I’ve been a stock investor for a long time, and there’s one point that stands out: building wealth through dividend stocks isn’t always about chasing the ones with the highest yields. Sometimes, the most promising ones are those currently offering modest yields but possess tremendous growth potential.
However, the tricky part is properly evaluating a company’s “growth potential.” I hear you. One of my proven yet simple strategies is to focus on companies with strong financials, conservative payout ratios, solid business positions, and positive technical opinions. With these criteria, investors can position themselves for solid dividend growth in the long run.
To be more specific, I’ll examine three companies that, despite their current modest yields, show signs of potentially tripling their dividend payments by 2030.
How I Came Up With The Following Stocks
To get the list of stocks, I used Barchart’s Stock Screener to look for stocks that meet the following criteria:
- Watchlist: Dividend Growth Stocks - I’m all about Dividend Stocks.
- Annual Dividend Yield: 0.01% to 2.75% (low to medium) - So I can easily spot which has more room for growth despite stellar financial performance.
- Analyst Ratings: 4.5 to 5 (strong buy) - This is my way of asking the experts.
- Number of Analysts: 12 and above (high to very high) - The more consensus we have, the better.
After applying all the filters, the stock screener gave me six results. Then, I sorted out the lowest to highest dividend yield; I picked the three with the lowest yields: SPGI, MSFT, and V, as they have the highest growth chances.
Without stretching any further, let’s tackle the first dividend stock of today’s analysis.
S&P Global Inc (SPGI)
Financial markets rely heavily on trusted data providers, and S&P Global Inc. stands as a backbone in delivering market intelligence. The company operates through five segments that offer services, from credit ratings to commodity insights—the same services that have made it an indispensable resource for investors like you and me worldwide.
A strong financial performance marked Q1’24 for the company. Revenue rose 16% to $3.57 billion, and net income increased 31% to $971 million, consequently bringing quarterly EPS to $3.12 from $2.34 YOY. For me, that reflects the company's solid operational efficiency.
For the whole-year outlook, S&P Global has raised its adjusted free cash flow expectations from $4.7 billion to approximately $5.2 billion due to higher expected net income. In addition, the company maintains a healthy annual dividend of $3.64, representing a 0.75% yield and a conservative 25.07% payout ratio, all while having a trailing twelve-month EPS of $14.39.
Analysts are bullish S&P Global's potential. Specifically, 20 analysts assigned a consensus rating of 4.8 out of 5 or a “strong-buy” recommendation, which reflects confidence in the company's future prospects.
Microsoft Corp (MSFT)
Technology moves our world forward, and Microsoft is one of those leading this charge. The company has three core divisions: Productivity and Business Processes, Intelligent Cloud, and Personal Computing, all of which work seamlessly to provide work-and-play tools. Its portfolio serves millions of users worldwide through Microsoft Office, LinkedIn, Azure, Windows, and more.
Microsoft's Q4’24 financials prove why the company remains a Wall Street powerhouse. Its revenue increased to $64.7 billion from $56.2 billion YOY, while net income and quarterly diluted EPS slightly increased to $22 billion and $2.95, respectively. Also, Microsoft repurchased $8.4 billion of shares in the same quarter—a favorable move for the company’s shareholders.
Meanwhile, the company’s annual EPS (TTM) is $11.81, which easily covers the company’s annual dividend of $3.32 per share. Its current dividend yield of 0.77% and a payout ratio of 24.71% demonstrate Microsoft's balanced approach to rewarding its shareholders while maintaining capital for growth. With all these pretty pictures, Wall Street's enthusiasm for Microsoft appears well-founded—38 analysts rate MSFT stock a 4.76 out of 5.
Visa Inc (V)
Visa Inc. is today's de facto digital payment giant. The company connects various stakeholders through its technology infrastructure and operates in over 200 countries and territories. Thanks to its network, seamless transactions are made possible between consumers, merchants, financial institutions, governments, etc.
Visa Inc. isn’t the one to back down in terms of financial performance. In Its Q3’24 financials, the company reported revenue climbing 10% to $8.9 billion, while net income surged 17% to $4.9 billion. And, of course, quarterly EPS flowed with this positive momentum, reaching $2.42 (non-GAAP).
In terms of shareholder value, Visa repurchased 17.2 million shares of class A common stock at $276.75 (average price) per share for $4.8 billion in the same quarter. Shareholders can benefit from Visa's commitment to paying dividends. The company maintains a modest payout ratio of 18.63%, paying a total annual dividend of $2.08 per share. Despite the relatively low dividend yield of 0.73%, the trailing twelve-month EPS of $9.67 suggests lots of room for future growth.
Wall Street maintains a positive outlook on Visa, similar to the other dividend stocks in this analysis. Among 37 analysts covering the stock, the consensus rating for V stock stands at "Strong Buy," with a score of 4.59 out of 5.
Final Thoughts on Dividend Stocks That Could Potentially Triple Your Income
One thing you’ll notice in this screen is that the three companies all exhibit similar attributes: they are leaders in their field, and their dividend payout ratio and yield are low. While many people might own S&P Global, Microsoft, and Visa for their potential appreciation, I like the dividend growth potential.
Investors should also understand that these metrics tell only part of the story. Some say history repeats itself, while others say that it merely rhymes. Regardless, thorough due diligence should be prioritized before making any investment decisions. Consider factors such as valuation metrics, debt levels, management quality, and macroeconomic conditions that could impact these companies' future performance.
On the date of publication, Rick Orford had a position in: MSFT , V . All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
