Kevin Simpson Highlights Dividend Stocks That Could Boost Steady Returns for Investors

Think of investing like planting a garden: you want plants that not only give you fruit now, but also grow bigger and offer even more over time. That’s why dividend-growth stocks are getting a lot of attention from investors today.

Why Dividend-Growth Stocks Matter for Investors

Dividend-growth stocks are shares of companies that pay out part of their profits as cash to investors—and they increase those payouts year after year. This matters because, when interest rates fall, the money you get from bonds drops, making these growing dividends more attractive.

The Federal Reserve is expected to cut rates soon, with the market seeing a 99% chance of another cut next week. As rates go down, dividend stocks become even more appealing for people who want steady income that also grows over time. Source

Bull Case: The Upside of Dividend-Growth Stocks

• Protection Against Inflation: As companies raise their dividends, your income goes up—like getting a yearly raise that helps keep up with rising prices.
• Steady Cash Flow: Growing dividends mean more money in your pocket each year, which can help balance out ups and downs in the stock market.
• Historical Strength: Companies that grow their dividends have outperformed the broader market over the long term. From 1973 to 2023, dividend growers beat non-dividend payers by almost 3% per year, according to Hartford Funds. Source
• Resilient Companies: Firms that can raise dividends usually have strong profits and solid business models.

Bear Case: The Risks and Downsides

• Not All Dividends Are Equal: Some companies pay high dividends but can’t keep raising them, or might even cut them if business gets tough.
• Lower Yields Than Bonds (Sometimes): If interest rates go up instead of down, bonds could look more attractive than dividend stocks.
• Slow Growth: Some dividend stocks, especially in older industries, might not grow as quickly as tech or other high-growth sectors.
• Market Risks: Even the best dividend stocks can drop in price during market sell-offs, which could shrink your portfolio’s value.

Three Dividend-Growth Stocks to Watch

• Apple (AAPL):
  • Dividend Growth Rate: 13.1% over three years
  • Current Yield: 0.40%
  • Why It Stands Out: Apple keeps growing its profits and has a loyal customer base. Even when iPhone sales slow, Apple uses its strong balance sheet to reward shareholders with buybacks and dividends. Recent data shows the new iPhone 17 outsold last year’s model by 14% in its first 10 days in the US and China.
• Coca-Cola (KO):
  • Dividend Growth Rate: 4.9% over three years
  • Current Yield: 2.88%
  • Why It Stands Out: Coca-Cola is a classic for a reason. It has global reach, strong pricing power, and a history of dependable payouts. Even when the economy gets rocky, Coke tends to keep delivering steady dividends and slow-but-steady growth.
• RTX (formerly Raytheon):
  • Dividend Growth Rate: 7.3% over three years
  • Current Yield: 1.53%
  • Why It Stands Out: RTX is benefiting from higher defense spending and a rebound in aerospace. Its stock is up nearly 55% this year, and it just raised its full-year outlook after strong earnings.

Investor Takeaway

• Consider adding dividend-growth stocks to your portfolio, especially if you want income that keeps up with inflation.
• Look for companies with a proven track record of raising dividends, not just high yields.
• Balance your investments: use dividend growers for stability, but keep some growth stocks for bigger long-term gains.
• Stay alert for changing interest rates, as they can affect how attractive dividends look compared to bonds.
• Review your picks regularly—companies that can’t keep growing earnings may not be able to keep raising dividends.

For the full original report, see CNBC