Investors looking for stocks with solid dividend yield, steady payouts during recessions, and dividend growth should consider stocks that have long histories of raising dividends every year. There is a group of stocks known as the Dividend Kings that have increased their dividends for over 50 years.

These 3 dividend growth stocks have current dividend yields above the S&P 500 Index average of 1.5%. The 3 dividend growth stocks also have the ability to maintain their dividends, even if the economy enters a recession.

Abbott Laboratories (ABT)

Abbott Laboratories, founded in 1888, is one of the largest medical appliances & equipment manufacturers in the world, comprised of four segments: Nutrition, Diagnostics, Established Pharmaceuticals and Medical Devices. Abbott Laboratories provides products in over 160 countries and employs 115,000 people. The company generated $44 billion in sales and $9.4 billion in profit in 2022.

 On October 18th, 2023, Abbott Laboratories reported third quarter earnings results for the period ending September 30th, 2023. For the quarter, the company generated $10.1 billion in sales (62% outside of the U.S.), representing an 2.5% decrease compared to the third quarter of 2022, but this was a deceleration from the decline seen in the preceding period. Adjusted earnings-per-share of $1.14 compared to $1.15 in the prior year. Revenue was $320 million more than anticipated while adjusted earnings-per-share was $0.04 better than expected.

Abbott Laboratories’ dividend payout ratio has never been above 50% throughout the last decade. Coupled with the fact that the company’s earnings-per-share did not decline during the last financial crisis – it actually continued to grow – Abbott Laboratories’ dividend looks very safe. Abbott is an attractive income stock.

Illinois Tool Works (ITW)

Illinois Tool Works is a diversified multi-industrial manufacturer with seven unique operating segments: Automotive, Food Equipment, Test & Measurement, Welding, Polymers & Fluids, Construction Products and Specialty Products. Last year the company generated $15.9 billion in revenue. The $67 billion market cap company is geographically diversified, with more than half of its revenue generated outside of the United States.

On October 24th, 2023, Illinois Tool Works reported third quarter 2023 results for the period ending September 30th. For the quarter, revenue came in at $4.0 billion, up 0.5% year-over-year. Sales were up 6.0% in the Automotive OEM segment, the largest out of the company’s seven segments. The Food Equipment segment also grew revenue by 7.2%. Net income equaled $772 million or $2.55 per share compared to $727 million or $2.35 per share in Q3 2022. Illinois Tool Works narrowed its 2023 guidance and expects full-year GAAP EPS to be $9.65 to $9.85.

Illinois Tool Works has an excellent dividend growth history. Its payout ratio was relatively high during the last financial crisis, but the company was not forced to cut the payout. Today the dividend payout ratio sits at 57% of expected earnings, which indicates a safe dividend. ITW shares currently yield 2.5%.

Lowe’s Companies (LOW)

Lowe’s Companies is the second-largest home improvement retailer in the US (after Home Depot). The stock has a current market capitalization of $133 billion. Lowe’s operates or services more than 1,700 home improvement and hardware stores in the U.S.

Lowe’s reported second quarter 2023 results on August 22nd, 2023. Total sales for the second quarter came in at $25.0 billion compared to $27.5 billion in the same quarter a year ago. Comparable sales decreased 1.6% and net earnings declined 2.4% year-over-year to $4.56 per share. The company repurchased 10.1 million shares in the second quarter for $2.2 billion.

Additionally, it paid out $624 million in dividends. Lowe’s launched same-day delivery nationwide, and expanded its rural merchandising framework to 300 stores.

The company reaffirmed its fiscal 2023 outlook and believes it can achieve adjusted diluted EPS in the range of $13.20 to $13.60 on total sales of roughly $88 billion.

Between 2013 and 2022, Lowe’s grew its earnings-per-share by 19% a year. In the recent 5-year period, LOW was able to compound earnings by 18% per year. Earnings-per-share have been driven by comparable store sales growth, increasing margins, and the company’s share repurchases, which have lowered the share count meaningfully.

Lowe’s enjoys competitive advantages from scale and brand power as it operates in a duopoly with Home Depot (HD). Neither of the two are expanding their store count significantly, and neither is interested in a price war. Both should remain highly profitable, as the home improvement market in the US is large enough for the two industry leaders.

Lowe’s has raised its dividend by 18% per year over the last 5 years. Overall, Lowe’s has increased its dividend for 60 consecutive years. LOW shares currently yield 1.9%.

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Bob Ciura has worked at Sure Dividend since October 2016. He oversees all content for Sure Dividend and its partner sites. Bob received a Bachelor’s degree in Finance from DePaul University, and an MBA with a concentration in Investments from the University of Notre Dame.