Intergenerational wealth is created when one’s investments provide not only for themselves, but for their children, grandchildren, and beyond. Unfortunately, the skills that it takes to build and maintain a growing investment portfolio are typically not transferred with an inheritance.

The good news is that quality dividend growth stocks can generate long-term wealth that lasts through the generations. The following 3 dividend growth stocks should continue to raise their dividends for decades to come. In this way, these 3 dividend growth stocks could produce intergenerational wealth.

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 generated $40 billion in sales and $8.3 billion in profit in 2023.

On October 16th, 2024, Abbott Laboratories reported third quarter results for the period ending September 30th, 2024.

For the quarter, the company produced $10.6 billion in sales (60.5% outside of the U.S.), which represented a 4.9% improvement compared to the third quarter of 2023 and was $90 million more than expected. Adjusted earnings-per share of $1.21 compared to $1.14 in the prior year and was $0.01 ahead of estimates.

U.S. sales grew 10.1% while international increased 1.7%. Currency exchange was a 2.5% headwind for the period. Companywide organic sales grew 7.6%. However, excluding Covid-19 testing products, organic growth was 8.2%.

Earnings-per-share have a CAGR of 7.7% since 2014 and 7.6% since 2019. With its strong position in growth markets such as diagnostics, where Abbott Laboratories is the market leader in point-of care diagnostics - and cardiovascular medical devices, Abbott Laboratories should be able to generate attractive long-term growth.

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.

ABT has increased its dividend for 52 consecutive years.

Automatic Data Processing (ADP)

Automatic Data Processing is one of the largest business services outsourcing companies in the world. The company provides payroll services, human resources technology, and other business operations to more than 700,000 corporate customers.

ADP posted first quarter earnings on October 30th, 2024, and results were better than expected on both the top and bottom lines. Adjusted earnings-per-share came to $2.33, which was 12 cents ahead of estimates.

Earnings were up from $2.08 in the year-ago period. Revenue was up 6.7% year-over-year to $4.8 billion, beating expectations by $30 million.

Management noted revenue and margin performance exceeded expectations as the company benefited from new business bookings, strong revenue retention and higher client funds interest revenue.

Employer Services revenue was $3.26 billion, up 7% year-over-year while segment earnings grew 15% to $1.16 billion. That was good enough from pretax margin to rise from 33.1% of revenue to 35.7%.

Automatic Data Processing has compounded its adjusted earnings-per-share at a rate of more than 13% per year over the last decade, which we believe it can come close to matching moving forward. Much of this growth is likely to be driven by the company’s Professional Employer Organization (PEO) Services segment, which continues to deliver very impressive revenue growth. 

Importantly, this revenue growth has been accompanied by meaningful margin expansion, which means that the segment’s growth has had an outsized impact on the firm’s bottom line. In addition, the company’s buyback has been a low single-digit tailwind annually for earnings-per-share growth in the past decade, and we expect that will continue moving forward.

ADP has increased its dividend for 49 consecutive years.

General Dynamics Corporation (GD)

General Dynamics is a US aerospace & defense company that now operates in four business segments: Aerospace (21% of sales), Combat Systems (19%), Marine Systems (26%), and Technologies (33%). General Dynamics combined the IT and Mission Systems segments in 2020.

The company’s Aerospace segment is focused on business jets and services while the remainder of the company is defense. The company makes the well-known M1 Abrams tank, Stryker vehicle, Virginia-class submarine, Columbia-class submarine, and Gulfstream business jets.

General Dynamics had revenue of approximately $42.3B in 2023.

General Dynamics reported poor Q3 2024 results on October 23rd, 2024, missing estimates on higher costs and taxes. Revenue rose 10.4% and diluted earnings per share increased 10.2% to $3.35 from $3.04 on a year-over-year basis. Aerospace revenue rose 22% while Gulfstream’s book-to-bill ratio was 1.0X.

Revenue for Marine Systems increased 20% to $3,599M from $3,002M on the strength of the Columbia and Virginia class submarine programs.

General Dynamics’ top and bottom lines have grown due to increasing US defense spending, international sales, business jet sales and services. General Dynamics has established naval and ground platforms that support maintenance and modernization contracts as well as future prime contract wins. From 2024 we forecast on average 6% annual earnings per share growth out to 2029. Operating margin expansion and a reduction of share count will support earnings per share growth.

General Dynamics is an entrenched military prime contractor. It has ground and marine platforms that serve as the backbone for the US Army, US Navy, and militaries around the world. This leads to a competitive advantage as these platforms have decades long life cycles and General Dynamics has expertise and experience to perform sustainment and modernization.

GD has increased its dividend for 33 consecutive years.