Analysts recommend these dividend-paying growth stocks.
Most high-growth companies reinvest every spare dime into expanding their businesses. However, one of the first things companies do when growth finally starts to level off is to begin returning excess cash to shareholders via dividend payments. Fortunately, there are a handful of companies that generate impressive growth numbers and also pay dividends. Many of these dividend-paying growth stocks are expanding via acquisitions, but some are still growing organically. Here are nine growth stocks Morningstar analysts recommend that have generated at least 9% average annual revenue growth over the past five years and pay at least 1% dividend yields.
Goldman Sachs Group Inc. (ticker: GS)
Goldman Sachs is one of the world’s largest investment banks. Analyst Michael Wong says Goldman shares are undervalued even with the investment banking industry facing a decline in 2022. While Goldman’s traditional banking business will benefit from rising interest rates, Wong projects that Goldman’s overall revenue will drop at least 15% this year. Still, Wong says revenue will remain well above 2019 levels. In the past five years, Goldman has averaged 11.3% revenue growth, and the stock also pays a 2.4% dividend. Morningstar has a “buy” rating and a $430 fair value estimate for GS stock, which closed at $334.30 on April 21.
BlackRock Inc. (BLK)
BlackRock is the largest U.S. asset manager and one of the world’s leading investment management companies. Analyst Greggory Warren says BlackRock’s $114 billion in net long-term inflows in the first quarter of 2022 were particularly impressive given weakness and volatility in the equity and credit markets. BlackRock’s average assets under management was up 10.1% year over year in the first quarter, and Warren projects mid-single-digit revenue growth in 2022. BlackRock has averaged 9.6% revenue growth in the past five years and pays a 2.8% dividend. Morningstar has a “buy” rating and a $930 fair value estimate for BLK stock, which closed at $681.46 on April 21.
Cigna Corp. (CI)
Cigna is one of the largest American managed care organizations and pharmacy benefit managers. The company provides health care services through programs funded largely by U.S. employers and government agencies. Analyst Julie Utterback says Cigna shares are undervalued, and the company should continue to aggressively buy back stock in 2022. Cigna has grown its revenue at a 34.4% annual rate over the past five years, the highest growth rate of any stock on this list. It also pays a 1.7% dividend. Morningstar has a “buy” rating and a $283 fair value estimate for CI stock, which closed at $264.61 on April 21.
Becton Dickinson and Co. (BDX)
Becton Dickinson is a medical device and diagnostics provider. Analyst Alex Morozov says continued demand for COVID-19 tests has been a tail wind for the company’s sales growth. Medication delivery solutions revenue grew 7% in the fiscal first quarter, and Morozov says the company’s pharmaceutical systems business is “firing on all cylinders.” He says pre-filled syringe demand will likely remain strong even after the pandemic has ended. Becton Dickinson has generated 10.2% annual revenue growth over the past five years, and it pays a 1.3% dividend. Morningstar has a “buy” rating and a $306 fair value estimate for BDX stock, which closed at $264.89 on April 21.
Truist Financial Corp. (TFC)
Truist Financial is one of the largest U.S. commercial banks, formed in December 2019 from the merger of BB&T and SunTrust. Analyst Eric Compton says Truist is positioned for an increase in profitability in 2022. He says merger-related costs will fall roughly 50% this year and disappear completely by 2023, improving overall margins. Truist has grown its revenue by 14.3% annually over the past five years and pays a 3.7% dividend, the highest yield of any stock on this list. Morningstar has a “buy” rating and a $66 fair value estimate for TFC stock, which closed at $52.11 on April 21.
Lam Research Corp. (LRCX)
Lam Research is a leading global supplier of wafer fabrication equipment and services for the semiconductor industry. Analyst Abhinav Davuluri says Lam has struggled to overcome semiconductor industry supply chain disruptions, but Davuluri says the stock is undervalued after a more than 30% sell-off so far this year. Lam management has said underlying wafer fabrication equipment demand remains robust, and Davuluri says the company’s services business has helped reduce Lam’s earnings volatility. Lam has averaged 20% revenue growth in the past five years, and the stock pays a 1.3% dividend. Morningstar has a “buy” rating and a $720 fair value estimate for LRCX stock, which closed at $469.51 on April 21.
FedEx Corp. (FDX)
FedEx is a leading air freight and logistics company. The pandemic has accelerated the global shift to e-commerce sales, triggering a surge in package delivery demand. Analyst Matthew Young says FedEx could achieve margins of between 11% and 12% as its business-to-customer profitability improves. Young says FedEx has grown its ground business in the past decade and has a speed advantage over rival United Parcel Service Inc. (UPS). In the past five years, FedEx has averaged 10.8% revenue growth, and the stock also pays a 1.4% dividend. Morningstar has a “buy” rating and a $258 fair value estimate for FDX stock, which closed at $206.86 on April 21.
Microchip Technology Inc. (MCHP)
Microchip Technology is a specialized semiconductor supplier that produces microcontrollers, or MCUs. Analyst Brian Colello says Microchip is one of the best-run companies in the semiconductor space and has demonstrated its unique ability to generate cash flow under virtually any economic conditions. Colello says Microchip should benefit from the Internet of Things and the trend toward smarter devices, which require MCUs to serve as their electronic brains. Microchip has averaged 20.1% revenue growth in the past five years and pays a 1.5% dividend. Morningstar has a “buy” rating and an $83 fair value estimate for MCHP stock, which closed at $67.62 on April 21.
T. Rowe Price Group Inc. (TROW)
T. Rowe Price is a global investment advisor that manages more than $1.5 trillion in assets. Warren says the firm’s growth is particularly impressive given the relatively poor performance of active fund managers as a whole in recent years. Warren says T. Rowe Price has size and scale advantages, strong brands, a consistent track record of outperformance and a reasonable fee structure. T. Rowe Price has grown its revenue at a 12.4% annual rate over the past five years. It also pays a 3.4% dividend. Morningstar has a “buy” rating and a $195 fair value estimate for TROW stock, which closed at $139.58 on April 21.
9 growth stocks that also pay dividends:
— Goldman Sachs Group Inc. (GS)
— BlackRock Inc. (BLK)
— Cigna Corp. (CI)
— Becton Dickinson and Co. (BDX)
— Truist Financial Corp. (TFC)
— Lam Research Corp. (LRCX)
— FedEx Corp. (FDX)
— Microchip Technology Inc. (MCHP)
— T. Rowe Price Group Inc. (TROW)
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9 Growth Stocks That Also Pay Dividends originally appeared on usnews.com
Update 04/22/22: This story was published at an earlier date and has been updated with new information.
