I write about, make videos on, and personally invest in high-quality dividend growth stocks. Why? Because they’re superior.
High-quality dividend growth stocks represent equity in world-class businesses. These companies are providing society with the products and/or services it demands.
In doing so, they’re making a lot of money. Not just that, though. They’re also sending a lot of that money back to their shareholders in the form of safe, growing dividends.
These dividends can form the backbone of a passive income strategy that allows you to eventually become financially independent.
Indeed, I now live off of the safe, growing dividend income my portfolio produces for me – and I’m still in my 30s.
As great as these stocks are in general, some are particularly great. That’s right.
Some dividend growth stocks are so high quality, I’d call them “forever” stocks. Stocks you can plan on holding for the rest of your life after you buy them.
These companies have leading positions in industries that have almost unlimited demand. They’re some of the best companies in the world.
Today, I want to tell you about five high-quality “forever” dividend growth stocks. Ready? Let’s dig in.
Forever Dividend Growth Stock #1: Apple (AAPL)
Apple is a multinational technology company with a market cap of $2.9 trillion.
It’s amazing that this company is coming up on a market cap of $3 trillion. I remember when they crossed a $1 trillion market cap – in 2018 – and a lot of people thought that was the top for them. They’d be too big to grow. Yet here they are, less than five years later, coming up on triple that number. This has been one of the best companies in the world for years. It’s still one of the best companies in the world. And it’ll likely remain one of the best. That’s partially evidenced by their commitment to paying a growing dividend.
Apple has increased its dividend for 10 consecutive years.
And guess what? I’m fully confident that Apple will increase its dividend for another 15 straight years and become a Dividend Aristocrat. Their five-year dividend growth rate of 9.7% is great, and well in excess of inflation. On the other hand, the yield of 0.5% leaves a lot to be desired. However, the yield is so low largely because the stock has skyrocketed – it’s up 36% this year alone. So it’s tough for shareholders to complain. With an extremely low payout ratio of only 15.7%, and over $60 billion in cash on the balance sheet, the dividend is almost guaranteed to continue growing for years to come.
This isn’t a stock to trade. It’s a business you own. As I’ve said so many times, this a “must-own” name for serious dividend growth investors.
That’s right. I called Apple a must-own back in March, when it was priced around $120/share. As it always happens whenever I bring up Apple, a lot of the commentary complained about the high valuation and low yield. Yet here we are, less than a year later, and shares are now around $175/each. This is a “forever” stock because technology is going to be with us forever. And increasingly so.
Yes, Apple is providing the tech we want today – think smartphones, computers, tablets, etc. But they’re also skating to where the puck is going and already planning for the tech of tomorrow – think AR, VR, the metaverse, and self-driving vehicles. This is one of the safest dividends I know of, and the company is about as sure a long-term bet as it gets. If you buy stock in Apple, plan on keeping it forever and letting the company compound your wealth and passive dividend income at a high rate for the rest of your life.
Forever Dividend Growth Stock #2: American States Water (AWR)
American States Water is an American water and electricity utility company with a market cap of $4 billion.
I’ve said this before, but I believe water will be the liquid gold of this century, much in the way that oil was the liquid gold of the last century. And companies involved in water – be it infrastructure, delivery, storage, etc. – will do well as a result of that exposure. This obviously includes American States Water, which is a water utility company. What makes this name really stand out to me is their exceptional dividend growth track record.
This company has increased its dividend for 67 consecutive years.
That’s the longest dividend growth streak in the world. No company has been more consistent or reliable with delivering ever-higher dividends to shareholders. And why wouldn’t they be? What else is as consistent or reliable as the literal thirst for water? The 10-year dividend growth rate is 9.4%, which is way higher than inflation. Of course, you want to see a fairly high dividend growth rate when considering the stock’s low-ish yield of 1.5%. But with a moderate payout ratio of 57.5%, this dividend is positioned to continue growing as consistently and reliably as it has been for the last seven decades.
What could be more forever than water?
Humans need water to survive. We can’t live without it. And the great thing about a water utility is that there’s almost no obsolescence risk. You can’t invent a new water. When I think of a forever stock – a super long-term investment – I want to be able to sleep at night for decades to come, knowing that it’s highly, highly unlikely they’ll go out of business. And when I think about investing in water, I sleep soundly with sweet dreams.
Forever Dividend Growth Stock #3: Johnson & Johnson (JNJ)
Johnson & Johnson is a global healthcare conglomerate with a market cap of $442 billion.
This has been one of my absolute favorite high-quality dividend growth stocks for more than a decade now. It was a great company when I first started investing in 2010. It’s still a great company today. And I see nothing that will change that in the future. If anything, with their plans to spin off the consumer products side of the business to better focus on pharmaceuticals and medical devices, Johnson & Johnson is arguably going to be better than ever. And that’s a big statement to make. After all, this is a company with one of the most impressive dividend resumes out there.
This company has increased their dividend for 59 consecutive years.
Just think about that. Think about the level of quality a company needs to have in order to hand out ever-larger dividends for nearly six straight decades. I mean, there are a lot of companies out there that don’t even last sixty years, let alone being able to hand out bigger and bigger dividends, year in and year out, like clockwork. But that’s why this is Johnson & Johnson, and that’s why I’m doing a write- up on it.
