.
- Dividend Yield: 0.04%
- 5-Year Dividend Growth Rate: 10%
- Payout Ratio: 7%
- Growth Potential: AI, data centers, and autonomous technology.
9. Costco Wholesale Corporation (COST)
- Why Buy & Hold? A retail giant with a membership-based model and growing revenue.
- Dividend Yield: 0.7%
- 5-Year Dividend Growth Rate: 12%
- Payout Ratio: 27%
- Growth Potential: Expanding global footprint and e-commerce.
10. UnitedHealth Group Inc. (UNH)
- Why Buy & Hold? A healthcare leader benefiting from growing insurance demand.
- Dividend Yield: 1.4%
- 5-Year Dividend Growth Rate: 17%
- Payout Ratio: 28%
- Growth Potential: Expanding Medicare and health tech services.
Historical Performance: The Power of Growth Dividends
If an investor had invested $10,000 in each of these stocks 20 years ago, the compounded annual return would be calculated as:
FV = P (1 + r)^twhere:
- P = Initial investment
- r = Annual return
- t = Number of years
For example, investing in NVIDIA (NVDA) in 2003:
FV = 10,000 \times (1 + 0.30)^{20} = 1,900,424This shows how high-growth dividend stocks can deliver outstanding total returns over the long run.
Conclusion
Growth dividend stocks combine the best aspects of income and capital appreciation. By selecting companies with rising dividends and strong earnings growth, investors can build long-term wealth and passive income. These 10 stocks offer dividend reliability while capitalizing on future trends, making them ideal for a buy-and-hold strategy.
