3 Dividend Growth Stocks You Can Buy and Forget About

Key Points

• These stocks offer seemingly low yields of less than 1%.

• They have, however, been generously increasing their payouts for years and with strong growth prospects, that's not likely to change anytime soon.

• A big part of the reason their yields are low is that their stocks have all more than doubled in value in the past five years.

• 10 stocks we like better than Walmart ›

If you want a good dividend growth stock to buy and not worry about, look no further. The three stocks that I've listed here have tremendous long-term growth prospects, offer great dividends, and have been increasing their payouts for years.

These are the types of stocks that are good buys even without factoring in their dividend payments, and that's what makes them no-brainer investments for the long haul.

Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. Continue »

Walmart (NYSE: WMT), Eli Lilly (NYSE: LLY), and Microsoft (NASDAQ: MSFT) may not be the highest-yielding stocks around or appear to be the most exciting options for dividend investors, but they have the potential to be amazing dividend growth stocks in the future.

Image source: Getty Images.

1. Walmart

Walmart is a top retail stock to own, but its dividend may not be all that exciting as it yields just 0.9%. That's below the S&P 500 average of 1.2%, which already isn't all that high to begin with. But shares of Walmart have skyrocketed more than 120% over the past five years. If not for such an impressive rally, the stock would be yielding far more than it is.

That's not a bad problem for income investors to have. The company has been growing its dividend generously, the stock has simply been incredibly hot. As the share price rises, the yield declines. It's a much better position to be in than a high yield due to a crashing share price.

Earlier this year, the big-box chain announced it was raising its dividend by a generous rate of 13%. It's the 52nd year in a row that this Dividend King (stocks that have increased their dividends for over 50 years) has boosted its payout, and underscores just how underrated of a dividend stock it is. Many dividend growth stocks make just small incremental increases to their payouts for the sake of keeping their streaks going. Walmart, however, has rewarded its shareholders with a sizable, double-digit increase.

The company is in a sweet spot where it can attract both low and high-income shoppers, with the latter making more trips to their local Walmart recently in an effort to save amid inflation and rising costs. Walmart's business has proven to be resilient over the years and with strong grocery operations and opportunities in e-commerce and advertising, this is a business that still has plenty of growth potential in the long run.

2. Eli Lilly

Another stock that's doing so well its yield is low is drugmaker Eli Lilly. The company's business has been thriving due to the success of its popular GLP-1 drugs, Mounjaro (diabetes) and Zepbound (weight loss), which are raking in billions for the business.

Eli Lilly's yield looks paltry at just 0.8% and its massive gains of around 400% in five years help explain why its payout also doesn't look all that high. And if you think Walmart's recent dividend increase was impressive, consider that Eli Lilly announced a 15% increase to its payout last December. And that was the seventh straight year it has boosted its dividend by such a generous amount.

The mammoth growth the healthcare company is experiencing makes it a compelling option for both growth and dividend investors alike. Even despite such significant increases to the dividend, the stock's payout ratio is less than 40%.

Eli Lilly has generated more than $53 billion in sales over the past 12 months and it was only a few years ago when its annual revenue was less than $30 billion. This is a growth beast that's worth buying and holding for the long haul.

3. Microsoft

The lowest-yielding stock on this list belongs to tech giant Microsoft. At less than 0.7%, this is another seemingly unimpressive dividend stock that is better than it looks. Like the other growth stocks on this list, it has performed exceptionally well in the past five years, rising by around 150% over that stretch.

The tech giant has been increasing its dividend since the early 2000s and it has more than doubled its payout within the past decade. And with so much growth on the horizon due to artificial intelligence (AI) and the business already being flush with cash, I believe Microsoft will raise its dividend at high rate for years to come.

Over the trailing 12 months, Microsoft has generated an incredible $71.6 billion in free cash flow and its dividend payments during that stretch have totaled just $24.1 billion. It may not be a terribly popular dividend growth stock to own today, but over time and as its dividend continues to increase, that's likely to change.

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David Jagielski has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Microsoft and Walmart. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.