When looking for the best dividend stocks, a good place to start is with the WisdomTree U.S. Quality Dividend Growth Fund (NASDAQ:DGRW). DGRW is one of the largest U.S.-listed dividend growth ETFs with $11.4 billion in net assets.
The ETF tracks the performance of the WisdomTree U.S. Quality Dividend Growth Index, a collection of 300 dividend-paying stocks with a record of increasing their dividends over time while generating healthy returns on equity and assets, with market capitalizations over $2 billion.
In 2022, the ETF had a total return of 18.8%, about 753 basis points less than the SPDR S&P 500 ETF Trust (NYSEARCA:SPY). There’s no question that DGRW can deliver a combination of offense and defense. Dividend stocks possess this attribute.
All three of my dividend stocks to buy now are held by DGRW. I’ve selected three that have grown their annual dividend by 8% over the past 12 months.
Regarding the best dividend stocks, I’m more interested in the dividend growth than the yield. That’s because growth in dividends is a by-product of earnings growth. The two usually go hand in hand. DGRW delivers these types of companies.
Microsoft (MSFT)
Microsoft (NASDAQ:MSFT) is DGRW’s largest holding with a 7.48% weighting. The company increased its quarterly dividend by 10.3% to 75 cents with the December 2023 payment. The annual payment of $3.00 gives a yield of 0.81%. It has a five-year dividend growth rate of 10.2%.
However, despite the tiny dividend, it still managed to pay $19.8 billion in fiscal 2023 (June year-end). That was 9.2% higher than a year earlier. It also repurchased $22.2 billion in 2023 and $82 billion of its stock over the past three years.
UnitedHealth Group (UNH)
UnitedHealth Group (NYSE:UNH) is the 11th-largest holding of DGRW with a 2.16% weight.
The provider of health insurance plans and optimized primary medical care increased its quarterly dividend by 14.0% to $1.88 a share with the June 2023 payment. The 1.4% yield comes from its annual payment of $7.52. It has a five-year dividend growth rate of 16.4%.
It paid out $6.0 billion in dividends in 2022, 13.5% higher than a year earlier. It also repurchased $7.0 billion in 2022 and more than $16 billion of its stock over the past three years.
On Dec. 29, 2023, the company announced that it was cutting its losses from its Brazilian operations, selling the unit to Brazilian entrepreneur José Seripieri Filho for approximately $515 million. That’s a far cry from the $4.7 billion it paid for Amil Participacoes SA in 2012. It will take a $7 billion charge on the sale.
While it’s never good to sell at a loss, CEO Andrew Witty announced it would sell the Brazilian unit in 2021 when he first took the helm. Any loss on the sale has already been priced into the stock price.
Focusing on the U.S. market makes sense. It is an example of addition by subtraction.
Morgan Stanley (MS)
Morgan Stanley (NYSE:MS) is the 12th-largest holding in DGRW with a 2.13% weight.
The investment bank increased its quarterly dividend by 10.0% to $0.85 a share with the August 2023 payment. The annual payment of $3.40 gives a 3.6% yield. It has a five-year dividend growth rate of 24.2%.
It paid out $5.1 billion in dividends in 2022, 33.8% higher than a year earlier. It also repurchased $10.9 billion of its stock in 2022 and more than $24 billion over the past three years.
Ted Pick took over from long-time CEO James Gorman at the beginning of January. A banker for three decades, Gorman will stay on for a year, serving as Executive Chairman during this transition.
When Pick was named CEO last October, Gorman was confident about the bank’s choice as successor.
“For several years I have worked with the Board to ensure an orderly succession, and I feel strongly that now is the time to step aside,” Gorman said in October. “[Pick is] battle-tested, understands complex risk, and works very effectively not just in the U.S., but around the globe,” Barron’s reported.
Morgan Stanley’s stock performed well over the past five years, up 127%, about 40 percentage points higher than the S&P 500.
On the date of publication, Will Ashworth did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
