We are buying these 7 dividend growth beauties

Dividend portfolio shake up to keep momentum going!

Today marks a decisive move in our dividend portfolio strategy. After extensive research and thorough preparation, we’ve pulled the trigger and added seven high-quality stocks to the portfolio. These new positions are driven by one central theme: robust dividend growth backed by solid fundamentals.

At the same time, we are taking a disciplined approach by removing four underperforming stocks—positions that have disappointed both in terms of price action and, crucially, dividend growth. Also we are selling three stocks that are doing just fine, but have to leave because we think we have found even better replacements.

Each of the 7 new purchases for our Dividend Hike Portfolio are ‘Focus Stock’ worthy investments that we will highlight later on in 2025 with a more detailed analysis. Three of our new buys are Dividend Heroes.

One notable exit is PepsiCo PEP 0.00%↑ , which is raising its dividend by just 5% this year—a clear signal of slowing momentum. In its place, we’ve identified a much stronger candidate with superior long-term growth potential and significantly more compelling dividend prospects. Another stock we are selling is Abbott Laboratories ABT 0.00%↑ the Dividend Aristocrat that is the second best performer YTD with a 18.4% gain. We think we have a replacement from the Health Care sector with a lower valuation, stronger balance sheet en better dividend growth prospects.

This rebalancing reflects our ongoing commitment to quality, performance, and sustainable income growth.

One of the stocks that we are buying just announced a big 20% dividend hike last week. This stock is one of the Dividend Heroes with now 13 consecutive years of (double digit) dividend hikes. Another one that we are buying is actually raising its dividend each single quarter; they just did their second dividend hike in 2025. Want to know what stocks we are talking about?

Portfolio Update – Rebalancing Executed on May 7, 2025

As of the May 7, 2025 closing prices, we have sold the following stocks:

• Abbott Laboratories – Sold at $133.35 with a 19% gain

• Eli Lilly – Sold at $776.72 with a 0.8% gain

• EOG Resources – Sold at $107.97 with an 11.1% loss

• Northrop Grumman – Sold at $486.04 with a 4.0% gain

• Owens Corning – Sold at $130.40 with a 23% loss

• PepsiCo – Sold at $131.92 with a 12.4% loss

• Westlake Corp – Sold at $78.00 with a 31.6% loss

We still believe all of the above names are solid long-term investments. However, we are making these changes because we believe we’ve found better stocks that also improve portfolio diversification.

A particularly painful exit is Owens Corning, which reported disappointing results today, causing an additional 8.6% drop.
Westlake Chemical, in hindsight, was simply a poor choice—partly in line with the broader sector. The company increased its dividend by just 5% last year. We still think it’s a good company, but given the low dividend growth, we should have made a different choice.

That’s also why PepsiCo is being removed. The dividend increase in 2025 is 5%, and it’s very possible that growth will slow further in the coming years, simply because the company is in a tough position.

EOG Resources is a great company, but the share price—and the entire sector—has been under pressure due to lower oil prices. We already hold Texas Pacific Land and believe that’s a better fit. In EOG’s place, we’re buying a company with more predictable performance and stronger dividend growth.

Eli Lilly started off strong but pulled back sharply in recent weeks. It remains a massive company by market cap. The outlook is solid, and LLY is clearly the top pharma stock in the sector—no doubt about that. But whether its current market cap of over $700 billion is justified remains uncertain. The revenue needed to support that valuation is enormous, and the risks—especially long-term—are significant. Pharma remains a difficult sector. Since we can now exit without a loss, we’re taking that opportunity.

The same goes for Northrop Grumman. It's the best defense stock out there, with strong dividend growth (around 10% annually) and massive buybacks. However, the U.S. government is cautious on defense spending, and it's a high-risk sector. We're replacing it with something we feel more comfortable holding.

Then there's Abbott—one of the very best Dividend Aristocrats in 2025. A great stock that we can now sell at a high. That’s exactly what we’re doing. We believe most of the 2025 upside is already priced in, and we’ve found an excellent replacement.

7 NEW BUYS

• Murphy USA MUSA 0.00%↑

• Equitable Holdings EQH 0.00%↑

• McKesson MCK 0.00%↑

• Watts Water WTS 0.00%↑

• Badger Meter BMI 0.00%↑

• Crane Co CR 0.00%↑

• Wabtec WAB 0.00%↑

In Short: Our Motivation
(We’ll discuss each new addition in more detail in upcoming updates!)

The Dividend Heroes in this update are:

• McKesson – A leading pharmaceutical distributor and healthcare services provider.

• Watts Water Technologies – Specializes in water quality and plumbing solutions for residential and commercial use.

• Badger Meter – Provides smart water metering and flow measurement solutions.

These are truly the crème de la crème in dividend growth.

We also find Murphy USA particularly interesting. The dividend increases every quarter, and we prefer a more retail-oriented energy company over a pure oil & gas producer like EOG.

• Murphy USA – Operates a large chain of gas stations and convenience stores, primarily near Walmart locations.
  The company combines strong dividend growth with massive share buybacks.

• Crane – An industrial company focused on engineered products and payment & fluid handling systems. Since the spin-off, Crane has increased its dividend by a solid double-digit percentage annually. We like the business model and fundamentals (check that balance sheet!) and are excited to add it to the portfolio.

• Wabtec – A key supplier of equipment, systems, and software for freight and passenger rail transportation.

• Equitable Holdings – A financial services firm focused on retirement, wealth management, and insurance.

Alle new buys are strong additions for diversification and double-digit dividend growth.

Disclaimer: The information provided here is for informational purposes only and should not be considered financial advice. Investors should conduct their own research or consult with a financial advisor before making any investment decisions.