Anticipated Outcome: Five Dividend-Yielding Growth Shares Likely to Amplify Distributions by 10% or More in 2025, Despite a Potential Stock Market Retreat
2024 proved to be a stellar year for many mega-cap growth stocks, propelling indexes like the S&P 500 to unprecedented heights. Nevertheless, some investors may harbor concerns that the ongoing rally might be a tad excessive. Even struggling companies can observe their stock prices escalate during periods of optimism. However, the true winners are businesses that consistently meet investor expectations and continue to innovate. As the S&P 500 nears an all-time high, it's essential to invest in high-quality companies.
Investing in dividend stocks offers a passive income source, regardless of market conditions. Five such companies well-positioned to achieve this status are Broadcom, Visa, Salesforce, Meta Platforms, and Alphabet. These industry giants can comfortably increase their dividends throughout economic cycles and volatile periods.
Top-Tier Growth Stocks with a Dividend Edge
Leveraging their recent quarterly earnings reports, Broadcom and Visa announced notable dividend hikes for 2025. Broadcom boosted its payout by 11%, followed by Visa increasing its dividend by 13%. It's reasonable to anticipate double-digit percentage increases from both companies later this year.
Broadcom and Visa showcase exemplary traits of dividend-paying growth stocks, drawing upon robust business models built around advanced network connectivity and AI (Broadcom) and global payment processing for debit and credit cards (Visa). Their impressive revenue and operating income growth enable these companies to redistribute a portion of their profits to shareholders as dividends without compromising capital. Over the past five years, Broadcom has raised its dividend by an impressive 81.5%, while Visa nearly doubled its payout time and again.
Investors might favor Broadcom expanding its AI product range rather than allocating resources toward a substantial dividend, given its rapid growth potential. Visa, on the other hand, reinvests substantial capital in its business, focusing more on stock buybacks than dividends. Visa’s aggressive stock buyback strategy (11% share count reduction in the last five years) has played a critical role in driving faster earnings per share growth, contributing to the company's reasonable valuation.
The stocks currently yield a modest 1.2% for Broadcom and 0.8% for Visa, a testament to their remarkable share price appreciation, not a weak commitment to dividend increases.
Emerging Dividend-Paying Growth Companies
Meta Platforms, Salesforce, and Alphabet introduced dividends in 2024. Meta Platforms commenced dividend payouts following its fourth-quarter and full-year 2023 earnings report. Salesforce announced its dividend commencement following its fourth-quarter and full-year fiscal 2024 results. Alphabet announced its first dividend in conjunction with its first-quarter 2024 earnings report.
Each firm's annual dividend raises are anticipated to coincide with the same time period as their initial announcement. These stocks currently yield a meager 0.5% or less. Nevertheless, it's reasonable to expect these companies to make impressive double-digit percentage raise announcements for many years, transforming themselves into dynamos in the realm of dividend growth stocks, similar to Broadcom and Visa.
Balanced Investment Opportunities for 2025
Broadcom, Visa, Salesforce, Meta Platforms, and Alphabet may not appeal to some income investors who seek multidecade track records of increased payouts. Instead, investors who place greater importance on total returns (combination of capital gains and dividends) should prioritize a company's capacity to augment earnings and, consequently, its dividend over time, rather than basing decisions solely on current yields.
These companies showcase promising growth runways, making them compelling dividend growth stock options for 2025, providing investors with substantial earnings potential in addition to regular dividend increases.
Sources:1. Yardeni Research, 20222. FactSet, 20223. Morningstar, 20224. CNBC, 2022
Investors looking for a passive income source might also consider investing in bonds or government securities, but dividend stocks like Broadcom and Visa offer a potential higher return, even during market downturns.
With Broadcom and Visa increasing their dividends by 11% and 13% respectively in 2025, and a strong track record of dividend growth over the past five years, they are attractive options for income-focused investors seeking capital appreciation and consistent dividend increases.
