2 Best Dividend Growth Stocks to Buy Now


DDividend-paying companies can form the basis of a diversified investment portfolio. Indeed, the best dividend stocks can provide you with a powerful way to protect and grow your wealth. They can also generate a steadily growing cash income stream along the way.

If that sounds appealing to you, read on to learn more about two of the most attractive dividend growth stocks available in the market today.

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The leader in agricultural equipment

The conflict in Europe is wreaking havoc on supply chains that were already under pressure from pandemic-related challenges. This fueled a spike in commodity prices. But as input cost inflation weighs on the profit margins of many companies, Deere (NYSE:DE) should benefit from higher food prices.

Higher prices for corn, wheat and other grains increase farmers’ profits. This allows them to invest in new equipment to further improve the efficiency and profitability of their farming operations. This is where Deere comes in.

Deere is incorporating increasingly advanced technology into its equipment that enables farmers to increase yields, reduce fertilizer use and waste, and achieve sustainability goals. This technological prowess widens Deere’s lead over its less tech-focused rivals. It is also strengthening its brand and pricing power – at a time when US food production is becoming increasingly vital due to major shortages in international markets.

Business, meanwhile, is booming. Deere’s revenue jumped 24% to $44 billion in fiscal 2021, which ended Oct. 31, while its net profit jumped 117% to $6 billion. Looking forward, management expects Deere’s net earnings to reach up to $7.1 billion in fiscal 2022.

With its profits rising, Deere has increased its capital returns to shareholders. Its stock is currently earning a modest 1%, but that’s largely a function of its strong share price appreciation of more than 400% over the past 10 years. Deere has more than doubled its dividend payout over the past decade, and investors can expect many more increases in the years to come.

The titan of the railroad

Union Pacific (NYSE:UNP) is another dividend mainstay that can add ballast to your portfolio in these difficult times. The company operates one of the largest rail networks in the United States, at a time when rail shipping services are becoming an increasingly vital part of the nation’s supply chain.

Strict regulations and intense owner opposition make it difficult to build new freight railways. The Union Pacific rail network, in turn, has become almost irreplaceable. This gives it a powerful competitive advantage and strong pricing power.

The ability to raise prices without putting too much of a strain on shipping volumes has allowed Union Pacific to increase sales and profits during the pandemic. Its revenue rose 12% year-over-year to $21.8 billion in 2021, while its operating profit climbed 15% to $9.3 billion. Even better, earnings per share for Union Pacific, which was boosted by $7.3 billion in share buybacks, rose an even more impressive 21% to $9.95.

Going forward, shipping volumes are expected to increase as the pandemic subsides and the economy recovers. This, combined with additional efficiencies, should lead to stronger earnings and dividend growth going forward. So the railroad giant should have no trouble extending its incredible 123-year streak of dividend payouts – and its shares are already yielding a solid 2%.

10 stocks we prefer to Union Pacific
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Joe Tenebruso has no position in the stocks mentioned. The Motley Fool recommends Union Pacific. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


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