I’ve been a dividend growth investor for more than 10 years. And what’s it done for me?

Well, how about allowing me to achieve financial freedom in my early 30s? How about giving the ability to quit my job at only 32 years old? How about giving me the chance to travel the world and even live in a foreign country?

Yeah, investing in high-quality dividend growth stocks has totally changed my life. See, these stocks represent equity in world-class enterprises.

World-class enterprises that are producing reliable, rising profits by selling the products and/or services the world demands. And they reward their loyal shareholders with reliable, rising dividends – which are funded by the reliable, rising profits.

The world demands stuff every day. And regular people like us can invest in this global economic ecosystem and financially benefit from it. Now, some dividend growth stocks are better than others. Not every business is equal. Not every stock is equal.

Some dividend growth stocks are practically legendary at this point. And building a portfolio around these stocks can set you up for incredible long-term success.

Today, I want to tell you about three dividend growth stocks that are the kind you buy and then hold forever. Ready? Let’s dig in.

Buy and Hold Forever Dividend Growth Stock #1: Apple (AAPL)

Apple is a multinational tech company with a market cap exceeding $2.4 trillion.

What can be said about Apple that hasn’t already been said? It’s beyond legendary at this point. It’s the largest company in the world by market cap. And rightfully so, in my opinion.

Almost everyone you know is using an Apple product.

Be it an iPhone, an iPad, or a Mac, you’d be hard-pressed to find people in your life that don’t use something made by Apple. Not only that, this has become an “everything” company. It’s not just electronics. Apple is in communication, entertainment, payments, health, gaming, shopping, etc. There are even rumors it’s moving into mobility with its own car. It’s way beyond a tech company now.

Once you buy Apple stock, plan on holding it forever.

If you do this – if you buy Apple stock and plan on it holding it forever – you’ll be in great company. Guess who else has bought a ton of Apple stock with the intention to hold forever? None other than the legendary buy-and-hold billionaire investor Warren Buffett. The common stock portfolio he controls through his conglomerate Berkshire Hathaway owns more than 887 million shares of Apple, worth about $130 billion. It’s the largest position in his portfolio. He loves this stock.

Of course Buffett loves Apple stock. Why wouldn’t he?

Buffett loves growing dividends, just like I do. Speaking of which, Apple has increased its dividend for nine consecutive years. But don’t let that short track record fool you. They’re just getting started with it. I have zero doubt that this will be a Dividend Aristocrat one day. The five-year dividend growth rate of 9.4% is rewarding patient, long-term investors who can get over the fact that the stock yields just 0.6%. And with nearly $100 billion in total cash on the balance sheet and a very low payout ratio of 17.2%, you can count on plenty more dividend increases for many years to come.

Apple is a compounding machine. It’s a force of nature.

The stock is up more than 450% over the last five years. Investors who get stuck on the 0.6% starting yield are missing the forest for the trees. It’s the growth in the dividends and the growth in the stock that you have to consider while you zoom out and look at things from a wide angle. This is the kind of stock that you can put away in a drawer for a generation and let it create magic for you. With the P/E ratio approaching 30, it’s not cheap here. But I don’t think I’ve ever seen this stock at a valuation that I’d call “cheap”. At any rate, get your hands on some as soon as you think the opportunity presents itself. This really is a buy-and-hold-forever dividend growth stock that can be part of the core of a diversified dividend growth stock portfolio.

Buy and Hold Forever Dividend Growth Stock #2: Johnson & Johnson (JNJ)

Johnson & Johnson is a global healthcare conglomerate with a market cap of $456 billion.

How do you think Johnson & Johnson became a $456 billion company? They did that by providing the world with the medical devices, pharmaceuticals, and consumer products it demands. And that’s the same way they’ll become a $500 billion company and then a $1 trillion company.

Johnson & Johnson may as well be renamed Quality & Quality.

Because every single aspect of the business is synonymous with quality. They’re one of only two companies in the world with a AAA credit rating from Standard & Poor’s. Net margin is routinely in the 20% range. Return on equity is over 20%. Revenue and profit grow in a secular manner, like clockwork, year after year after year. That’s because the demand for high-grade healthcare is only growing year after year after year. And the dividend?

This is a company that has increased its dividend for 59 consecutive years.

