3 Brilliant Dividend Growth Stocks With Sub-50% Payout Ratios

Dividend Growth Investing Strategy - Building lasting wealth through dividend investing involves identifying companies with sustainable payout ratios and consistent dividend growth, benefiting from rising income streams and potential capital appreciation [1] - Stocks with payout ratios below 75% and five-year annualized dividend growth rates above 6% tend to generate superior total returns over extended holding periods [2] Microsoft (MSFT) - Microsoft has transformed from a software company into a diversified technology powerhouse, with significant growth in cloud computing through Azure [3] - The company has a modest 0.77% dividend yield but has increased payouts by 10.3% annually over the past five years, with a low payout ratio of 24.7% [4] - Microsoft trades at a forward P/E of 32.5, reflecting its cloud-computing leadership, enterprise-software ecosystem, and AI research capabilities [5] - Its cloud leadership and strong balance sheet make it an ideal cornerstone holding for dividend growth investors [6] Mastercard (MA) - Mastercard operates one of the world's largest payment networks, benefiting from the global shift toward digital transactions [7] - The company has a 0.58% dividend yield, with a five-year annualized dividend growth rate of 14.5% and a lean payout ratio of 19.3% [8] - Mastercard trades at a forward P/E of 32.3, justified by its duopoly position in global payments, high-margin business model, and growth potential in digital payments [9] Lockheed Martin (LMT) - Lockheed Martin is the largest U.S. defense contractor, specializing in advanced military systems and space technology, poised to benefit from increased global defense spending [10] - The company offers a 2.69% dividend yield, with a 7.21% five-year annualized dividend growth rate and a reasonable payout ratio of 45.6% [11] - Lockheed Martin trades at a forward P/E of 17.2, making it a bargain relative to the S&P 500, given its expertise in hypersonics, space systems, and predictable government contracts [12] Overall Investment Strategy - Successful dividend growth investing involves identifying quality companies like Microsoft, Mastercard, and Lockheed Martin, and accumulating shares through dollar-cost averaging [13] - These companies offer robust economic moats, strong fundamentals, clear growth trajectories, shareholder-focused management, and well-structured dividend programs, making them attractive for dividend growth investors [14]