Investors seeking to generate income while staying ahead of inflation are encouraged to consider dividend-growth stocks, as highlighted by investor Kevin Simpson. In the wake of the Federal Reserve’s expected rate-cutting cycle, dividend stocks are anticipated to gain appeal among income-focused investors. With the market pricing in a nearly certain chance of another rate cut during the Fed’s upcoming meeting, interest in dividend-paying stocks is set to rise.
Simpson, who is the founder and chief investment officer of Capital Wealth Planning, emphasizes the significance of identifying stocks that not only pay dividends but also consistently grow their payouts. His investment strategy hinges on finding companies that are increasing earnings, a factor likely to drive stock appreciation over time. “If we have companies that are increasing their earnings, and therefore have the ability to increase their dividends, then we think we’ve got a real hedge against inflation,” he noted. He describes the impact of dividend growth as effectively providing investors with a pay raise each year.
Among Simpson’s top stock picks is Apple, a company lauded for its resilience and unmatched ecosystem. Simpson observes that Apple’s transition towards artificial intelligence is poised to bolster growth in the upcoming hardware cycle. Despite being a large-cap stock, Apple’s robust balance sheet and loyal customer base allow it to endure sluggish iPhone cycles while still providing value to shareholders through share buybacks and dividends. Notably, Apple’s recently released iPhone 17 has seen impressive sales, outpacing its predecessor by 14% within the first ten days. While Apple’s dividend yield stands at 0.40%, its three-year dividend growth rate is an impressive 13.1%, with the stock rising approximately 4% year to date.
Coca-Cola also features prominently in Simpson’s recommendations. With a dividend yield of 2.88% and a three-year dividend growth rate of 4.9%, Coca-Cola is described as a “boring” yet dependable company capable of weathering economic challenges. Recently, it reported better-than-expected earnings and revenue for its third quarter, signaling strong management, global reach, and pricing power. Simpson remarked that Coca-Cola provides investors with a compelling combination of growth, reliability, and a dependable dividend while shares have appreciated by 12% this year.
Lastly, Simpson highlights RTX, formerly known as Raytheon Technologies, which recently surpassed earnings and revenue expectations and raised its full-year guidance. The aerospace and defense firm is currently experiencing robust growth and momentum, buoyed by increasing defense budgets and a recovering aerospace sector. Simpson advises that RTX is an appealing play that marries long-term growth potential with strong current execution, supported by a three-year dividend growth rate of 7.3% and a current yield of 1.53%. The stock has surged nearly 55% year-to-date.
Investors looking for stability amid economic volatility should look closely at these dividend-growth opportunities, as they offer both immediate returns and long-term appreciation potential.