3 Quality Dividend Growth Stocks for the Long Run
These companies, all with enviable histories of dividend growth, are attractive for investors seeking long-term income.
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Income investors typically focus on stocks with high dividend yields. There is good reason for this, as investors looking for higher levels of income (such as retirees) will naturally gravitate toward higher-yielding stocks.
That said, dividend growth stocks may generate more long-term dividend income as they have the ability to raise their dividends at higher rates.
Heat Up Your Dividend Income
A.O. Smith AOS is a leading manufacturer of residential and commercial water heaters, boilers and water treatment products. The company generates two-thirds of its sales in North America, and most of the rest in China, whereas the rest of the world is just a small market for A.O. Smith. It has raised its dividend for more than 25 years in a row, making the company a Dividend Aristocrat.
A.O. Smith reported its third-quarter earnings results on October 22. The company generated revenues of $903 million during the quarter, which represents a decline of 4% compared to the prior year’s quarter. Revenues were down by 1% in North America, but the international business saw a wider decline, primarily due to lower sales in China, which has a troubled real estate market.
The company generated earnings per share of $0.82 during the third quarter, which was down 9% on a year-over-year basis. This was caused by lower revenues and lower margins, with buybacks not being able to fully offset these headwinds. A.O. Smith has reduced its guidance for 2024. The company is forecasting full-year EPS in a range of $3.70 to $3.85.
Thanks to a healthy housing market in the U.S., the company has enjoyed consistent growth in the domestic market throughout most of the last decade. For a long time, A.O. Smith’s sales performance was even more impressive in China, where sales have grown at a double-digits pace during the last decade.
China’s huge population, its robust GDP growth, and the booming of its middle class were major tailwinds in this important market. In addition, thanks to the severe pollution of the country, the demand for air purifiers remains strong as well.
AOS has increased its dividend for 31 years.
A 61-Year Streak of Dividend Growth
Nordson Corp. NDSN was founded in 1954 in Amherst, Ohio by brothers Eric and Evan Nord, but the company can trace its roots back to 1909 with the U.S. Automatic Company. Today the company has operations in over 35 countries and engineers, manufactures, and markets products used for dispensing adhesives, coatings, sealants, biomaterials, plastics, and other materials, with applications ranging from diapers and straws to cell phones and aerospace.
The company generated $2.7 billion in sales last fiscal year. On November 3, 2022, Nordson completed its acquisition of CyberOptics Corp., expanding its product offering in the semiconductor and electronics industries. CyberOptics is a global developer and manufacturer of high-precision 3D optical sensing technology solutions. Nordson also completed its acquisition of Atrion in August 2024.
On December 11, Nordson reported fourth-quarter results for the period ending October 31, 2024. Sales of $744 million were 4% higher compared to $719 million in Q4 2023, which was driven by a positive acquisition impact, and offset by organic decrease of 3%.
Industrial Precision saw sales decrease by 3%, while the Medical and Fluid Solutions and Advanced Technology Solutions segments had sales increases of 19% and 5%, respectively. The company generated adjusted EPS of $2.78, a 3% increase compared to the same prior-year period.
Areas for growth include increased use of disposable products, productivity investments, mobile computing, increased medical device usage and lightweight/lean manufacturing of vehicles, all of which benefit from the company’s adhesive and coating segments.
Additionally, with the acquisition of CyberOptics and Atrion, Nordson has expanded its position in the semiconductor and electronics industries, and proprietary medical products.
NDSN has increased its dividend for 61 years.
A 'Remarkable Growth Track Record'
Brown & Brown Inc. BRO is a leading insurance brokerage firm that provides risk management solutions to both individuals and businesses, with a focus on property & casualty insurance. Brown & Brown has a notably high level of insider ownership.
The company posted third-quarter earnings on October 28, and results were better than expected on both the top and bottom lines. Adjusted EPS came to 91 cents, which was three cents ahead of expectations. Revenue was up over 10% year over year to $1.18 billion, and beat estimates by $10 million.
Commissions and fees revenue rose 10.1%, while organic revenue rose 9.5%. Income before taxes was $317 million, soaring 31% year over year. As a percentage of revenue, it rose from 22.7% to 26.7%. Net income was $234 million, up $58 million year over year. On a per-share basis, net income was up from 81 cents a year ago to 91 cents. Brown & Brown boosted its dividend by 15.4% to a new payout of 60 cents per share annually.
Brown & Brown has a remarkable growth track record that includes a decade-long compound annual earnings growth rate of more than 14%. The company’s book value per common share has grown at a similar rate, expanding at ~11% per year over the last 10 years. Brown & Brown’s growth strategy is both simple and sustainable.
Over the years, the company has actively acquired smaller insurance brokerage firms and integrated them into its larger operating base. We believe that this strategy has plenty of room left to run and forecast that the firm can continue to grow at 9% per year for the foreseeable future.
BRO has increased its dividend for 31 years.
At the time of publication, Ciura had no positions in any stocks mentioned.