Dividend stocks have an undeniable allure for investors seeking to build long-term wealth and generate passive income.
Take a moment to consider the staggering figures associated with dividend payments.
Berkshire Hathaway, led by the legendary Warren Buffett, is projected to rake in an astounding $5.7 billion in dividends alone. Furthermore, research from Fidelity reveals that dividends account for approximately 40% of total stock market returns. These compelling facts underscore the remarkable potential that lies within dividend-paying stocks.
Whether you’re at the early stages of your investment journey or have a modest sum to allocate each month, dividend stocks offer an enticing avenue for long-term wealth creation.
In this blog post, we’ll delve into the world of dividend investing and present you with a list of top dividend stocks to hold forever. So, let’s explore these financial powerhouses that have stood the test of time and possess the potential to raise your investment game to new heights.
The Benefits of Dividend Investing
Dividend investing is a powerful strategy that offers distinct advantages over other investment approaches. At its core, dividend investing involves selecting stocks that consistently pay out a portion of their profits to shareholders in the form of dividends.
This approach provides investors with several key benefits.
Firstly, dividend stocks have the potential for compounding returns through dividend reinvestment. When dividends are reinvested back into the stock, they can purchase additional shares, leading to a larger dividend payout in the future. This compounding effect can significantly enhance long-term returns and accelerate wealth accumulation.
Moreover, dividend stocks tend to exhibit stability and reliability even during market downturns. While stock prices may fluctuate, companies with a history of paying dividends are often financially sound and capable of maintaining their dividend payments.
This stability provides a sense of reassurance to investors, especially during market volatility.
Additionally, the regular income generated from dividends can act as a cushion during challenging economic times. It offers a consistent stream of cash flow regardless of market conditions.
By embracing dividend investing, investors can unlock the power of compounding returns. This means that as dividends are reinvested, they can purchase additional shares, leading to larger dividend payments in the future.
Dividend Stocks To Hold Forever
1. Costco Wholesale
Annual Dividend Yield: 0.73%
Costco Wholesale is one of the most successful wholesale retailers. In the last decade, Costco generously rewarded its investors. In fact, the total return, which includes the change in stock price and dividends, has reached an impressive 459%. This outstanding performance has exceeded the returns of the S&P 500 benchmark by more than 250%.
From the outset, Costco’s quarterly dividend yield of $1.02 per share may not excite many investors. But, the dividend is expected to rise. Since 2004, the management has increased the payments annually.
Furthermore, Costco is known for its special cash dividends that they pay approximately every three years. For example, in 2020, Costco shareholders received a special cash dividend of $10 per share.
Also, Costco attracts investors because of its impressive track record of performance, consistent dividend payouts, and promising growth prospects.
In 2023, the company aims to open around 29 new warehouses, representing a growth of about 3% from its existing 848 sites as of February 12, 2023.
Furthermore, Costco is expected to raise its annual membership fees in the near future, adding more revenue. In the past, Costco typically increased membership fees every five-and-a-half years, with the last adjustment occurring in June 2017.
2. Waste Management
Annual Dividend yield: 1.7%
Industry: Waste disposal
As the name suggests, Waste Management is a business that takes care of your trash and recycling in Canada and America.
The stock has generated a total return of approximately 125% in the last five years.
The quarterly dividend payment is $0.70 per share or an annual dividend of 1.7%. Also, Waste Management has increased its dividend payments for the past 20 years.
For 2023, exciting prospects await the company. They are anticipating a substantial free cash flow of approximately $2.6 billion. Also, they are investing a considerable $1 billion into growth projects. This showcases Waste Management’s commitment to expansion and sets the stage for its future growth.
With such promising developments on the horizon, Waste Management emerges as an ideal stock to consider for investment.
3. Kraft Heinz
Annual Dividend Yield: 4.19%
Industry: Food company
Amidst the pandemic, Kraft Heinz thrived as customers shifted towards eating more meals at home and stocking up their pantries. Not only did the company outperform the market in 2022, but its shares also experienced a remarkable 14% increase while the S&P 500 declined by 13%.
It’s worth noting that one of the most successful investors, Warren Buffett, also holds Kraft Heinz in high regard.
With these positive indicators, it’s evident that Kraft Heinz is performing well and could prove to be a resilient choice for investors, particularly during times of economic downturn. Adding this stock to your portfolio indefinitely may be a wise decision.
Annual Dividend Yield: 0.8%
Industry: Information Technology
The tech giant Microsoft springs to mind when thinking of scale and power. Microsoft is known for providing software to help with workplace productivity worldwide.
For long-term investment, Microsoft is a contender. It’s one of the 35 largest corporations in the world when measuring its revenue. Although it offers a modest dividend payment, it’s set to increase its dividend payout.
Microsoft’s dividend stock is great if you’re looking for stability and scale in the long term.
In conclusion, dividend investing offers an attractive avenue for long-term wealth creation and creating passive income. The power of compounding returns through dividend reinvestment and the stability and reliability of dividend payments make dividend stocks a compelling choice for investors.
Costco Wholesale has been a standout performer in the wholesale industry, delivering a remarkable total return of 459% over the past decade. With plans for further expansion and potential increases in annual membership fees, Costco continues to position itself for future growth.
Waste Management, a leader in waste disposal, has shown impressive growth, with a total return of approximately 125% in the last five years. The company’s anticipated free cash flow and investments in growth projects further reinforce its potential for continued success.
Kraft Heinz, a renowned food company, offers a generous annual dividend yield of 4.19%. With its resilience during challenging times and the endorsement of investor Warren Buffett, Kraft Heinz presents an attractive option for long-term portfolio holdings.
Microsoft, a global tech giant, combines stability and scale with its modest yet growing dividend payout. As one of the largest corporations in the world, Microsoft offers investors a combination of growth potential and dividend income.
While this blog post has provided valuable insights into dividend stocks to hold forever, you need to conduct further research and consult with financial advisors before making investment decisions.
By adopting a long-term investment approach with dividend stocks, you have the potential to build sustainable wealth and enjoy the rewards of consistent income over time.
Asma is a freelance writer specialising in finance and business niche topics. Her experiences include working at one of the world’s oldest and largest asset management firms.
Apart from writing, Asma also enjoys reading about finance, business, and entrepreneurship.