3 Dividend Growth Stocks That Will Deliver Meaty Returns After 5 Years

Investing

Published: July 28, 2025 1:38 pm

It’s no secret that AI has captured the imagination of many growth oriented investors, which is a big reason why the Magnificent 7 tech stocks have been so strong in leading the S&P 500 to new heights. That said, the renaissance of American industry spearheaded by the $26 trillion in US investment commitments negotiated by President Trump will benefit the growth of US companies across the board in such conventional fields as Energy, Insurance, and Healthcare. Distinguishing as to the ones with the best upside potential in each sector can be more difficult. However, there is one objective criterion that is industry agnostic but is often a good indicator of future performance: dividend growth. 

Provided no unforeseen management, natural disaster, or geopolitical events befall a company in the near-term future, a 5-year history of strong dividend growth in double-digits can be a reliable barometer for strong upside potential. The key is for the company to maintain sufficiently low payout ratios so it has the capex warchest for expansion growth via new construction, acquisition, or other opportunities. 

Diamondback Energy, Inc.

Headquartered in Midland, Texas, Diamondback Energy, Inc. (NYSE: FANG) is an independent oil and natural gas company that is developing and drilling in the Permian Basin.

Diamondback’s operating area totals 870,000 net acres, thanks to its 426 billion merger with Endeavor Energy Resources in 2024. Current output is estimated at 816,000 barrels of oil equivalent (BOE) per day from over 6,000 drilling sites. The company also has over 750 miles of pipeline distribution for oil, gas, and water throughout its operating regions. Diamondback’s break-even cost is less than $40 per barrel, so even with oil prices between $60 to $75 per barrel, the company is making profits. 

Since 2018, Diamondback Energy has been averaging quarterly dividend growth of 8%, and roughly 93% over a 5-year period. While 2025 has shown this growth rate to be lagging thus far, the overall average and the escalating demands for energy from the tech sector for their proliferation of AI data centers will likely buoy continued production growth on the oil and gas side. 

From the 5 years starting in July, 2020 to the time of this writing, Diamondback Energy’s stock has gone from about $35 per share to $145.26. During the same period, the dividend has gone from $.0375 per share to $4.00 per share. The company assiduously maintains a policy of keeping the dividend payout ratio under 50%. At the time of this writing, it is 32.59%

Based on historic data, calculations for projected dividend growth for Diamondback Energy could conceivably reach the following amounts and yields, based on stable management, continued energy demand trends, and no geopolitical or unforeseen disaster that can negatively impact present operations:

Of course, there would likely be capital expenditures for other acquisitions of construction of additional pipelines or drilling sites that would cut into those projections. Nevertheless, the rate of revenue growth to support dividend growth will inevitably be tracked by analysts. Of the ones currently following Diamondback Energy and have issued “strong buy” ratings as of July, 2025, the five most bullish included:

• Piper Sandler – target price of $225 – $228
• Raymond James – target price of $204 – $221
• Wells Fargo – target price of $210
• Susquehanna – target price of $188 – $192
• Barclays – target price of $185

Abbott Laboratories

Chicago based Abbott Laboratories (NYSE: ABT) is a US healthcare goliath with multiple areas of development and manufacture of healthcare products.

The company has a 135 year operating history and a presence in over 160 different nations. Among its best known products are its i-Stat blood analyzers, FreeStyle Libre glucose monitors, Pedialyte and Similac baby products, and Ensure shakes for the elderly. 

From the 5 years starting in July, 2020 to the time of this writing, Abbott Labs’ stock has gone from about $98 per share to $126.54, which is a 1.88% yield. .  During the same period, the dividend has gone from $1.80 per share to $2.36 per share. The company’s dividend payout ratio at the time of this writing is 29.5%. That is a dividend growth rate of 11.5%.

Based on historic data, calculations for projected dividend growth for Abbott Labs could conceivably reach the following amounts and yields, based on stable management, continued energy demand trends, and no geopolitical or unforeseen disaster that can negatively impact present operations:

Abbott Labs has a history of strong earnings, and Wall Street analysts believe that earnings growth will go hand in hand with any dividend growth that manifests as well. The following analysts hold the most bullish prognostications:

• Barclays has a price target of $159.
• Citigroup has a price target of $155 – $157.
• Bank of America has a price target of $150.
• Well Fargo has a price target of $142 – $151. 
• UBS has a price target of $148.

The Cigna Group

The US healthcare and medical insurance industry is enormous. The Cigna Group (NYSE: CI) is one of the major players in the industry.

From the 5 years starting in July, 2020 to the time of this writing, Cigna Group’s stock has gone from about $170 per share to $296.37, which is a 2.05% yield. During the same period, the dividend has gone from $4.00 per share to $6.00 per share. The company’s dividend payout ratio at the time of this writing is 31.35%. That is a 5-year dividend growth rate of 170.75%.

Based on historic data, calculations for projected dividend growth for Cigna Group could conceivably reach the following amounts and yields, based on stable management, continued energy demand trends, and no geopolitical or unforeseen disaster that can negatively impact present operations:

Cigna Group has no shortage of fans within the Wall Street analyst community. With a number of “strong buy” recommendations out of 14 positive analyst ratings, the following analysts hold the most bullish prognostications:

• Truist Financial has a target price of $385 – $405.
• Jeffries has a target price of $376 – $397.
• UBS has a price target of $390.
• Guggenheim has a price target of $388.
• Barclays has a price target of $382 – $385.

While it can’t be said to be infallible, dividend growth rates for a 5-year or longer period that show consistent strength and low enough payout ratio to sustain capex and additional earnings growth can be an excellent way to separate a potential company from its sector rivals as the one with the greatest upside potential.