It’s in the upper echelon as a Dividend Aristocrat for good reason. The 10-year dividend growth rate of 6.6% is solid, but it’s not as high as what you get with Apple. However, the stock yields a much higher 2.5%. This is a pretty compelling balance between yield and growth. And the payout ratio is only 43.3%, based on midpoint adjusted EPS guidance for this fiscal year. Plus, they’re one of only two companies in the world with a AAA credit rating from S&P, showing how strong and flexible the balance sheet is. So even after nearly 60 years of ever-higher dividends, the company has plenty of financial room to continue this.
A diversified healthcare conglomerate is a no-brainer in a world where healthcare is in secular growth mode.
Because humanity is growing bigger, older, and richer, you have an expanding pool of potential customers for the very healthcare products that Johnson & Johnson provides. I simply cannot imagine anything other than a future world, 30 or 40 years from now, in which more older human beings with more discretionary income will demand, and be able to afford, quality healthcare.
It’s a straight line from demographic prosperity to Johnson & Johnson’s prosperity. I’ve owned shares in Johnson & Johnson for many years. And I’ve never once stressed out about it. When you own blue-chip stocks like Johnson & Johnson, you don’t have to sit and babysit them. And when you think about owning something forever, that’s exactly what you want. Because it’s just not sustainable to carefully watch and stress out about an investment for decades.
Forever Dividend Growth Stock #4: Realty Income (O)
Realty Income is a triple net lease real estate investment trust with a market cap of $39 billion.
Real estate isn’t going anywhere. Well, it’s technically going somewhere – up. As in, up in value and income production potential. After all, we have one planet with limited land. So there’s a natural lid on how much real estate we can possibly put up. Of course, even a great business model can be a poor investment if it’s not being run correctly. No need to fear about that here, though, since Realty Income has proven itself to be a blue-chip gem for long-term dividend growth investors. You can see that clearly show up in the dividend.
Realty Income has increased its dividend for 28 consecutive years.
That track record of 28 straight years of ever-higher dividends dates right back to the company’s IPO in 1994. So they’ve been paying growing dividends right from the start. But wait, there’s more. This Dividend Aristocrat has increased the dividend 114 times since going public, with 618 consecutive monthly dividend payments throughout its 52-year operating history.
That’s right, this is a dividend that’s paid monthly. In fact, the company has officially trademarked itself as the “The Monthly Dividend Company”, so you know how serious they are about providing dependable, growing monthly dividend income to shareholders. With a 10-year DGR of 4.9%, and a current yield of 4.3%, it’s a rather compelling combination of yield and growth in a world starved of both. With a payout ratio of 82.6%, based on 2021 AFFO per share guidance at the midpoint, the dividend is secure.
I believe in the long-term viability of commercial real estate, and I believe in Realty Income.
Realty Income has a diversified portfolio of over 11,000 properties with are leased out on long-term, net lease agreements to approximately 650 clients in 60 different industries, and spread out across all 50 states in the US, Puerto Rico, the UK, and Spain. I’m talking about convenience stores, wholesale shopping clubs, gyms, shipping centers, pharmacies, etc.
Basically the everyday businesses that make up countless communities. I’ve been hearing about the demise of commercial real estate for as long as I’ve been investing. That’s 10+ years now. Supposedly, the internet was going to make commercial real estate obsolete. Instead, all Realty Income has done over the last decade is expand the property portfolio, grow the profit, increase the monthly dividend, and compound the stock at a 12% annual rate. This is a “forever” dividend growth stock that one can sleep well at night owning.
Forever Dividend Growth Stock #5: Waste Management (WM)
Waste Management is an American waste management company with a market cap of $68 billion.
The investment thesis here is in the same vein as American States Water, in the sense that you have a company providing something that humanity cannot do without. We’ve needed waste management solutions since the early innings of society, and I see no reason to conclude that we’ll need it any less 20, 30, or 40 years from today. Look, I get it. Trash isn’t exciting. But the dividend sure is.
Waste Management has increased its dividend for 19 consecutive years.
And as sure as I’ll be producing waste for the rest of my life, I’m sure that Waste Management will continue paying a growing dividend. The 10-year dividend growth rate of 5.6% isn’t huge, nor is the yield of 1.4%. This isn’t the kind of stock that’ll wow you or make you rich tomorrow. Instead, it’s a slow, steady, sure compounder based on a business model that is about as bulletproof as it gets.
Indeed, this stock has compounded at more than 20% annually over the last decade, so it’s been a monster. Plus, they just increased the dividend yet again only weeks ago – this time by 13%! With a payout ratio of 63.1%, even after that big dividend increase, the dividend is headed higher along with the world’s trash pile.
If you want a sure bet, where you almost can’t lose over the coming decades, it’s tough to beat Waste Management.
This is a “forever” dividend growth stock because humanity will forever be producing waste and needing this waste to be managed. It’s a simple concept. So many investors try to complicate long-term investing. But it’s not necessary to do that. In fact, it’s the opposite – the simplest business models have been some of my most successful investments over the years.
If I suddenly fell asleep for the next 30 years, I have zero doubt that Waste Management would still be around when I woke up. In fact, I’m fully confident that it would be a bigger, more profitable company paying out a significantly larger dividend. This is the kind of stock that you buy, stick in a digital drawer, and then forget about for a few decades while it makes you rich.
— 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.
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Source: Dividends & Income