High-quality dividend growth stocks are stocks that pay reliable, rising dividends. These are some of the very best stocks you can buy and own. Why? Simple.
These stocks represent equity in some of the world’s best businesses.
After all, it takes a special kind of business in order to consistently produce the reliable, rising profit necessary to pay out reliable, rising dividends.
I’ve used the dividend growth investing strategy for myself to great effect, building a significant amount of wealth and passive income and even retiring in my early 30s.
I now live off of the reliable, rising dividends my dividend growth stock portfolio produces for me.
As great as these stocks are, though, some dividend growth stocks are particularly fantastic.
I would go so far as to say that some are even in the category of “forever” stocks. Yep.
Stocks so consistent, predictable, and high quality, you could potentially buy and own them forever.
Today, I want to tell you about five forever dividend growth stocks to consider buying for your own portfolio. Ready? Let’s dig in.
Forever Dividend Growth Stock #1: Apple (AAPL)
Apple is a multinational technology company with a market cap of $2.5 trillion.
You know what I’ve been hearing about Apple for the last decade? That the company can’t innovate. That the stock is overvalued. What has Apple done over the last decade? Innovate at the business level and outperform the market at the stock level. Guess what else they’ve been doing? Yep. Increasing the dividend.
Apple has increased its dividend for 10 consecutive years.
And I think that’s just the start of many more decades of dividend increases to come. The five-year dividend growth rate is 9.7%. And with a payout ratio of only 17.2%, this is one of the safest possible dividends in the market. Moreover, Apple has nearly $100 billion in total cash on the balance sheet. Yeah, this dividend is headed higher. Of course, you want to see that dividend growth, since the stock only yields 0.6%.
I’ve said it before. I’ll say it again. Apple is a must-own stock for serious dividend growth investors.
I called Apple a must-own stock back in March, when it was priced around $121/share. A lot of comments questioned the valuation and low yield. Yet here we are in late October, and the stock is now coming up on $150. Next stop is $200, guys. Apple is a world-class business that is fundamentally as excellent as it gets. They’re classified as a tech business. But it’s really more of a consumer products company than anything else. With high-single-digit or better long-term growth on one of the safest dividends in the world, backed by nearly unrivaled brand power, it’ll likely go down as one of the all-time best dividend growth stocks. This is a stock you buy with the intention of holding for the rest of your life, ignoring the day-to-day noise of the stock market.
Forever Dividend Growth Stock #2: Johnson & Johnson (JNJ)
Johnson & Johnson is a global healthcare conglomerate with a market cap of $431 billion.
This is one of my favorite dividend growth stocks. It’s been said that successful long-term investing should be like watching paint dry. If you want excitement, go to a casino. Well, Johnson & Johnson is so consistent and boring, it’ll almost put you to sleep. Well, if it weren’t for that nice dividend coming in every quarter to spark a little exhilaration and wake you up.
This company has increased its dividend for 59 consecutive years.
How much more consistent does it get? Almost 60 straight years of ever-higher dividends. That’s a time frame that stretches wars, recessions, and even a global pandemic. None of it impacted this company’s commitment and ability to keep growing that dividend. The 10-year DGR of 6.6% handily beats inflation. And the yield of 2.6% handily beats the market. You’re slaying two dragons right there. And with a payout ratio of 63.8%, the dividend is secure.
In a world growing bigger, older, and wealthier, this healthcare company is set to prosper for years to come.
A larger pool of older people with more expendable income. What does that mean? It means more demand for, and access to, quality healthcare. Quality healthcare like the various pharmaceuticals, medical devices, and consumer products that Johnson & Johnson produces. If I had to bet my life on one business, it’d be tough to think of a business I’d rather go with than this one. Now, anything can happen to any business at any time. There’s always risk when you invest. But this is one of those stocks that’s so easy to own and not even think about. No need to babysit this one. You just sit back collect those growing dividends, and watch your wealth exponentially increase while you go about your life. That’s dividend growth investing at its finest.
Forever Dividend Growth Stock #3: PepsiCo (PEP)
PepsiCo is a multinational food, snack, and beverage corporation with a market cap of $221 billion.
People gotta eat, right? Well, PepsiCo fills that basic need. And, look, it’s not just basic need here. We’re not talking about simple sustenance for survival here. PepsiCo makes enjoyable foods, snacks, and beverages. People tend to consume what they enjoy, which PepsiCo is all too happy to cater to with their branded products – brands so successful, by the way, that 23 of them do more than $1 billion in annual sales. Consumers consume what they enjoy. You know what I enjoy? Growing dividends.
The company has increased its dividend for 49 consecutive years.
