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Dividend growth investors consider multiple things when buying a stock, such as dividend yields and P/E ratios. Investors looking for better returns should also consider stocks that have established a history of regular dividend increases.The Dividend Challengers are a group of companies with over 5 years of dividend growth. These 3 Dividend Challengers have market-beating yields and can continue to grow their payouts in the years ahead.
Constellation Brands (STZ)
Constellation Brands was founded in 1945. The $48 billion market cap company produces and distributes alcoholic beverages including beer, wine, and spirits. With over 100 brands in its portfolio, it is the third largest beer company in the U.S. importing and selling beer brands such as Corona, Modelo Especial (the #1 Beer in the U.S.), Modelo Negra, and Pacifico.In addition, Constellation has many wine brands including Robert Mondavi and Kim Crawford, as well as spirits brands including SVEDKA Vodka, Casa Noble Tequila, and High West Whiskey. The company also has a stake in cannabis company Canopy Growth.Constellation Brands declared a $1.01 quarterly dividend on April 10th, 2024, which represented a 13% increase.On April 11th, 2024, Constellation Brands reported fourth-quarter fiscal 2024 results for the period ending February 29th, 2024. (Constellation Brands’ fiscal year ends on the last day of February). For the fourth quarter, the company recorded $2.14 billion in net sales, a 7% increase compared to the same prior year period. Beer sales improved by 11% year-over-year, while wine and spirits sales declined by -6%. Comparable earnings-per-share equaled $2.26 for the quarter, which was a 14% increase compared to Q4 2023, and 17 cents ahead of analyst estimates.Constellation Brands initiated its fiscal 2025 outlook. The company expects adjusted earnings-per-share of $13.50 to $13.80 for the full fiscal year. Additionally, beer sales are anticipated to increase 7% to 9% and wine and spirit sales are expected to be down -0.5% to up +0.5%.Constellation Brands has several competitive advantages. Its long list of strong brands gives the company pricing power. Its strong distributor network provides an effective route-to-market for the company’s strategy in premium categories. Another benefit of Constellation Brands’ business is that it can withstand downturns very well.
eBay Inc. (EBAY)
eBay Inc. (EBAY) is an American multinational e-commerce corporation. The company manages the ebay.com website, which brings buyers and sellers together in auction and fixed-price formats to buy and sell a wide variety of items worldwide. The company provides several services including online auction-style sales, instant shopping, online classified advertisements, online event ticket trading and other services.eBay reported a strong start to 2024 with first-quarter financial highlights including revenue of $2.6 billion, up 2% on an as-reported basis and up 2% on an FX-Neutral basis, and gross merchandise volume (GMV) of $18.6 billion, up 1% on an as-reported basis and roughly flat on an FX-Neutral basis. GAAP and Non-GAAP earnings per diluted share stood at $0.85 and $1.25, respectively, with GAAP and Non-GAAP operating margins at 24.7% and 30.3%, respectively. The company returned $638 million to shareholders in Q1, including $499 million of share repurchases and $139 million paid in cash dividends.eBay is a household name with strong branding and a significant network effect, which serves as a considerable economic moat. Indeed, the company is still able to generate returns on invested capital in the mid-teens, which implies a competitive advantage.eBay has a secure dividend, with a payout ratio expected to be under 30% for the current year. eBay has increased its dividend for 5 consecutive years and currently yields 2%.
Norfolk Southern (NSC)
Norfolk Southern Corporation is a freight railroad company that operates in the Southeast, East, and Midwest geographic regions of the United States. Norfolk Southern services several ports on the Atlantic as well as on the Gulf coast.Norfolk Southern reported its first-quarter earnings results on April 24. The company generated revenues of $3.0 billion during the quarter, which represents a revenue decline of 4% compared to the prior year’s quarter. Revenues were lower due to lower volumes, especially in coal and intermodal, and lower fuel surcharges. Norfolk Southern’s adjusted earnings-per-share came in at $2.49 for the first quarter, which was ahead of what the analyst community had expected.Norfolk Southern does generally benefit from economic growth, as that means that more goods are transported on its railways. Coal is becoming a less important business for the company, which is why further declines in coal transportation volumes in the future will hurt less, although they still pose a headwind in the present. Norfolk Southern continues to repurchase shares, which makes the company’s share count decline meaningfully each year.NSC has increased its dividend for 7 years and currently yields 2.4%.Norfolk Southern’s dividend payout ratio has never been above 50%, and most of the time, the dividend payout ratio has been below 40%. This makes the company’s dividend look quite safe. The US railroad business is an oligopoly, where each of the companies is focused on certain geographic markets. Due to the tremendous asset base that is required to operate a railroad business, there is also a huge moat versus new market entrants. Competition is therefore not a major concern for Norfolk Southern.More By This Author:3 Dividend Growth Stocks For Long-Term Returns
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