The landscape of dividend growth typically witnesses a notable surge in the first quarter of the fiscal year, coinciding with many companies concluding their fiscal year and gearing up for shareholder meetings. For the first quarter of 2025, while growth was discernibly slower, it continued to align with market expectations amidst ongoing economic uncertainties. Despite these challenges, companies did not halt their dividend increases, although the pace of growth was somewhat restrained, reflecting cautious forward commitments.

Howard Silverblatt, a Senior Index Analyst at S&P Dow Jones Indices, maintained a cautiously optimistic outlook regarding the overall trajectory for dividends in the current economic climate. He acknowledged the prevailing uncertainties but emphasized the positive momentum in dividend distributions.

Recent data from S&P Dow Jones Indices revealed that 758 companies raised or initiated dividends in the first quarter of 2025. This figure represents a slight decline from the 796 companies that did so during the same quarter of the previous year, translating to a year-over-year drop of 4.8%. However, the total value of these dividend increases reached an impressive $19.5 billion for the quarter. Over the 12-month period concluding in March 2025, a total of 2,412 companies raised their dividend payments, just edging out the 2,411 companies from the same period a year before. The cumulative value of these dividend hikes amounted to $68.2 billion, marginally surpassing the $68.1 billion recorded during the prior year.

The report further indicated that overall dividend payments experienced an increase of approximately 6% to 7%. While this growth rate is commendable, it slightly falls short of the pre-2025 expectations of 8%. In comparison, dividend payouts had risen by 6.4% in 2024 and 5.1% in 2023.

In terms of U.S. domestic common stocks, S&P Dow Jones Indices reported a net dividend increase of $15.3 billion in the first quarter of 2025, marking an improvement from the $11.7 billion increase observed in the preceding quarter. Over the 12 months up until March 2025, dividend hikes totaled $68.2 billion, slightly above the $68.1 billion from the previous year. On a positive note, dividend cuts saw a significant reduction, totaling $15.6 billion compared to $25.2 billion in the prior 12-month period.

The popularity of dividend-paying stocks among investors can be attributed to their strong historical performance, which has encouraged many companies to either maintain or raise their dividend payouts or even introduce new dividend policies. This sustained interest highlights the importance of dividends as a crucial component of total investment returns.

In our recent analysis, we published a list of the ten dividend stocks with sustainable payout ratios. Among these, we take a closer look at Dover Corporation (NYSE:DOV) and how it measures up against other leading dividend stocks with sustainable payout ratios.

Even amid cautious economic forecasts, analysts continue to express positivity regarding dividend stocks. They point to the fact that U.S. companies are well-positioned to uphold their payouts, thanks in large part to their substantial cash reserves. A financial planning firm based in Illinois, Nuveen, has noted that a growing number of companies might soon implement or enhance dividend policies, supported by the current cash-rich environmentpotentially driving stronger-than-anticipated dividend growth in 2025.

The report further highlighted that as of September 30, 2024, corporate cash holdings stood at an impressive $1.8 trillion, nearing the highest levels observed in the past two decades. With equity valuations currently exceeding historical averages, companies are likely to favor increasing dividend payments as a means of returning value to shareholders rather than opting for stock buybacks, which may appear less appealing in this higher-valuation context.

Analysts often regard a payout ratio within the range of 30% to 50% as the optimal benchmark. This range indicates that a company is returning a significant portion of its earnings to shareholders while simultaneously retaining enough profits to reinvest in its operations and support future growth.

Dover Corporation (DOV) stands out as one of the top dividend stocks with sustainable payout ratios, illustrating the company's commitment to maintaining a healthy balance between shareholder returns and growth reinvestment.

Dover Corporation, based in Illinois, manufactures a diverse range of industrial equipment and components. The company continues to adapt to changes in the industrial landscape, refining its strategies to align with market conditions. Investors and analysts closely monitor Dover's financial results and strategic initiatives, keen to assess its current standing and future potential.

In the fourth quarter of 2024, Dover Corporation reported $1.9 billion in revenue, reflecting a modest 1% increase year-over-year. However, GAAP earnings from continuing operations experienced an 8% decline to $238 million, while GAAP diluted earnings per share (EPS) decreased by 7% to $1.72. Conversely, on an adjusted basis, earnings from continuing operations remained steady at $305 million, with adjusted diluted EPS increasing slightly by 1% to $2.20.

By the end of the quarter, Dover Corporation boasted a robust cash balance exceeding $1.8 billion in cash and cash equivalents, a significant rise from $400 million recorded the previous year. The company generated over $1 billion in operating cash flow throughout the year, underscoring its strong financial health. As of April 17, it offers a quarterly dividend of $0.515 per share with a dividend yield of 1.28%, and it is recognized for having one of the longest streaks of dividend growth in the market, currently extending over 68 years.

In conclusion, while Dover Corporation ranks third on our list of the best dividend stocks with sustainable payout ratios, we believe that there are other undervalued dividend stocks with even greater potential for delivering higher returns, particularly within shorter time frames. For investors seeking compelling opportunities, we recommend exploring deeply undervalued dividend stocks that trade at lower price-to-earnings ratios and exhibit robust earnings growth.

Explore our report on the most promising dividend stocks to consider for your investment portfolio.

Disclosure: None. This article was originally published by Insider Monkey.