As an income investor, is there anything more exhilarating than watching passive income flow into your brokerage account? I would argue that there is one other thing that is even better: Watching growing passive income flow into your brokerage account with each passing quarter or year.
But, how to do that? Here are two dividend stocks that have each raised their payouts to shareholders for more than 10 years straight, making them Dividend Contenders. And the best part is that the dividends paid to shareholders are expected to keep growing in the years to come.
1. Home Depot
Many still believe that homeownership is a vital part of fulfilling the American Dream. And whether you plan on an extensive home renovation or are simply looking for new appliances, the home improvement retail giant Home Depot (NYSE: HD) has you covered. With over 2,300 stores throughout the U.S., Mexico, and Canada, Home Depot is the largest player in the home improvement retail industry. As long as homeownership remains important in North America, no company is set to benefit as much as Home Depot.
Analysts believe that the dream of homeownership is here to stay. This is why many expect that Home Depot will deliver 14.6% annual non-GAAP (adjusted) diluted earnings per share (EPS) growth over the next five years.
The stock’s dividend payout ratio is set to be 45.9% in 2022. This should allow Home Depot to extend its 13-year dividend growth streak with payout hikes as fast as its earnings growth in the years ahead. Low-teens annual dividend growth is quite enticing, considering that the stock also yields a market-topping 2.5%.
Best of all, Home Depot’s valuation looks to provide a reasonable entry point for investors at the current $298 share price. The stock is trading at a forward price-to-earnings ratio of 18, which is moderately lower than the consumer discretionary sector average of 22.
With semiconductor chips found in thousands of everyday products like appliances, smartphones, and computers, it’s not an overstatement to argue that the modern world depends on semiconductor chips. This is why the market research firm Fortune Business Insights is forecasting that the industry will grow from $483 billion in 2022 to $893.1 billion by 2029.
With a market capitalization of $239.7 billion, Broadcom (NASDAQ: AVGO) is the fourth-largest publicly traded semiconductor company in the world. Effectively, this means that there are fewer companies that are set to benefit more than Broadcom from the rapidly growing demand for semiconductor chips. The company’s impressive market cap also explains why analysts believe that Broadcom will produce 14.7% annual earnings growth through the next five years.
Given Broadcom’s projected dividend payout ratio of 44.4% in 2022, the dividend should be able to grow as fast as earnings moving forward. This should mean plenty of raises around 15% annually over the next several years, which would build on the stock’s track record of 13 consecutive years of dividend growth. Paired with a 2.9% dividend yield, this is an enviable mix of starting income and future income potential.
The cherry on top is that Broadcom appears favorably valued for long-term investors. The stock’s forward P/E ratio of 15.4 is moderately lower than the information technology sector average of 20. Broadcom’s promising growth prospects, sustainable payout ratio, and modest valuation make the stock a safe dividend play to build significant wealth in the years ahead.