US inflation sitting at 4.2% and now outpacing wage growth puts reliable income and pricing power back in the spotlight for dividend investors. With real wages shrinking and energy costs pressuring consumer spending, companies that have a track record of growing dividends from relatively solid financial foundations can look more appealing to those seeking steadier cash flows. This article walks through 3 dividend growth stocks from our screener that appear positioned to handle the current mix of higher prices, squeezed consumers and a cautious Federal Reserve, and explains how each might respond to these pressures on earnings and payouts.

Verizon Communications (VZ)

Overview: Verizon Communications is a large US telecom company that provides mobile, broadband and wired connectivity services for consumers, businesses and government, selling wireless plans, fixed wireless access, Fios fiber, and connected devices nationwide and in select international markets.

Operations: Verizon generates about US$139.1b in annual revenue, with roughly US$107.6b from its Consumer segment and US$29.2b from Business, almost entirely in the United States.

Market Cap: US$189.4b

For dividend investors unsettled by 4.2% inflation and shrinking real wages, Verizon Communications offers a combination of a high 6.24% dividend yield, a long record of steady payouts and a large US$189.4b scale in services that households and businesses tend to treat as essential rather than discretionary. At the same time, earnings have trended weaker in recent years and the company carries substantial debt, so higher interest costs and intense wireless competition are real pressure points. Recent moves into fixed wireless broadband, AI enabled cost savings and debt tender offers aimed at tidying the balance sheet are central to the story income focused investors are watching closely, but there is more to unpack on how resilient this cash flow really is under persistent inflation.

Verizon’s high 6.24% yield and essential services are only part of the story; the real test is how inflation, competition and debt costs interact across its 3 key rewards and 2 important warning signs

American Water Works Company (AWK)

Overview: American Water Works Company is a large US regulated utility that supplies water and wastewater services across 14 states, operating hundreds of treatment plants and over 55,000 miles of pipelines for around 3.6 million customer connections spanning households, businesses, public authorities and military installations.

Operations: American Water Works generates about US$4.8b in annual revenue from its Regulated Businesses and US$0.4b from Other activities, almost all within the United States.

Market Cap: US$24.4b

American Water Works sits squarely in the inflation conversation because water is essential, usage is relatively steady and regulators typically allow utilities to seek rate relief when costs rise. That can matter when CPI is at 4.2%, real wages are shrinking and energy driven input costs are rising, as hinted at in management’s comments about disciplined cost control, labor negotiations and regulatory filings. At the same time, investors need to weigh earnings growth that trails the broader US market, a dividend yield of 2.87% that is not well covered by free cash flow, and meaningful reliance on debt to fund up to US$48b of planned infrastructure spending. The recent Nexus acquisition spree, fresh rate case settlements and inflation dynamics together make American Water Works a utility dividend investors may want to examine more closely.

American Water Works is pushing hard on infrastructure and acquisitions while leaning on regulated returns and rate cases to do the heavy lifting. However, its balance of dividends, cash flow and debt is not as straightforward as it looks in headline figures, so it is worth checking the American Water Works Company financial health report

Sempra (SRE)

Overview: Sempra is a large US energy infrastructure company that owns regulated electric and gas utilities in California and Texas and develops LNG and related infrastructure through Sempra Infrastructure to serve customers in the United States, Mexico and select international markets.

Operations: Sempra generates about US$11.6b in annual revenue from Sempra California and around US$2.0b from Sempra Infrastructure, with small intersegment eliminations reducing the total slightly.

Market Cap: US$59.3b

Dividend investors looking for inflation resilience may find Sempra interesting because its regulated utilities and LNG assets are tied to essential energy demand, even as CPI at 4.2% squeezes real wages and raises funding costs. Recent milestones such as the Port Arthur Pipeline Louisiana Connector entering service, first LNG production at ECA Phase 1 and ERCOT backed Texas transmission projects point to long dated, regulated and contracted cash flows that can support dividend growth. However, earnings have recently faced margin compression and the dividend is not well covered by free cash flow. Heavy reliance on debt funding and exposure to regulatory and climate risks mean this is not a simple bond like utility story. This is one reason why a closer look at how Sempra balances growth, funding and dividends matters for income focused portfolios.

Sempra’s regulated projects and LNG build out could be reshaping its income story faster than the headline dividend suggests, and the full picture only comes through in the 1 key reward and 4 important warning signs (1 is major!)

The three stocks covered here are only a starting point, as the full dividend growth screen highlights 37 more companies with equally compelling income stories and financial profiles across sectors and regions that could matter for your portfolio. To identify the highest conviction dividend growth opportunities, use Simply Wall St to filter the Dividend Growth Stocks screener by the specific catalysts, payout ratios and narrative drivers that fit your own income goals.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.