These dividend growing stocks are ripe for the picking in 2024, Morgan Stanley says

Dividend growing stocks offer investors the ultimate of benefits: the prospect of rising income and stock price appreciation, Morgan Stanley found. "On average, dividend increases lead to outperformance and cuts portend lower returns," Todd Castagno, global valuation, accounting and tax strategist at the investment bank wrote in a Monday report.

"Companies with dividend increases outperformed those that cut their dividends by ~780 bps," or 7.8 percentage points. Dividend stocks are coming back into vogue in 2024, and they may see a tailwind once the Federal Reserve begins dialing back interest rates. That's because last year's high interest rate environment made Treasury yields competitive against other income paying assets.

"Equity investors are seeking durable, higher yielding dividends as market volatility is expected to continue throughout the easing cycle," the strategist said. In his team's analysis, Castagno found that in the six months following a company's change to its dividend, those that announced an increase saw their stock prices outperform by an average of 3.1 percentage points, while those that cut their dividends underperformed by 4.7 points.

The Wall Street firm highlighted a handful of its stock ideas: large cap companies that have recently hiked their dividends. Tech isn't usually associated with dividend income, but some semiconductor related stocks made it to Morgan Stanley's list. Back in August, Lam Research announced that its board of directors approved a 16% increase to its quarterly dividend to $2 a share, up from $1.725 per share.

The company pays a dividend yield of 1.1% and has an average consensus rating of overweight, according to FactSet. Citi named Lam its No. 1 pick in the U.S. semiconductor industry on Wednesday. "Our 2025 peak earnings sensitivity analysis shows Buy rated LRCX/AMAT/KLAC have ~30% further upside using peak multiples which remain 20% below prior peak average," Citi analyst Atif Malik said.

Shares are up about 64% over the past 12 months. Broadcom , an artificial intelligence beneficiary whose shares are up 88% in the past year, was also highlighted on Morgan Stanley's list of dividend ideas. The stock offers a dividend yield of 1.9%. In December, Broadcom hiked its dividend 14% to $5.25 per share.

The stock is a favorite on Wall Street. Average consensus ratings are overweight, according to FactSet. Goldman Sachs last month highlighted Broadcom, among a list of semiconductor players, as being "well positioned to benefit from the ongoing build out of data center AI infrastructure." Finally, Mondelez International , maker of Sour Patch Kids candy and Oreo cookies, made it to Morgan Stanley's list of dividend growers.

The stock had an underwhelming performance in 2023, rising less than 9%, but Wall Street analysts have a consensus buy rating on the packaged foods giant, according to FactSet. Morgan Stanley's Pamela Kaufman sees upside to earnings per share at Mondelez, and the firm recently raised its target price to $78 per share from $74.

"We are [overweight] MDLZ given its favorable positioning heading into 2024," the bank said, citing Mondelez's competition in "attractive" categories in developed and emerging markets and its "strong global and local brands with demonstrated pricing power." Last July, Mondelez raised its quarterly dividend by 10%.

The company offers a dividend yield of 2.3%. Other names that made Morgan Stanley's list of companies that have raised their dividends include Accenture , Microsoft , Marathon Petroleum and D.R. Horton ..