Companies with high dividend yields can imply relatively high risk. However, companies that grow their dividends over time tend to provide fundamental growth that supports such dividend hikes. That’s the primary reason I have so many dividend-paying growth stocks in my portfolio and on my watch list.
These companies pay steady dividends, providing a regular income stream in good times and bad. Accordingly, during times of market volatility, these stocks pay investors to be patient. Those with strong growth characteristics can deliver long-term capital appreciation as well. That is the mix of total return I like.
Below are three dividend-paying growth stocks worth buying right now.
First up on this list of dividend-paying growth stocks is Restaurant Brands (NYSE:QSR). The parent company of Burger King, Tim Hortons coffee chain, Popeyes Louisiana Kitchen and Firehouse Subs recently announced impressive Q4 results.
While earnings per share of 72 cents missed estimates by 2 cents, revenue exceeded expectations, jumping 9% year over year to $1.69 billion. Moreover, Burger King’s same-sales rose by 8.4%, and Tim Hortons’ same-store sales were up 9.4%. On the earnings call accompanying the results, Chairman Patrick Doyle said the company is preparing for an “accelerated pace of growth for the next five to 10 years” with its newly appointed CEO, Joshua Kobza, at the helm.
Restaurant Brands has raised its dividend for the past eight years. The current quarterly dividend of 55 cents a share throws off an impressive 3.6% yield. This is well above the average yield for consumer discretionary stocks of 1.2%.
Investors who purchase QSR before the company’s March 21 ex-dividend date will be entitled to receive the upcoming 55-cent per-share dividend payment. Thus, I think it’s worth considering purchasing shares now.
Occidental Petroleum (OXY)
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Among the top dividend-paying growth stocks I think can’t be ignored right now is Occidental Petroleum (NYSE:OXY), a key holding of Warren Buffett.
Of course, Buffett isn’t the only one bullish on OXY stock. In recent weeks, Occidental Petroleum has benefited from positive analyst coverage, including an upgrade fromGoldman Sachs. Goldman’s Neil Mehta raised his opinion on the stock from “neutral” to “buy” and upped his price target slightly to $81. That implies upside of nearly 35% from current levels.
Although the company has just two years of consecutive dividend increases under its belt, its payout ratio is less than 12%, providing ample room for further increases or special dividends. The current 18-cent quarterly payout delivers a yield of 1.2%. However, the company went ex-dividend earlier this month, meaning investors will likely have to wait until June to collect the next one.
Buffett — one investor who certainly doesn’t mind being patient — recently added to his position in OXY. According to regulatory filings, Berkshire Hathaway (NYSE:BRK-B) bought nearly 5.8 million shares this month, paying between $59.85 and $61.90 a share. This brings Buffett’s stake in the oil company to just over 22%, although he has received the OK from regulators to purchase up to 50% of the company’s stock. This has led to bets that Buffett may buy out the energy giant, which would provide a significant boost to shareholders, to say the least.
Regardless of Buffett’s plans, I think Occidental is among the best operators in its sector, which is why it’s among the top dividend-paying growth stocks on my watch list right now.
Fortis (FTS)
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Rounding out this list of dividend-paying growth stocks to buy is one of my personal favorites, Fortis (NYSE:FTS). The Canadian utility company is often overlooked by investors, in large part due to the company’s geographical focus. That said, there are many reasons why long-term investors should consider this company.
Fortis primarily engages in the energy infrastructure business, with approximately 93% of its assets allocated to the transmission and distribution segment, which is considered low-risk. It provides electricity and natural gas services to around 3.4 million customers in Canada, the United States and three Caribbean nations.
The company’s financial performance is relatively stable due to its low-risk, regulated utility business, making it less vulnerable to market fluctuations. This stability allows the company to increase its dividend consistently. In fact, FTS is a Canadian Dividend Aristocrat, having raised its payout for 48 consecutive years.
In the press release accompanying Fortis’ Q4 and full-year results, CEO David Hutchens said: “2022 was a year of execution with strong financial, operational and sustainability results across our utilities. We invested over $4 billion in capital, delivered strong EPS and rate base growth, and further reduced our carbon emissions… With a focus on organic growth, we also announced our largest five-year capital plan of $22.3 billion representing steady rate base growth of 6% and supporting annual dividend growth guidance of 4-6% through 2027.”
Based on analysts’ consensus price target of $42.82, FTS stock could gain 6% over the next 12 months. Throw in the stock’s 4.3% yield, and you’re looking at a total return north of 10%.
On the date of publication, Chris MacDonald has a position in QSR. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Chris MacDonald’s love for investing led him to pursue an MBA in Finance and take on a number of management roles in corporate finance and venture capital over the past 15 years. His experience as a financial analyst in the past, coupled with his fervor for finding undervalued growth opportunities, contribute to his conservative, long-term investing perspective.