There are only a handful of companies in the whole world with that kind of track record. This time period spans all kinds of trouble – wars, recessions, upheaval, and even a global pandemic you might have heard of. You simply cannot increase your dividend for almost 60 straight years without doing almost everything right across the entire business. With a 10-year dividend growth rate of 6.5% to go along with the yield of 2.5%, this one is right in that sweet spot where you balance yield with growth. And with the payout ratio at only 44.4%, based on the midpoint of this fiscal year’s adjusted EPS guidance, the dividend is covered handily.

I’ve never heard of an unhappy Johnson & Johnson shareholder.

What is there to be unhappy about? The market-beating yield? The inflation-beating dividend growth that consistently comes in at between 6% and 7% per year? A low-risk stock that’s nearly tripled over the last 10 years? No, the most common things I hear from Johnson & Johnson shareholders is that they wish they had bought it sooner, or that they wish they would have bought more, or that they wish they wouldn’t have sold some of it.

If you install shares of Johnson & Johnson in your portfolio, do yourself a favor and plan on holding those shares forever.

The world is only getting bigger. We had a global population of around 1.6 billion in 1900. We’re now over 7.5 billion. We’ll be at 8 billion soon enough. Simultaneously, the average person is becoming wealthier. On top of it all, the average lifespan is becoming longer. There is no future in which more people who are richer and living longer will demand less high-grade healthcare. And that bodes well for Johnson & Johnson. The stock’s current P/CF ratio of 17.7 is basically right in line with its five-year average of 17.4. So this stock looks reasonably valued. If you buy Johnson & Johnson shares, do plan on holding them forever.

Buy and Hold Forever Dividend Growth Stock #3: PepsiCo (PEP)

PepsiCo is a multinational food and beverage company with a market cap of $212 billion.

What is something that all humans have in common? Yep. We all have to eat. That’s a basic fact of life. And while basic subsistence is all that’s necessary, people tend to want food that’s enjoyable, too. Well, that’s where PepsiCo comes in. They provide the foods and beverages that people all over the world enjoy.

PepsiCo has – get this – 23 different billion-dollar brands.

How many companies would love to have one brand that does more than $1 billion in sales every year? PepsiCo has more than 20 of them. This is a world-class food and beverage company that really has no rival. They have major competitors in food. And they have major competitors on the beverage side. But no company has been able to put both together quite like PepsiCo.

PepsiCo is feeding the world food and beverages. And they’re feeding their shareholders growing dividends.

Indeed, this company has increased its dividend for 49 consecutive years, with a 10-year dividend growth rate of 7.8%. As impressive as that already is, I’m confident they’ve got decades upon decades of more dividend growth to go. The stock also yields a market-beating 2.8%. Yeah, near-8% dividend growth and a near-3% yield. That is very nice. And with the payout ratio at 68.3%, based on this year’s core EPS guidance, the dividend is positioned to continue moving up.

Just think about what kind of investment you can own while also sleeping well at night.

Do you want to toss and turn thinking about what kind of news you might awaken to? Of course not. When you own a slice of PepsiCo, you own a slice of brands like Pepsi, Lay’s, Quaker Oats, Aquafina, and Doritos. Are consumers going to suddenly stop eating snack foods or drinking beverages? Of course not. There is almost no change in any of this stuff from day to day. Instead, the only real “change” shareholders can be excited about is the fact that PepsiCo is growing year after year by selling more products to more people at higher prices.

This is exactly the kind of high-quality dividend growth stock that an entire portfolio can be built around.

And it’s exactly the kind of high-quality dividend growth stock that you should plan on holding forever once you buy it. It’s a simple business model that anyone can understand. And it’s easy to take a look and see people all around you consuming their products. Why wouldn’t you want to profit from some of that?

With the stock trading hands for a forward P/E ratio of 24.8, based on this year’s guidance for core EPS, I wouldn’t say the stock is exactly cheap. On the other hand, the P/S ratio of 2.9 isn’t that far above its five-year average of 2.7. Waiting for a dip might not be a bad idea. But if you get a dip, and you buy the dip, strongly consider keeping those shares under lock and key for the rest of your life.

— Jason Fieber

P.S. If you’d like access to my entire six-figure dividend growth stock portfolio, as well as stock trades I make with my own money, I’ve made all of that available exclusively through Patreon.

Source: DividendsAndIncome.com

We’re Putting $2,000 / Month into These Stocks
The goal? To build a reliable, growing income stream by making regular investments in high-quality dividend-paying companies. Click here to access our Income Builder Portfolio and see what we’re buying this month.