4 Top Dividend Growth Stocks to Build Your Portfolio Around in 2025

You will want to build your portfolio the right way if you're going to make money with stocks over the long haul. You wouldn't build your house on a shaky foundation, would you?

It's the same thing with investing. Those risky, lottery ticket-style stocks are fine, but only after you've laid the groundwork with proven winners. Dividends can help you find those foundational stocks you're looking to own. Companies that pay a growing dividend typically have strong business models and consistent growth.

Start Your Mornings Smarter! Wake up with Breakfast news in your inbox every market day. Sign Up For Free »

Here are four examples of stocks that can anchor a diversified portfolio. These stocks all trade at appealing valuations, making them a great way to kick off 2025 with a bang.

1. Microsoft

Technology conglomerate Microsoft (NASDAQ: MSFT) has been winning since Windows software revolutionized the personal computer in the 1980s. Today, Microsoft's reach spans enterprise and personal software, gaming, cloud computing, and artificial intelligence (AI). The company generates over $72 billion in annual free cash flow despite massive investments in data centers to accommodate growing demand for cloud and AI services.

Microsoft has become an elite dividend stock, too. Though it only yields 0.8%, the company has increased the dividend for 22 consecutive years, and its payout ratio is still just 31% of cash flow. Microsoft figures to be a power player in AI, which is still a young industry with lots of long-term potential. That will contribute to growth that should fuel continued share price appreciation and dividend growth for years.

Analysts estimate Microsoft will grow earnings by 13% annually over the long term, making the stock a reasonable buy at its forward P/E ratio of 32.

2. Novo Nordisk

Pharmaceutical giant Novo Nordisk (NYSE: NVO) is a leader in the diabetes and obesity field. Its history dates back to the commercialization of insulin in the 1920s. Today, it is leading one of the hottest growth opportunities in healthcare: GLP-1 agonists. These drugs combat type 2 diabetes and obesity by slowing digestion in patients and making them feel fuller for longer. Novo Nordisk's Ozempic and Wegovy are among the top sellers in what could become a $168 billion market by the early 2030s.

Management has a long track record of raising the dividend over time. However, Novo Nordisk is a Danish company, so U.S. investors may experience fluctuations as the dividend converts to U.S. dollars. The stock yields 1.7% today and has plenty of room for growth, with a manageable 65% payout ratio.

The company is poised for 16% annualized long-term earnings growth, making it a bargain at 21 times forward earnings estimates.

3. Johnson & Johnson

Pharmaceutical and medical device conglomerate Johnson & Johnson (NYSE: JNJ) is legendary for its dividend. The stock is a Dividend King with 62 consecutive annual increases. This means the business has endured multiple economic ups and downs, giving investors confidence to buy and hold it. Plus, it's a solid income stock with a current yield of 3.4%. Johnson & Johnson spends just 61% of its cash flow on the dividend, leaving plenty of cushion to continue investing in growth.

If the business did take an unexpectedly lousy turn, Johnson & Johnson's balance sheet would come to the rescue. The company has a perfect AAA credit rating. It's one of only two companies (along with Microsoft) with those bragging rights. Johnson & Johnson is a slow and steady grower. Analysts estimate the business will grow earnings by an average of 5% to 6% annually over time. That growth makes the stock a solid buy at its forward P/E of just under 14.

4. Visa

Leading payments network Visa (NYSE: V) has enjoyed years of growth as consumers slowly abandon cash in favor of debit cards, credit cards, and digital payments. The company charges a small fee for every global transaction involving Visa-branded payment methods. Visa isn't a lender, so its asset-light business is highly profitable. Roughly half of every dollar of revenue Visa earns winds up as cash flow, used to pay a growing dividend and repurchase its stock.

Since going public, Visa has paid and raised its dividend annually, a growth streak of 16 years and counting. The dividend payout ratio is still under a quarter of Visa's cash flow, so the stock compensates for its small yield (0.75%) with excellent growth prospects. Analysts estimate Visa will grow earnings by 12% annually over the long term as consumers worldwide continue ditching cash.

Visa's quality and consistent growth make the stock worth buying at 28 times forward earnings.

Should you invest $1,000 in Microsoft right now?

Before you buy stock in Microsoft, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Microsoft wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $858,668!*

Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. The Stock Advisor service has more than quadrupled the return of S&P 500 since 2002*.

See the 10 stocks »

*Stock Advisor returns as of January 6, 2025

Justin Pope has positions in Johnson & Johnson and Visa. The Motley Fool has positions in and recommends Microsoft and Visa. The Motley Fool recommends Johnson & Johnson and Novo Nordisk and recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.