These dividend growth giants have impressed investors in 2023 (and may deliver an encore in 2024).

Most dividend-paying stocks aim to increase their dividends at least once a year. The average growth rate of member companies is S&P 500 It has increased by about 6% per year over the past five years.

prologue (PLD 2.00%) and Equinix (EQIX 1.89%) It’s not average. Real estate investment trust (ritz) continued its trend of above-average dividend growth by impressing investors last year. There will be no problem holding an encore performance in 2024.

Various growth drivers

mainly Industrial REITs Prologis increased its dividend by 10% last year. This continued the trend of providing above-average dividend growth. Over the past five years, dividends have grown at an average of 12% per year, double the average for the S&P 500 and the REIT sector. That’s a strong growth rate for a company that offers an above-average dividend yield (2.7% compared to the S&P 500’s 1.5%).

The REIT should continue to grow its payout at an above-average rate beyond 2024. A big factor driving that view is Prologis’ implied rent growth. The warehouse owner expects same-store net operating profit for its existing portfolio to grow 7.5% to 8.5% annually over the next three years. A key driver will be lease expirations, which will allow the REIT to enter into new contracts at much higher market rates.

Additionally, Prologis will benefit from continued expansion of its portfolio. REITs have large land banks, giving them plenty of space to build additional warehouses or invest in higher-use projects like data centers. The company’s organic growth drivers (rent growth and development projects) alone require core funding of 9-11% per annum from operations (FFO) Growth rate per share over the next three years.

The company also has an elite balance sheet (and access to third-party capital), giving it a lot of flexibility for acquisitions. Over the past three years, M&A has contributed to FFO per share, increasing by 1.5% per year. Adding all this up, Prologis should be able to continue growing its dividend at a double-digit rate per year.

Strong intrinsic growth through dual upside catalysts

Equinix supercharged its dividend last year. leading Data Center REIT In February, payments were increased by 10%. This was followed in October by offering investors a whopping 25% raise.

The company has increased its dividend every year since converting to a REIT in 2015, raising its dividend by an average of more than 12% per year. Meanwhile, increased dividend yields over the past year have helped push it above 2.2% on average.

The data center operator is expected to continue delivering strong dividend growth in the coming years. Equinix expects to invest $3 billion annually through 2027 in organic capital projects to maintain and expand its global data center platform. These investments support expectations that sales will grow 8-12% annually, reaching $12 billion by 2027. This will drive annual adjusted FFO per share growth of 7% to 10%.

There is plenty of upside, as the plan doesn’t include M&A and artificial intelligence, two notable growth catalysts.AI).

Equinix has a long history of making value-enhancing acquisitions. Since 2018, we have created approximately $3 billion in incremental value through M&A. Meanwhile, AI can strengthen development plans. The company estimates that AI infrastructure could be a $60 billion market opportunity by 2026.

Equinix can deliver strong dividend growth even without considering these upside catalysts. The company currently anticipates underlying growth drivers and low levels. Dividend payout ratio (45% in 2023) will support dividend per share growth of more than 10% until at least 2027.

Above average earning potential

Prologis and Equinix have been great dividend growth stocks for several years. This trend should continue in 2024. This is good news for investors because dividend growth companies have historically delivered above-average total annual returns (10.2% compared to 7.7% for the average S&P 500 stock over the past 50 years). These characteristics make it a great dividend stock to buy for income and upside potential in 2024.