Dividend growth stocks are companies with stable cash flow and the ability to increase their payout annually. They are important to investors because they provide stable returns and leverage for portfolio growth. An ever-increasing dividend per share distribution provides growing annual income that can be reinvested and compounded over time to achieve market-leading performance.
The stocks included on the list today are also growth stocks, although they grow more slowly than riskier, faster-growing companies, increasing their total return potential. Total earnings represent the total amount of shareholder earnings, including stock price appreciation and dividends, which, in the case of Packaging Corporation of America, New York Stock Exchange: PCGRibbons NASDAQ:CTASand Casey’s General Stores NASDAQ: CASEYmeasured in double digits in 2024, triple digits in the last five years, and quadruple digits in the last ten years.
Additionally, dividend growth stocks can help reduce portfolio volatility and offset inflation. The average annual distribution rate for stocks on this list has been 12% over the past five years; the lowest level is 9% or more than three times the rate of inflation. Their buy-and-hold quality reduces portfolio volatility as their investors are less likely to sell the stock, as reflected in beta statistics. Beta measures a stock’s volatility relative to the S&P 500 and averages 0.66x, ranging from a very low 0.4x for Casey’s General Store to a relatively high 0.9x for Cintas.
Packaging Corporation of America returns to growth in 2024
Packaging Co. of America Today
Packing Company of America
(As of 12/17/2024 ET)
- 52 week range
- $159.57
▼
US$250.82
- Dividend yield
- 2.15%
- P/E ratio
- 27.11
- Target price
- $221.60
Packaging Corporation of America has seen business return to normal following the pandemic and supply chain disruptions, but it’s barely noticeable in price movements. This 2% yield stock is up nearly 100% over the past eighteen months and will continue to rise in 2024, with quarterly results showing growth accelerating year-over-year. The outlook for next year, F2025, is for growth to slow to the high single digits and be compounded by wider margins. Adjusted earnings per share are forecast to grow nearly 25%, but estimates may be too low.
Packaging Corporation of America has increased its dividend for 15 years and will likely continue to do so for the next 15 years. The payout ratio is low at just 55% of earnings, and earnings growth forecast is robust. The payout ratio falls to just 45% from the 2025 forecast, and the dividend’s health is exacerbated by the strength of the balance sheet. The company uses corporate debt to increase cash flow, but leverage is low at 0.5x equity and 0.25x assets, giving it good financial health.
Analyst sentiment has taken a turn for the better on PKG stock heading into 2024. Analysts cut targets in the first half of the year but switched to higher in the second half, pushing the consensus up nearly 50% from the end of 2023. Consensus lags price action in 2024. December 2024, but the revision trend is positive and leads to an upper range sufficient for a new all-time high.
Cintas: High-quality work supported by secular tailwinds
Feeds today
(As of 12/17/2024 ET)
- 52 week range
- $138.39
▼
$228.12
- Dividend yield
- 0.75%
- P/E ratio
- 52.62
- Target price
- $200.77
Cintas is among the best-performing companies in the market, generating self-funded growth while maintaining a strong balance sheet, paying dividends and repurchasing shares. This company is a dividend aristocrat and can extend its 42-year history well beyond the 50-year mark required to become a dividend king.
Highlights for 2024 include sustained high-single-digit growth well above GDP, and improved forecasts as geographic expansion, deeper penetration and a broader labor market will drive results. Share repurchases reduced the ratio by 1% in the first quarter of 2025/third quarter of 2024, strengthening prospects for dividend growth. The small number of shares means the company can increase the per share payout each year without increasing the total amount paid out in dividends.
Casey’s Department Stores: Maintaining Profitability in Headwinds
Casey’s Department Stores Today
Casey’s Department Stores
(As of 12/17/2024 ET)
- 52 week range
- $268.07
▼
$439.68
- Dividend yield
- 0.47%
- P/E ratio
- 29.37
- Target price
- $419.45
Casey’s General Stores will face some headwinds in 2024, but will be able to maintain its earnings, generate strong cash flow, self-fund its growth and return capital to shareholders. Highlights in 2024 include the acquisition of Fikes Wholesale, a Texas-based convenience store chain, and the infrastructure to support them. The move strengthens the company’s regional presence, providing the basis for the expansion of its services in the south west.
Casey has suspended share repurchases in 2024 to replenish cash reserves ahead of the deal. The company will likely resume buybacks in 2025. In terms of dividends, Casey’s pays out less than 15% of its earnings, so it is well positioned to extend its 25-year history of increasing its distribution to 50.
Before considering Packaging Co. of America, you should hear this.
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