Dividend stocks give investors the opportunity to beat inflation. While most dividend-paying corporations raise their dividends each year, some of those growth rates regularly exceed inflation. Luckily, it’s been getting easier to beat inflation. Core PCE only increased by 2.6% year-over-year in May, indicating a potential cool down.
While a stock’s dividend payout only needs to increase by the rate of inflation to keep up, some companies have maintained double-digit dividend growth rates for several years. On top of that, some of these same corporations end up outperforming the stock market in the long run. It pays to beat inflation, and you don’t have to invest in speculative assets to achieve that objective.
Wondering which stocks are beating inflation with their dividends? These are some of the top blue-chip stocks that are raising their dividends by at least 10% annually. Strong financials suggest these corporations can generate additional gains for investors.
Microsoft (MSFT)
Microsoft (NASDAQ:MSFT) has been cursing the stock market for several years. Shares are up by 21% year-to-date and have more than tripled over the past five years. Many Wall Street analysts are bullish about the stock and have rated it as a Strong Buy. The average price target suggests that the stock can gain an additional 12% from current levels.
The tech giant’s financials suggest the dividend can continue to grow for a long time. Revenue increased by 17% year-over-year in the third quarter of fiscal 2024 while net income jumped by 20% year-over-year. Microsoft Cloud is driving more than half of the company’s growth, but it also has respectable growth in segments like gaming, social media, advertising, and business software.
Microsoft only has a 0.67% yield, but it has maintained a double-digit dividend growth rate for several years. Last year, Microsoft raised its quarterly dividend from $0.68 per share to $0.75 per share, marking a 10.3% year-over-year increase. Microsoft is due to announce another dividend hike this September.
Visa (V)
Visa (NYSE:V) is just one of the credit and debit card issuers that you will find on this list. Few companies are as well positioned to beat inflation as credit and debit card companies. As inflation rises, people will spend a little more money on their cards. Companies like Visa collect a small percentage of every transaction. If transaction sizes increase due to inflation, Visa’s earnings also increase due to inflation.
Investors have seen this trend play out for several quarters, including in Q2 FY24 results. Visa reported 10% year-over-year growth rates for revenue and GAAP net income in that quarter. GAAP earnings per share increased by 12% year-over-year to reach $2.29 per share. Visa also allocated $3.8 billion to stock buybacks and dividend distributions in the quarter.
The fintech firm offers a 0.79% yield and a double-digit growth rate. Visa hiked its quarterly dividend from $0.45 per share to $0.52 per share near the end of 2023. That’s a 15.6% year-over-year increase that comfortably exceeds the rate of inflation.
Cintas (CTAS)
Cintas (NASDAQ:CTAS) serves more than one million businesses which gives it plenty of revenue streams. The company also offers an essential service — business supplies and safety equipment. Many businesses need safety equipment and supplies to operate smoothly and remain compliant. If a business lacks these resources, it’s possible that the business cannot operate.
Dividend growth and long-term returns haven’t been an issue for this firm. Cintas hiked its quarterly dividend from $1.15 to $1.35 per share last year, representing a 17.4% year-over-year increase. Cintas made that dividend hike last year, and it’s due to announce another one this month. Shares are up by 18% year-to-date and have almost tripled over the past five years.
Cintas recently delivered 9.9% year-over-year revenue growth and a 22.0% jump in net income in the third quarter of fiscal 2024. These metrics suggest that Cintas has plenty of room to grow its dividend and reward long-term investors.
Mastercard (MA)
Mastercard (NYSE:MA) is the second credit and debit card issuer on this list. The industry is filled with corporations that have delivered long-term returns to their investors and have lofty dividend growth rates. Shares are up by 5% year-to-date and have gained 67% over the past five years.
Mastercard offers a 0.60% yield and hiked its dividend by 15.8% year-over-year to start 2024. The quarterly dividend payout currently stands at $0.66 per share. The firm has plenty of room to expand its dividend payouts. Mastercard only has an 18.82% dividend payout ratio. It’s only using a small percentage of retained earnings to reward investors.
Many Wall Street analysts like what they see with the stock. The average price target suggests a 19% upside. Mastercard stock is currently rated as a Strong Buy among 24 analysts. The highest price target of $550 per share suggests that Mastercard can gain an additional 25%.
Texas Roadhouse (TXRH)
Texas Roadhouse (NASDAQ:TXRH) presents growth at an affordable price for investors who want exposure to restaurant stocks. Shares are up by 44% year-to-date and have more than tripled over the past five years, but the stock still trades at a 35 P/E ratio. It also has a 1.42% yield, so you are getting respectable cash flow right away while capitalizing on a double-digit growth rate.
The steakhouse chain hiked its quarterly dividend from $0.55 per share to $0.61 per share earlier this year. That’s a 10.9% year-over-year increase. Texas Roadhouse has regularly maintained a double-digit dividend growth rate, and first-quarter results make it easy to see why.
Revenue increased by 12.5% year-over-year while net income surged by 31.0% year-over-year in that quarter. Comparable restaurant sales were up by 8.4% year-over-year, indicating more customers are coming back and making larger orders. Texas Roadhouse opened nine company restaurants and three franchise restaurants in the quarter.
Intuit (INTU)
Intuit (NASDAQ:INTU) offers business and finance software for consumers and business owners. Turbotax and Quickbooks are Intuit’s two most notable products, but it also has a business segment that includes Mailchimp. Shares are up by 9% year-to-date and have gained 151% over the past five years.
The firm only has a 0.55% yield but has maintained an impressive dividend growth rate for several years. Intuit hiked its quarterly dividend from $0.78 per share to $0.90 per share last year. That’s a 15.4% year-over-year increase, and Intuit is due to raise its dividend again this October. Intuit has regularly maintained a double-digit dividend growth rate for several years, and financial results suggest that the streak will continue.
Intuit reported 12% year-over-year revenue growth in Q3 FY24. Earnings per share increased by 14% year-over-year, going from $7.38 to $8.42 per share. Intuit’s big winner is the Small Business and Self-Employed Group which reported 18% year-over-year revenue growth.
American Express (AXP)
American Express (NYSE:AXP) is the final stock and credit card issuer on this list. The company offers a respectable 1.21% yield and has maintained a double-digit dividend growth rate for several years. That also includes a 17% dividend hike earlier this year. The stock currently trades at a 19 P/E ratio which suggests it is reasonably valued. Shares have gained 23% year-to-date and have rallied by 88% over the past five years.
The company is attracting younger generations. First-quarter results indicated that more than 60% of new account openings came from Millennials and Gen Z consumers. Revenue increased by 11% year-over-year while net income was up by 34% year-over-year.
Stephen J. Squeri, Chairman and CEO of American Express, mentioned in the press release that the firm continues to attract high-spending, high credit-quality customers. That customer base bodes well for a company that intends on delivering 9% to 11% year-over-year revenue growth beyond 2026.
On this date of publication, Marc Guberti held long positions in MSFT and TXRH. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
On the date of publication, the responsible editor did not have (either directly or indirectly) any positions in the securities mentioned in this article.
