This Magnificent Dividend Stock Has Increased Its Payouts by 500% in 10 Years

There are many dividend stocks on equity markets, but not all are attractive to income investors. Those that go beyond paying a quarterly payout but also consistently raise their dividends -- all while having robust businesses that can support their dividend programs for a long time -- are the ones income-seekers want.

That description fits Zoetis (NYSE: ZTS), an animal health specialist, pretty well. Here's why this is a top dividend stock to hold on to for the next decade.

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The business is strong despite a recent setback

Zoetis is the world's leading drugmaker focused on animal health. It has a well-diversified lineup of products across many different categories, from companion animals to livestock, fish, and poultry. Zoetis consistently develops new products, and boasts 15 in its lineup that each bring in over $100 million in annual sales.

The animal health leader generates consistent revenue and earnings as a result. In 2024, Zoetis' revenue grew by 8% year over year -- a strong performance in this industry -- to $9.3 billion. Earnings per share of $5.47 were also up 8% compared to the previous fiscal year.

Zoetis' stock fell on the heels of its earnings release on weak guidance for the fiscal year 2025. It expects new competition for some of its products to pose a challenge. For instance, the company's Apoquel, an oral medicine to relieve allergic itch in dogs, is one of its key growth drivers. Recent market entrants, including Elanco Animal Health's Zenrelia, which was approved late last year, could eat into Apoquel's market share.

These considerations likely influenced Zoetis' weak guidance. And it's plausible that the company will deliver disappointing results through 2025.

However, Zoetis' track record and prospects remain impeccable if we look at the big picture. Consider that the company has increased its revenue faster than the industry average since 2014 -- that's no easy feat, and speaks volumes about its ability to navigate challenges, including stiff competition.

Thanks to newer approvals, the animal health leader still has the means to do so. Products such as Solensia, a medicine for osteoarthritis (OA) pain in cats that was first approved in the U.S. in 2022, and Librela, a drug for OA pain in dogs that hit the market in 2023, are already important contributors and should continue growing their sales for a long time.

Even within its dermatology segment, Zoetis has miles of growth left for Apoquel. Management pointed out that an estimated 12 million dogs are on Apoquel or Cytopoint (another one of its medicines for itch in dogs), and 7 million are on other therapies, but 13 million aren't being treated. That grants Zoetis plenty of sales opportunities in this niche.

The company is still looking at critical long-term tailwinds, including the increased humanization of pets. While the U.S. birth rate is below replacement level, younger generations are leading a "pet humanization trend." People see their cats and dogs as part of their families and are willing to spend top dollars caring for them. Zoetis' companion animal unit is its most significant growth driver for a reason, and will probably remain so for a long time. So, despite the company's recent setback, it should still deliver strong returns over the long run.

Zoetis is a terrific dividend stock

Zoetis has consistently paid and raised its dividends since its initial public offering (IPO) in 2013. In the past decade, its payouts have increased by 502%:

ZTS Dividend data by YCharts.

The company's current forward yield isn't that impressive at 1.2% -- it's below the S&P 500's average of 1.3%. However, a high yield, though sometimes attractive, isn't everything. Considering Zoetis' track record in the past 10 years -- and its excellent prospects -- we can expect the company to reward shareholders with payout increases for a long time, especially since it boasts a conservative cash payout ratio of 34%.

Despite its relatively low forward yield, Zoetis looks like a top income stock to buy and hold for a long time.

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Prosper Junior Bakiny has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Zoetis. The Motley Fool has a disclosure policy.