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Dividend investing gives stock investors a path to appreciation and cash flow. These two forces can help individuals build wealth and cover expenses. Loading up on long-term dividend stocks can increase your long-term returns, but each stock poses risk. Knowing what to look for in a dividend stock can help you decide which ones make sense for your portfolio. This guide will walk you through the steps to identify a promising long-term dividen stock and offer some top picks for inspiration.
Quick Look at the Top Performing Long Term Dividend Stocks:
Deep Dive
Investing in long-term dividend stocks can increase your cash flow and capital gains. Dividend investing is less time-intensive than real estate, but you still have to pick stocks that align with your financial objectives. These are some long-term dividend stocks to consider.
1. NextEra Energy Inc. (NYSE: NEE)
| Ticker | Company | ±% | Price | Invest | ||
|---|---|---|---|---|---|---|
| NEE | NextEra Energy | 0.03% | $76.90 | Buy stock | ||
NextEra Energy is a leader in renewable energy that has raised its dividend for 30 consecutive years. The company’s earnings and revenue have grown nicely in recent quarters.
2. Visa Inc. (NYSE: V)
Visa’s dividend yield is below 1%, which doesn’t make it the best stock for dividend-income investors. However, dividend-growth investors will like to see that the company has more than doubled its quarterly dividend per share in the past five years. The financial services corporation makes money from many sources, including its credit and debit cards.
3. Broadcom Inc. (NASDAQ: AVGO)
Broadcom has grown like a tech stock while outpacing most stocks with its commitment to dividend growth. Shares have more than quadrupled over the past five years. Broadcom’s strategic position in the AI boom has helped the stock surge in recent months, but shares still have a 2% yield. Revenue and net income growth have been solid for many quarters.
4. JPMorgan Chase & Co. (NYSE: JPM)
| Ticker | Company | ±% | Price | Invest | ||
|---|---|---|---|---|---|---|
| JPM | JPMorgan Chase | 0.36% | $241.64 | Buy stock | ||
JPMorgan has endured economic cycles for over a century and is a durable blue-chip company. JPMorgan is the largest U.S. bank based on assets under management (AUM) and saw cash inflows during the regional bank scare earlier in the year. Consumers pool more of their money into big banks like JPMorgan when regional banks aren’t performing as well. Rising interest rates can create more pressure on smaller institutions and result in more consumers and investors turning to banks like JPMorgan.
5. Devon Energy Corp. (NYSE: DVN)
| Ticker | Company | ±% | Price | Invest | ||
|---|---|---|---|---|---|---|
| DVN | Devon Energy | 0% | $38.30 | Buy stock | ||
Devon Energy is an energy conglomerate involved in hydrocarbon exploration. The company has profit margins in the high 20% to low 30% range, which can support future dividend growth.
6. Microsoft Corp. (NASDAQ: MSFT)
Microsoft shares have more than tripled over the past five years. The tech conglomerate has several business segments, such as Azure, laptops and Xbox consoles and video games. Microsoft also made a big investment in OpenAI which gives it additional exposure to the growth of artificial intelligence.
7. Public Storage (NYSE: PSA)
| Ticker | Company | ±% | Price | Invest | ||
|---|---|---|---|---|---|---|
| PSA | Public Storage | 0% | $332.86 | Buy stock | ||
Public Storage is the largest self-storage company in the industry and owns over 2,900 facilities across the U.S. Many people need extra storage space for their prized items. The low cost of public storage combined with its importance for many people makes PSA more resistant to recessions. The company combines high cash flow with some appreciation.
8. Medtronic (NYSE: MDT)
Medtronic produces medical devices that address some of the most challenging health problems. The company has served over 74 million patients since it was founded in 1949.
Pros
Investing in long-term dividend stocks can allow you to capitalize on growing cash distributions and share price appreciation. Dividend-paying companies tend to have more resilience than unprofitable high-growth companies during economic downturns. The most reliable dividend stocks can continue paying and raising their dividends when the economy slows down.
Where to Buy
Investors can choose from several brokers to get started on their long-term dividend investing journeys. These are some of the top brokers to consider.
- Best For:Active and Global TradersVIEW PROS & CONS:Securely through Interactive Brokers’ website
- Best For:Global Broker for Short SellingVIEW PROS & CONS:securely through TradeZero's website
How to Choose
Investors can choose from several long-term dividend stocks. However, some are better than others, especially when it comes to your financial objectives. Here are some factors to consider before investing in long-term dividend stocks.
Dividend Yield
The dividend yield reflects how much money you will receive each year if you buy shares at the current market price. A higher dividend yield rewards investors with more cash flow right away. Lower yields generate less cash flow, but some low-yielding dividend stocks generate higher returns than high-yield stocks.
Track Record of Dividend Increases
Investors should look at a company’s dividend history and assess how frequently the company raises its payout. Dividend companies should raise their dividend at least once a year, as it indicates confidence to shareholders. It’s also important to analyze the growth rate. A corporation raising the annual dividend from $1 to $1.20 is a bigger statement than raising the annual dividend from $1 to $1.01. A declining dividend growth rate can be troublesome for long-term prospects.
The Company’s Financial Health and Profitability
A company’s financial health impacts its ability to offer the dividend, raise it over time and gain market share. Strong financials can also lead the stock price higher, resulting in asset appreciation. A company’s revenue and earnings trends can reveal a lot about the future direction of a dividend stock’s share price.
Dividend Payout Ratio
The dividend payout ratio helps investors gauge a dividend’s sustainability. This ratio measures the percentage of a company’s earnings that go toward the dividend. If a company makes $1 billion and gives out $700 million as dividends, the stock has a 70% dividend payout ratio. Higher dividend payout ratios are riskier and are indicative of maturing companies. Payout ratios can get especially dangerous if they hover over 80%. Dividend growth companies tend to have payout ratios between 20% and 50%, but these companies may start off with lower dividend yields.
Frequently Asked Questions
Are dividend stocks good for long-term investors?
Dividend stocks can be good for long-term investors. These stocks can offer consistent cash flow and asset appreciation.
How can I earn $1,000 a month in dividends?
Earning $1,000 per month is the equivalent of earning $12,000 each year. You then have to decide which yield is acceptable to you and perform the calculation. If you want a 4% yield, you will have to invest $300,000 to earn $12,000 each year ($1,000 per month).
How can I earn $3,000 a month in dividends?
You can earn $3,000 per month in dividends by investing often, reinvesting the dividend payments and waiting for companies to hike their dividends. Aiming for a higher yield can help you get to your goal faster, but you should look at a company’s financials to avoid high-risk investments with unsustainable dividends.
About Marc Guberti
Marc Guberti is an investing writer passionate about helping people learn more about money management, investing and finance. He has more than 10 years of writing experience focused on finance and digital marketing. His work has been published in U.S. News & World Report, USA Today, InvestorPlace and other publications.