Income investors love Dividend Kings, that select group of stocks that have increased their dividends for 50 or more consecutive years. They love them for their stability, their fiscal management, and their ability to generate free cash flow.
They’re great, but if you’re looking to keep up with inflation, maybe it makes more sense to find dividend stocks that have kept up their increases at above-inflationary rates. Those with increases of 50% or more over the past five years but with relatively low payout ratios, so they can continue to keep raising their dividends. Yes, their yields are average or below, but they provide dependable dividend growth and share-price growth.
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Three stocks come to mind and they’re not coming out of the blue. Pharmaceutical giant Eli Lilly(NYSE: LLY), motion control and technologies conglomerate Parker-Hannifin(NYSE: PH), and tech behemoth Microsoft(NASDAQ: MSFT) have generously boosted dividends by 50% or more over the past five years while growing earnings per share (EPS) by 100% or more, while still keeping payout ratios below 27%.
Why I like all three stocks:
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Eli Lilly is growing fat on GLP-1 profits
The healthcare company’s blockbuster is tirzepatide, a GLP-1 drug sold as Mounjaro for type 2 diabetes and Zepbound for obesity. In the first quarter, Lilly’s revenue was reported as $19.8 billion, up 56% year over year, and EPS rose by 156% over the same period a year ago to $8.55. Those numbers could rise now that Foundayo, a daily GLP-1 pill, was approved by the Food and Drug Administration (FDA) to treat adults with weight-related medical problems.
The company’s pipeline has 42 phase 3 trials and 32 phase 2 trials, including other potential blockbusters in that mix, such as Alzheimer’s treatment donanemab and another GLP-1 drug, retatrutide, which, besides its weight-loss efficacy, could treat non-alcoholic steatohepatitis (NASH/MASH) and severe metabolic dysfunction.
Lilly just increased its dividend by 15.3% to $1.73 per quarterly share. It has increased its dividend for 12 consecutive years and by 104% over the past five years. The payout ratio is only 22.4%, and the company predicts 2026 revenue between $82 billion to $85 billion, up 28% at the midpoint, and EPS from $35.50 to $37, an increase of 49.7% at the midpoint.
While many Dividend Kings offer predictable but sluggish low-single-digit raises, Parker-Hannifin stands out with surprisingly aggressive growth. In April, the industrial company increased its dividend by 11% to $2 per share, marking the 70th consecutive year of dividend increases. Its 5-year dividend growth rate sits near 94%.
As a global leader in motion and control technologies, Parker is a quiet backbone of trends such as near-shoring in global supply chains, factory electrification, and clean technology infrastructure.Because its components are mission-critical but account for a tiny fraction of a client’s total project cost, the company possesses immense pricing power.
Parker-Hannifin’s business portfolio has evolved to provide longer-cycle, high-margin end markets that buffer it against short-term economic downturns. Its Aerospace Systems segment continues to be a big growth segment, as it saw revenue rise 15.5% year over year in the third quarter to $1.8 billion, while overall revenue increased by 11% over the same period a year ago to a record $5.5 billion. Adjusted EPS rose 18% over the same period a year ago to a record $8.17. Cash flow was a record $2.6 billion. That cash flow keeps the payout ratio a relatively low 26.6%.
Microsoft is that rare income-growth combo
Everyone thinks of Microsoft as a growth stock, which it is, thanks to its role in the AI revolution. Its partnership with OpenAI and its huge cloud infrastructure enable it to integrate AI capabilities across its software platform. The tech company has a highly resilient Productivity and Business Processes segment that, thanks to Office 365, Windows commercial, and LinkedIn, operates primarily on a subscription model.
However, Microsoft has a strong record of dividend growth, including a 10% bump last September to $0.91 per quarterly share, the 21st consecutive year it has increased its dividend and usually by 10% or more. It can do that because it steadily grows its businesses. In the third quarter, it reported revenue of $82.9 billion, up 18% year over year, and EPS of 4.27, up 23% over the same quarter in 2025.
Other companies are spending massively to scale data centers, which is driving more revenue for the company’s Intelligent Cloud (Azure) and other cloud services, which reported year-over-year revenue growth of 40% in the quarter. Because its customers face incredibly high switching costs once embedded in Microsoft’s server and software ecosystem, this cloud revenue represents a durable, wide-moat competitive advantage that will power top-line growth for the next decade.
Should you buy stock in Eli Lilly right now?
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James Halley has positions in Microsoft and Parker-Hannifin. The Motley Fool has positions in and recommends Eli Lilly and Microsoft. The Motley Fool has a disclosure policy.
