Cash cow stocks offer dividends and the ability to generate long-term returns. These stocks still have many growth catalysts and aren’t just mature companies with high yields and nothing else to show for them.

It’s possible to receive steady cash distributions from your portfolio while generating returns similar to the stock market. It’s even possible for some of these cash cows to outperform the stock market in the long run. Investors looking for cash cow stocks may want to consider these top picks.

Automatic Data Processing (ADP)

Automatic Data Processing (NASDAQ:ADP) is a human resources management software that offers growth at a reasonable price. Shares trade at a 28 P/E ratio while achieving high single-digit revenue and earnings growth rates. Profit margins are in the double digits.

Dividend growth investors will like that the company already has a 2.30% dividend yield. You don’t have to wait several years for this cash cow to deliver. Automatic Data Processing follows up a great yield with solid dividend growth. The corporation hiked its quarterly dividend from $1.25 per share to $1.40 per share in 2023. That’s a 12% year-over-year increase. 

The stock isn’t just a dividend play. Shares are up by 57% over the past five years. It offers a good amount of stability, and any drops will result in a higher yield for reinvested dividends. It’s a boring stock, but it’s the type of stock that will get the attention of many dividend investors.

American Express (AXP)

Many credit and debit card firms have low dividend yields and high growth rates. American Express (NYSE:AXP) fits the latter with a recently announced 17% dividend hike. The fintech corporation has a lengthy history of rewarding investors with double-digit dividend growth rates.

However, American Express also has a respectable 1.30% dividend yield. Most corporations issuing debit and credit cards have yields less than half of AXP’s yield. American Express also trades at a 20 P/E ratio and has demonstrated impressive financial growth.

The firm reported 11% year-over-year (YoY) revenue growth and 23% year-over-year net income growth in the fourth quarter of 2023. It was a part of American Express’ record-breaking year. The firm generated $60.5 billion in revenue for the first time. 

American Express is in a solid position to reward long-term investors. People will continue to use credit and debit cards to buy goods and services. AMEX makes a small percentage of each transaction, and they all add up.

Microsoft (MSFT)

Microsoft (NASDAQ:MSFT) has the lowest dividend yield of the three picks on this list. Although Microsoft only offers a 0.71% dividend yield, the corporation raises it by at least 10% each year. The firm upheld that expectation by hiking its dividend by 10.3% in 2023.

While the dividend growth rate makes the low yield look more reasonable, the stock’s capital gains are the real story. Shares are up by 63% over the past year and 266% over the past five years. A 37 P/E ratio and expanding profit margins suggest growth can continue.

Analysts certainly feel that way based on an average Strong Buy rating that projects a 10% upside from the current price. The highest target of $600 per share suggests the stock can rally over 40% from its current price.

It’s a big hill to climb, but Microsoft can pull it off if it continues to deliver earnings reports like this one. The firm achieved 18% YoY revenue growth in the second quarter of fiscal 2024. Net income was up by 33% YoY, helping to paint a promising long-term picture for investors. 

On this date of publication, Marc Guberti held a long position in MSFT. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.