Decades upon decades of sending out ever-more dividends to shareholders. How can you not love that? This is another “forever” dividend growth stock because of that consistency in the growth of the dividend that is almost poetic in its beauty. The stock yields 2.7%, which blows away the broader market’s yield. And the 10-year DGR of 7.8% means your purchasing power is staying ahead of inflation. This dividend is also protected by a payout ratio of 73.3%.
Betting on people’s desire to consume enjoyable food products is the easiest long-term bet you could make.
When I think of a business to consider owning forever, I want to own something that has practically zero chance of going out of business in my lifetime. Well, I can’t imagine any scenario in which PepsiCo suffers such a fate. This isn’t a difficult business model to understand. We’re talking about snacks and beverages here. But simple isn’t bad. In fact, it’s often the opposite. It’s those overly complex business models that are designed to confuse and obfuscate that often cost naïve investors money. PepsiCo is the kind of business that I can sleep well at night owning, knowing that the sun will rise and PepsiCo will still be there doing what they do best – which includes paying out that safe, growing dividend.
Forever Dividend Growth Stock #4: Procter & Gamble (PG)
Procter & Gamble is a global consumer goods corporation with a market cap of $341 billion.
What does Procter & Gamble sell to consumers? Perhaps the better question would be what does Procter & Gamble not sell to consumers? Their product portfolio includes diapers, razor blades, soaps, tissue paper, toothpaste. You know, the stuff billions of people use every single day. And these aren’t just products. They’re branded products. Those brands have been so successful, the company lays claim to 22 different brands with $1 billion or more in annual sales. It’s more people consuming more branded products at higher prices, which has led to an uncanny ability pay out a reliable, rising dividend.
This company has increased its dividend for 65 consecutive years.
This is rare territory here. Only a small handful of companies in the whole world have been able to increase their dividend for more than 60 straight years. But I don’t see any reason why Procter & Gamble won’t be able to increase their dividend for another 65 consecutive years. I mean, it’s not like people are going to suddenly stop needing soap or toothpaste. With a 10-year DGR of 5.2% paired with a yield of 2.5%, the dividend metrics don’t wow you with big numbers. Instead, it’s that consistency and reliability that wows you. And with a payout ratio of 63.5%, the dividend is in a position to reliably grow like clockwork, just as it’s been doing for decades.
It’s an easy stock to think about owning forever because people are probably going to need their products forever.
Stocks aren’t just digital tickers. They’re slices of real businesses employing real people and selling real products and/or services. In the case of Procter & Gamble, you’re investing in easy-to-understand consumer products that billions of people use every day. Shampoo and laundry detergent might not be sexy, but that’s not what this kind of investment is all about. It’s about investing in a business with the intention of holding forever, because you have a high degree of confidence in that company’s ability to grow its revenue, profit, and dividend for decades to come. Since I can’t imagine any future world in which people suddenly stop using these everyday products, I have a high degree of confidence in all of that.
Forever Dividend Growth Stock #5: Microsoft (MSFT)
Microsoft is a multinational technology corporation with a market cap of $2.3 trillion.
Two tech companies? Absolutely. Our future is becoming increasingly tied to and reliant on technology. You have to have exposure to companies that are laying the groundwork and providing the infrastructure for that future. I remember when I first started investing, how a lot of dividend growth investors would shun tech companies. Well, you can’t think like that anymore. You should embrace tech companies like Microsoft. Of course, it’s easy to adopt that point of view when Microsoft is so busy paying its shareholders a reliable, rising dividend.
Microsoft has increased its dividend for 20 consecutive years.
As with Apple, I think that’s only the start of many, many more decades of dividend growth to come. Now, the stock only yields 0.8%. But dividend growth investors getting stuck on that low yield and shunning Microsoft are doing their wealth and portfolios a huge long-term disservice. The 10-year DGR is 14.3%. And even after all of that double-digit dividend growth, the payout ratio is still only 30.8% – because the business has been growing at such a high rate. Plus, with $130 billion in total cash on the balance sheet, along with a AAA credit rating from Standard & Poor’s, I would go so far as to say this is the safest dividend in the world.
Want to sleep like a baby? Consider buying this stock and holding it for the rest of your life.
It’s a no-brainer long-term investment. I actually highlighted Microsoft as an undervalued, long-term dividend growth stock idea back in April, when it was around $253/share. As with what always happens whenever I bring up Microsoft, comments left and right complained about valuation and yield. Well, it’s now coming up on $310/share. For years, I’ve heard about how Microsoft is overvalued. For years, it’s outperformed most everything else. Those bitter investors who never got on the train keep complaining while Microsoft keeps performing and handing out generous dividend increases to their shareholders. If this stock isn’t one you’ve already bought in order to put away for a generation or two while it exponentially compounds, do consider changing that.
— 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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