Dividend growth investors consider multiple things when buying a stock, such as dividend yields and P/E ratios. Investors looking for better returns should also consider stocks that have established a history of regular dividend increases.

The Dividend Challengers are a group of companies with over 5 years of dividend growth. These 3 Dividend Challengers have high yields above 5%, and can continue to grow their payouts in the years ahead.

Brookfield Infrastructure Partners (BIP)

Brookfield Infrastructure Partners L.P. is one of the largest global owners and operators of infrastructure networks, which includes operations in sectors such as energy, water, freight, passengers, and data. Brookfield Infrastructure Partners is one of multiple publicly-traded listed companies under Brookfield Corporation (BN). 

BIP reported solid Q1 2024 results on 05/01/24. For the quarter, funds from operations (FFO) rose 11% to $615 million, reflecting organic growth of 7% and contributions related to +$2 billion of new investments, partially offset by the impact of higher interest costs and its ongoing capital recycling program. Ultimately, FFO per unit came in at $0.78, which was 8.3% higher versus a year ago. 

BIP uses FFO, which are relatively in line with its cash flows, to determine its dividend growth. From 2014-2023, the FFOPS and DPS had a CAGR of 7.5% and 6.7%, respectively, on a split-adjusted basis. BIP has a strong track record of selling mature assets and redeploying capital for attractive long-term returns. Additionally, its infrastructure portfolio also expects to experience strong organic growth of 6-9% per year.

BIP has a secure distribution payout. According to this formula, its 2023 payout ratio is 66%, within management’s FFO payout ratio target of 60% to 70%. BIP’s FFOPS remains stable even through recessions because of the essential services provided by its diversified infrastructure portfolio. Stable FFO and a sustainable payout ratio leads to a secure dividend. 

BIP benefits from the qualitative competitive advantages of the Brookfield family of companies, which includes access to large-scale capital, vast experience owning and operating real assets, and a truly global operating presence. These factors allow BIP to invest in the most compelling global infrastructure opportunities. BIP has strong liquidity of ~$2.0 billion at the corporate level. Additionally, BIP maintains a solid credit rating of BBB+.

BIP has increased its distribution for 15 years and currently yields 5.7%.

Philip Morris International (PM)

Philip Morris International is a tobacco company that was spun off from its former parent company Altria (MO). Philip Morris sells cigarettes under the Marlboro brand, among others, in the international markets.

On April 23rd, 2024, Philip Morris reported its Q1 results. For the quarter, the company posted net revenues of $8.8 billion, up 9.7% year-over-year. Adjusted EPS equaled $1.50, up 8.7% versus Q1- 2023. In constant currency, adjusted EPS grew by 23.2%. Total shipment volumes were up 3.6% collectively, as growth in heated tobacco and oral products more than offset the modest decline in combustibles. 

Management now expects adjusted EPS in a range of $6.55 to $6.67 for the full year. Its midpoint implies a year-over-year growth between 9% and 11% and new record adjusted EPS for the company.

Future growth will be driven by the company’s investments in its iQOS/Heatsticks technology. The investment in the development and manufacturing of this device were significant, but necessary to adapt to declining smoking rates. Ramp-up of iQOS/Illumina in international markets has boosted net income and expanded the margin mix. 

For example, in the most recent quarter shipment volumes of cigarettes declined 0.4%, but rose 20.9% for heated tobacco and 35.8% for oral products. The Swedish Match buyout contributed strongly to the strong increase in oral products’ shipment volumes. 

Due to strong cash generation, low capex requirements and the stability of Philip Morris’ business model during recessions the dividend remains relatively well-covered, with a 2024 expected payout ratio of 80%. PM has increased its dividend for 17 consecutive years and the stock currently yields 5.2%.

Bristol-Myers Squibb (BMY)

Bristol-Myers Squibb is a leading drug maker of cardiovascular and anti-cancer therapeutics has annual revenues of about $45 billion. On April 25th, 2024, Bristol-Myers reported first quarter results. For the quarter, revenue increased 5% to $11.8 billion, which was $330 million better than expected. Adjusted earnings-per-share totaled -$4.40 compared to $2.05 in the prior year. This was $0.02 above estimates. 

The earnings-per-share loss was related to the closing on several acquisitions during the quarter. Bristol-Myers closed three transactions during the quarter, including Mirati Therapeutics, Karuna Therapeutics, and RayzeBio. This incurred nearly $13 billion of in-process research and development charges that negatively impacted results. Adjusting for unfavorable currency exchange, revenue was higher by 6% for the quarter. 

We expect Bristol-Myers Squibb to grow its earnings-per-share at a 3% annual rate going forward as the company has a number of high-growth products in its portfolio. In the most recent quarter revenue for Eliquis, which prevents blood clots, increased 9% to $3.72 billion due to strong demand in the U.S. Eliquis remains the top oral anticoagulant outside of the U.S. and generated more than $12 billion in revenue for 2023, which was a 4% increase from the prior year. Separately, revenue for Orencia, which treats rheumatoid arthritis, was higher by 4% to $798 million. 

Bristol-Myers provided updated guidance for 2024 as well. The company now expects revenue to be flat compared to the prior year, down from low single-digit growth. While earnings-per-share are set to take a hit this year due to significant one-time charges, EPS should recover in 2025 and beyond. As a result, BMY should continue to increase its dividend.

The most recent increase occurred on December 6th, 2023, when Bristol-Myers raised its quarterly dividend 5.3% to $0.60. BMY has increased its dividend for 17 consecutive years. With a dividend payout ratio around 70%, the dividend payout appears secure. BMY stock currently yields 5.4%.