Dividends are a leading reason to buy a stock because the stock pays you to own it. Growing dividend distributions are more valuable than those that aren’t; by extension, distributions growing faster than average are even more valuable. Or so goes the theory. This is a look at the four S&P 500 stocks with the hottest three-year distribution growth and whether they are a buy, sell, or hold. 

Morgan Stanley Tops the List With 32% Dividend Growth in 3 Years: Hold

Morgan Stanley (NYSE: MS) is the fastest-growing dividend on Wall Street. The company kicked its dividend into high gear in 2021 and is sustaining a solid growth pace today. The payout has increased by more than 30% in the last three years because of the accelerated growth in 2021, but the growth pace has slowed. The last two increases are strong, nearly 11%, but not 30%. 

Investors can expect increases to continue at this pace because of earnings quality and the growth outlook. Revenue growth has also slowed, but it is still sound. The consensus for this year is for a low-to-mid-single-digit advance and for the margin to widen. Analysts rate this stock a Hold and see it advancing less than 5% at the midpoint. The consensus target is up compared to last year, but the trend has flattened for the last quarter and provides no tailwind for the market.

Goldman Sachs Stock Is the 2nd Fastest Growing Dividend on Wall Street: Hold

Goldman Sachs's (NYSE: GS) dividend is similar to Morgan Stanley's. Dividend growth accelerated in the wake of the pandemic but has slowed since. The payout has increased more than 30% in the last three years, but the last two increases were in the 10%-12% range, where the next will likely fall. The differences are the payout ratio and the yield, which are lower. 

Goldman only pays about 30% of its earnings, and the yield is correspondingly lower, about 2.45%, with shares near record highs. Another difference is the analysts' sentiment. The analysts rate this stock as a Moderate Buy but view it as valued fairly. The latest updates are leading to the high end of the target range, but the market may have difficulty getting there without another catalyst. That could be the FOMC decision or earnings due in July. 

Thermo Fisher Science Is Strategically Increasing Distributions: Hold

Thermo Fisher (NYSE: TMO) is the 3rd fastest-growing company on a three-year basis, increasing its distribution by nearly 18% annually. Among the differences with this payout are that the pace of increase can vary from year to year, either faster or slower, and that the pace of growth tends to run hotter, above 12%, over the long term, and it is sustainable. The company is paying less than 10% of its earnings, but there is a catch: the yield is very low. The yield is so low that it is little more than a token gesture that allows dividend-only investment funds to buy in.

Income investors looking to buy this stock for its distribution growth will be disappointed by the yield of about 0.25%. Analysts are another headwind for this market. The 18 tracked by MarketBeat rate the stock at Moderate Buy but see it advancing only 5% at consensus, and the consensus target has been trimmed since last year. 

Oracle Accelerates Dividend Growth: AI Is in the House: Buy

From the dividend growth perspective, Oracle (NYSE: ORCL) is the most attractive S&P 500 stock. The company pays an average of 1.35% in yield but is growing the distribution at a 15% CAGR and growth is accelerating. The pace of growth hit 25% last quarter and may sustain at a high level for the next few years due to the low 30% payout ratio, an expectation for earnings growth, and the tailwind provided by AI. 

Oracle is among the leading players in generative AI due to its position in the cloud and AI infrastructure. This position should drive growth over the next five to ten years as the industry matures and its business completes the shift to cloud-based services. Analysts rate Oracle a Moderate Buy and see it advancing 5% at the consensus midpoint, enough to set a fresh all-time high.