Five of the best dividend growth stocks to buy in June 2024

• Dividend growth investing gives investors a chance to gain both income and share price growth.
• High dividend growth rates are often coupled with large increases in capital gains.
• Standard & Poor’s claims that dividends are behind 44% of long-term S&P 500 gains.
• This article screens for stocks that have average revenue growth above 10% and payout ratios below 50%.

While semiconductors like Nvidia (NVDA) hogging the headlines this summer as most traders seek to profit from the artificial intelligence (AI) revolution in chips, it may be best for most retail investors to hop off the bandwagon and focus on a tried-and-true strategy for above average returns. 

In this case, we’re talking about dividend growth investing. This strategy employs a focus on companies that already have an existing commitment to returning capital to investors. By reinvesting dividends, investors can obtain more shares of that stock. Coupled with capital gains, dividend growth stocks have a tendency to beat the market.

Standard & Poor’s itself claims that dividends accounted for 44% of total S&P 500 returns during a recent 80-year stretch. While many investor’s choose higher yields once they reach retirement, these higher yields normally come with low price appreciation, and yields may fail to keep up with inflation. Dividend growth stocks, on the other hand, often bear low yields but grow their payouts at a steady clip that begins to accumulate over a longer time horizon and comes coupled with often impressive share price gains.

Top five dividend growth stocks for June 2024

To discover the following stocks, we screened for stocks with greater than 12% dividend growth rates over the past five years. Additionally, we sorted through the matches by requiring stocks to have payout ratios below 50% in order to ensure that the dividend growth would likely continue.

Then further criteria was added, including 10 years of consecutive dividend growth and average revenue growth above 10%.

Broadcom (AVGO)

First up is semiconductor component maker Broadcom. Besides producing chips, especially system-on-chip (SOCs) products for communication uses, Broadcom produces infrastructure software. As part of the latter business, Broadcom acquired VMWare for $69 billion in 2023. Broadcom is a major supplier of Apple (AAPL) components for the iPhone.

Broadcom has raised its dividend for 13 consecutive years as of 2024, and its five-year dividend growth rate is an impressive 17.5%. Its 1.1% yield has been pushed down over the past year, which has seen its share price rise 108%. Broadcom sports a 48% payout ratio, meaning that it still has room to grow dividends in the coming years. Its dividend growth is aided by its long-term policy of steep share buybacks.

Revenue has grown 18% on average over the past three years, while net income growth tops 28% over that period. This is one healthy stock, and the artificial intelligence (AI) revolution should bear further fruit for shareholders.

Pool Corporation (POOL) 

The aptly named but little known Pool Corporation is a sleeper pick for this list. You don’t see many dividend investors boasting of their share count in POOL, but you may begin to soon. A distributor of pool supplies, maintenance products and materials, Pool Corporation has raised its dividend for 13 consecutive years now. 

The 1.3% yield has been growing at an 18.8% rate over the past five years. What’s more, the 34% payout ratio gives investors the leeway to be sure dividends will likely have a long runway for increases over the next five.

Revenue has grown by 8% on average over the past three years, but free cash flow has averaged 39% in that time period.

Comfort Systems (FIX)

Comfort Systems provides HVAC systems and installation in the United States, as well as plumbing, electrical, piping services. The firm has a large number of subsidiaries. HVAC work is quite steady, and the company’s expanding footprint has allowed it to pay dividends for 18 consecutive years and raise that dividend for the last 11. 

Comfort Systems offers the smallest yield of any stock on this list at 0.37%, but that comes with a 22.6% growth rate. Likewise, the scant payout ratio of just 9% means that management will have now problem raising its dividend over the next half decade.

The broader business looks stable as well. Revenue has grown by 25% a year over the past three years, and free cash flow has risen 19% on average over that period.

Tractor Supply (TSCO)

Tractor Supply continues to surprise many investors since its breakneck growth over the past 15 years comes from a retailer of hobbyist materials, farm equipment and recreational products. Who knew this rural lifestyle dealer would become one of the best stocks coming out of the Great Recession.

Tractor Supply offers a 1.5% trailing yield, a 41% payout ratio and a 27.2% five-year dividend growth rate. The company’s free cash flow margin is small at 5%, the lowest among these stocks, but Tractor Supply has still been able to increase net income by almost 10% on average over the past three years.

While free cash flow has been flagging of late, revenue over the past half decade still averaged 12.7%. Tractor Supply is currently selling for under 28 times forward earnings.

Nexstar Media Group (NXST)

The fastest-growing dividend payer on our list is Nexstar Media Group. Despite its red-hot 29.8% dividend growth rate, the company sports a 4% dividend largely due to the fact that it makes its money from the unsexy industry of local television affiliates and cable channels. Besides owning NewsNation, its local news channels are affiliates of ABC, NBC, FOX and CBS. Much of its revenue stems from advertising on those channels and related websites.

Nexstar has been growing its dividend for a full decade now. Despite falling net income and free cash flow since the pandemic, revenue continues to grow by 12% on average. What makes Nexstar an interesting opportunity  is that its faltering profit growth has made it by far the cheapest stock on this list. Shares of NXST trade for one times trailing sales and 13 times trailing earnings per share.