3 Underrated Dividend Growth Stocks to Buy and Hold for Years
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When you think of a great dividend stock to own, you're bably thinking of one that yields a high rate of return. But focusing on yield alone can be a mistake. It...
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July 8, 2025
04:55 AM
The Motley Fool
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When you think of a great dividend stock to own, you're bably thinking of one that yields a high rate of return
But focusing on yield alone can be a mistake
It can lead you down a path where you buy a stock with a risky payout, and you could overlook mising dividend stocks simply because their yields don't look all that high right now
Three stocks with yields that are less than 2% but that have been increasing their dividends at high rates in recent years include Eli Lilly (LLY -1. 00%), TJX Companies (TJX -0. 55%), and American Express (AXP -1
Here's a closer look at why these three underrated investment options could make for solid dividend stocks to buy and hold
Image source: Getty Images
Eli Lilly Pharmaceutical company Eli Lilly is the big name behind GLP-1 drugs Zepbound (apved for weight loss) and Mounjaro (apved for diabetes)
It has been reporting impressive results in recent years as its sales went from $28. 5 billion in 2022 to more than $45 billion this past year
While it does offer a yield of 0. 8%, that may not grab the attention of dividend investors simply because it's not hard to find higher-yielding payouts out there
The big reason its yield is so low, however, is because Eli Lilly has been such a red-hot stock to own
In five years, its stock price jumped by over 370% (returns as of July 7)
As the price goes up, the yield comes down
And it's not as if Eli Lilly hasn't been generous when it comes to dividend increases
In December, the company announced it would be raising its dividend by 15%
It's been raising its dividend by an average of 15% annually for seven years now
That's an impressive rate of increase, and its current quarterly dividend of $1. 50 has roughly doubled from the $0. 74 that Eli Lilly paid holders back in 2020
With a solid and growing dividend, Eli Lilly is a stock that you may want to invest in for both its stock price growth spects and rising payouts
TJX Companies Retailer TJX offers a higher yield than Eli Lilly, paying investors 1. 4% per year, which is slightly above the S&P 500 average of 1
Although retail may not appear to be the best place to invest these days due to the threat of tariffs, off-price retailer TJX is doing well
By buying overstocked and otherwise unneeded ducts from other retailers, it can offer value to consumers amid challenging market conditions
And that appears to be evident in its most recent results
TJX's revenue for its first quarter of fiscal 2026 (it on May 3) rose at a healthy rate of 5% versus the same period last year, with its top line totaling $13
The company's confidence in its operations is also visible in a recent announcement where it said it would be increasing its dividend by 13% this year
It's the 28th time in 29 years that it has raised its payout, during which the company says its dividend has averaged an annual rate of increase of 20%
Those are impressive numbers for dividend investors and serve as a reminder of why TJX may make for a solid dividend growth stock to buy, despite what might at first glance appear to be an underwhelming payout
American Express Credit card company American Express pays out a modest 1% dividend yield
The company has been showing solid resiliency this year; through the first three months of 2025, its revenue net of interest expense totaled nearly $17 billion and rose by 7% year over year
Net income of $2. 6 billion was up by 6%
Card member spending remained strong, and the company jects revenue growth of around 8% to 10% for the current year
This bodes well for the company's dividend, as it could result in continued generous rate hikes in the future
In March, American Express boosted its quarterly dividend by 12 cents, which represented an increase of 17% from its previous rate. 82, the quarterly dividend today is 91% higher than the $0. 43 it was paying its holders five years ago, which averages out to a compounded annual growth rate of 13
With strong financials and a high rate of dividend growth, American Express is a stock that income-seeking investors shouldn't overlook today
American Express is an advertising partner of Motley Fool Money
David Jagielski has no position in any of the stocks mentioned
The Motley Fool has positions in and recommends TJX Companies
The Motley Fool has a disclosure policy.
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