The next American stimulus package is all but signed. And if you’re an American, a new round of stimulus checks are all but guaranteed to come your way soon.
We’re talking about $1,400 per adult here, which is not chump change. But what if you could turn that $1,400 into much, much more money? What if you could turn that $1,400 into a golden goose that lays ever-more golden eggs? What if you could invest that $1,400 for the long haul, grow your wealth, and build passive income?
Well, that’s what I’m talking about today.
I’m going to show you two high-quality dividend growth stocks that could turn that $1,400 into thousands of dollars over time. Better yet, both of these stocks offer market-beating yields that are growing at inflation-beating rates.
That means you get to have your cake and eat it, too. Let’s dig in.
Let’s say you want to invest that $1,400 into two stocks evenly – that’s $700 per stock. These two stocks could each turn $700 into multiples of that number, all while providing safe, growing dividend income along the way.
Dividend Growth Stock #1: Lockheed Martin (LMT)
The first stock is Lockheed Martin Corporation (LMT). It’s the world’s largest defense contractor. This high-quality dividend growth stock is a long-term compounder. The business practically prints money.
This $92 billion (by market cap) defense company is classically thought of as an industrial play. But I’d argue it’s a tech company at this point. Yet the stock is valued as if it’s stodgy, slow-growth consumer staples business. It’s nonsensical.
The stock’s P/E ratio is below 14. That’s less than half of the broader market’s earnings multiple. The five-year average P/E ratio on this stock is over 23.
And even after a recent period of languishing, the stock has still delivered a compound annual rate of return of 19.66% over the last 10 years, including reinvested dividends, turning $700 into $4,208.
That might not get the Reddit YOLO crowd pumped up, but sextupling your money in only 10 years on a low-risk business sure gets me excited. Better yet, Lockheed Martin has been pumping out safe, growing dividends to their shareholders like clockwork.
The stock yields a market-beating 3.2%. And that’s paired with a 10-year dividend growth rate of 14%. That’s a doubled dividend in about five years.
$700 is nice. $4,200 is nicer. Collecting safe, growing dividend income on top of that makes it the nicest of all.
I think there’s a very good chance that the next decade looks a lot like the last decade for this stock. Keep in mind, we’re starting the next 10-year period from a low valuation point on the stock. And the business is carrying a backlog of over $147 billion.
This is one of my top 5 stocks for 2021. And I think it’s a great long-term investment idea for half of a stimulus check.
Dividend Growth Stock #2: Qualcomm (QCOM)
The next stock I want to highlight is Qualcomm Inc. (QCOM). This company develops and licenses products and services based on its advanced wireless broadband technology. Whereas I think Lockheed Martin should be thought of as a tech company, Qualcomm actually is a tech company.
This $154 billion (by market cap) tech giant is an amazing business that surprisingly flies under the radar. It’s a royalty machine, licensing out all kinds of IP so that smartphones actually work.
Yet again, there’s a valuation disconnect here.
After finally moving past some legal disputes with Apple in the spring of 2019, Qualcomm’s stock surged. This thing went from under $60/share to about $90/share in a hurry. Since then, all Qualcomm seems to do is announce amazing earnings.
However, the P/CF ratio of 19.9 is actually below its three-year average of 20.9. This valuation implies the business in 2021 is somehow situated worse than it has been, on average, over the last three years. With legal issues behind them and mountains of opportunity in front of them? That’s crazy.
The stock is now near $139/share, which is well off of its 52-week high of $168. This pullback is a gift. A gift you can use to turn your other gift – that stimulus check – into, well, an even bigger gift.
That number would be even higher had I did the math back when the stock was near $170, which shows you just how impressive things have been.
Investing $700 into Qualcomm today could very well perform that same magic over the next decade.
The other magic? Qualcomm’s growing dividend.
Their 10-year dividend growth rate is 13.3%, which comes on top of the stock’s market-beating 1.9% yield. While the dividend growth has been lumpy due to prior legal wrangling, the truth of the matter is that this company and its dividend has an extremely bright future. That bright future is blinding because of the rollout of 5G, which plays right into Qualcomm’s massive basket of tech IP.
With this rollout just getting started, Qualcomm could pave your portfolio with a yellow brick road of profits and growing dividends. Investing $700 into each of these two stocks would have turned $1,400 into $6,400 over the last decade. That’s more than quadrupling the original capital.
Plus, they’re each paying safe, growing dividends. These are golden geese laying ever-more golden eggs.
So before you do anything with that $1,400, consider investing it into one or both of these high-quality dividend growth stocks for the next decade.
— 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.
