Rising Treasury yields, a firm May jobs report with 172,000 roles added, and geopolitical tension around Iran have put interest rates and inflation expectations back at the center of the market conversation. In this kind of rate focused setting, reliable dividend growth and solid balance sheets can matter even more for investors who want steady income potential without taking on unnecessary surprises. This article highlights 3 dividend growth stocks from developed markets that are exposed to these macro shifts and may be positioned to benefit. It also explains how the latest Fed expectations could reshape the risk and reward trade off for each one.

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CVB Financial (CVBF)

Overview: CVB Financial is a California based bank holding company for Citizens Business Bank that focuses on serving small and mid sized businesses, agriculture clients, municipalities and individuals with a mix of traditional banking, commercial lending, equipment and vehicle leasing, and wealth and trust services.

Operations: CVB Financial generates all of its US$519.4 million in revenue from banking activities in the United States.

Market Cap: US$3.6b

Some investors looking for steadier income potential in a higher rate setting may find CVB Financial worth a closer look, as it combines a long history of regular dividend increases with a focus on business clients that can benefit from higher yields on its loan book. Forecasts in the market currently indicate expectations for strong earnings and revenue growth, supported by fee rich specialty banking and wealth services. At the same time, the stock trades on a higher P/E than many US bank peers and has a concentrated exposure to California commercial real estate, which introduces credit and valuation risk. How those trade offs stack up, especially after the recent Heritage merger and leadership changes, is a key consideration for investors.

CVB Financial’s mix of dividend growth and fee rich specialty banking has investors focused on earnings potential, but the real story sits in the analyst forecasts for CVB Financial and how it interacts with that California loan exposure.

Cummins (CMI)

Overview: Cummins is a global power solutions company that makes engines, power systems and related components for trucks, industrial equipment, data centers and other critical infrastructure, and also supplies electrified power systems such as batteries, fuel cells and electric drivetrains.

Operations: Cummins generates its revenue mainly from its Engine segment at US$10.8b, Distribution at US$12.6b, Components at US$10.0b and Power Systems at US$7.8b, partly offset by intersegment eliminations of US$7.7b, with the United States contributing US$18.7b of sales and other countries a smaller share.

Market Cap: US$92.8b

Investors looking for dividend-focused companies that can potentially hold up in a higher rate, higher inflation setting may find Cummins worth attention, as it combines a long operating history with exposure to data center power, emissions-driven engine upgrades and cleaner power solutions through its Accelera segment. Analyst estimates currently indicate that earnings growth is expected to exceed that of the broader US market, supported by power systems demand and cost discipline, while return on equity is currently reported at 20.8%. At the same time, the stock trades on a premium P/E, faces legal and regulatory overhangs, and remains exposed to cyclical truck markets and tariff uncertainty. How this trade off looks once you weigh the appeal of its income profile against those risks is a key focus for further analysis.

Accelera, data center power and a 20.8% return on equity hint that Cummins’ story is still evolving, but the real twist sits inside the analyst forecasts for Cummins

First Merchants (FRME)

Overview: First Merchants is a Midwest regional bank that offers everyday banking, business lending, mortgages and cards, alongside wealth management and financial planning, serving consumers and commercial clients across Indiana, Ohio and Michigan through branches and digital channels.

Operations: First Merchants generates US$637.8 million in revenue from Community Banking activities in the United States.

Market Cap: US$2.5b

First Merchants sits in a sweet spot for income focused investors, combining a 3.55% dividend that has been raised five times in five years with forecasts for earnings and revenue growth that are expected to outpace the wider US market. Higher rates can support loan and securities yields, and management has been active in putting excess liquidity to work. However, the recent decline in net income and higher net charge offs show that credit cycles still matter. The stock trades at a discount to some estimates of fair value, yet carries a modest 7.4% return on equity, so the real question is whether strong growth expectations, buybacks and a solid reputation for customer trust are enough to compensate for that profitability gap and recent earnings pressure.

First Merchants’ mix of a 3.55% dividend, growth expectations and a modest 7.4% return on equity hints at a story that is still taking shape, but the real tension sits in the analyst forecasts for First Merchants that could explain whether recent net income pressure is a temporary setback or the start of a deeper shift investors are not yet pricing in.

The three stocks covered here are just a starting point, and the full Dividend Growth Stocks screener surfaces 39 more companies from developed markets with dividend growth track records, solid balance sheets and equally compelling income stories. Use Simply Wall St to analyze those companies side by side, identify the specific catalysts and balance sheet strengths that matter to you, and focus on the dividend growth stocks that best fit your highest conviction ideas.

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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.