If you’re looking for the best dividend stocks to buy now, the WisdomTree U.S. Quality Dividend Growth Fund (NASDAQ:DGRW) is an excellent place to start. DRGW is one of the largest U.S.-listed dividend growth ETFs with $9.2 billion in net assets.
When looking for the best dividend stocks to buy, 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.
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.
Microsoft (MSFT)
Microsoft (NASDAQ:MSFT) is the largest holding in DGRW with an 8.46% weighting.
The company increased its quarterly dividend by 9.7% to 68 cents with the December 2022 payment. Its annual payment of $2.72 yields 0.84%. It has a five-year dividend growth rate of 9.7%.
It’s a good thing I don’t focus on dividend yield because Microsoft’s is pint-sized. You can’t pay the rent from its dividend payout unless you’re Bill Gates and own 103 million shares.
However, despite the tiny dividend, it still managed to pay out $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.
Many investors are focused on its $69 billion acquisition of Activision Blizzard (NASDAQ:ATVI). Facing intense scrutiny from regulators, the Federal Trade Commission (FTC) filed a lawsuit on June 12, seeking to place a permanent injunction against Microsoft so that it can’t finish its acquisition until the FTC finishes its case looking to block the deal.
However, on July 14, a U.S. appeals court rejected the FTC’s request to pause the takeover, leaving only the United Kingdom as the last major stumbling block to the deal’s completion.
On another front, Bernstein analyst Mark Moerdler believes its push into AI could vault it past Amazon (NASDAQ:AMZN) into the top spot in the cloud.
“AI at Microsoft is far more than Bing Chat,” Barron’s reported the analyst’s May 9 comments. “It is becoming core technology everywhere and in everything that Microsoft does.”
According to the analyst, AI touches about 42% of the company’s revenue in some fashion. This commitment to AI will lead to even greater cloud revenues — its 2023 actual cloud revenue was $111.6 billion with a 12-month run rate of $121.2 billion.
Deere & Co. (DE)
Deere & Co. (NYSE:DE) is the 48th-largest holding in DGRW with a 0.43% weighting.
The agricultural and construction equipment manufacturer last raised its quarterly dividend by 4.2% with the May 2023 payment. It also raised its payment by 6.2% in February. Year-to-date, it’s increased its dividend by 10.6%. The annualized dividend is $5.00 a share, yielding 1.2%.
As I said in the introduction, it’s more about growth than yield. As for its return on equity and return on assets, they are 9.81% and 43.34%, respectively, in the trailing 12 months ended April 30.
Between the ongoing need for housing and food, Deere plays in some very important sandboxes. It’s a big reason why analysts like its stock. Of the 26 that cover it, 18 rate it as Overweight or an outright Buy with a $455.50 target price, about 8% higher than its current share price.
One thing to remember: The United States Department of Agriculture (USDA) estimates that U.S. farmers will make $151 billion in 2023, down 21% in 2022. That could translate into lower agricultural equipment sales in the near term.
However, over the long haul, Deere stock is a winner.
Elevance Health (ELV)
Elevance Health (NYSE:ELV) is the 62nd-largest holding in DGRW with a 0.35% weighting. It used to be known as Anthem until its rebranding in June 2022.
The health insurance provider to more than 48.1 million medical members through various health plans last raised its quarterly dividend by 15.6% with the March 2023 payment. It is the 12th consecutive year it’s raised its dividend. The annualized dividend is $5.92 a share. It yields 1.4%.
Elevance reported its Q2 2023 results in July. It’s gotten off to a good start halfway through the year with an 11.7% increase in operating revenue to $85.28 billion with an operating gain of $5.46 billion, 14,4% higher than the first six months of 2022.
Its pharmacy benefits manager, CarelonRX, had an 18.1% increase in operating revenue in the first half to $23.24 billion, accounting for 32.5% of its overall revenue, flat to a year earlier.
Analysts like its stock. Of the 22 covering it, 18 rate it Overweight or an outright Buy with a median target price of $572, 24% higher than its current share price.
As a result of its strong quarter, Elevance raised its full-year earnings to $32.85 a share or higher. That’s a reasonable 14.1x its 2023 earnings per share. As for its price-to-sales ratio, it’s trading at 0.68x; it’s cheaper than it’s been since 2017.
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
