5 Top Dividend Stocks to Buy With Decades of Passive Income Potential

5 Top Dividend Stocks to Buy With Decades of Passive Income Potential

Dividends are a force of nature that too many investors overlook. Since 1960, approximately 69% of the S&P 500’s total returns have come from reinvested dividends. So if you’re looking for a long-term investment strategy, why not consider companies that pay and raise their dividends regularly?
To start, consider looking at what people routinely buy in their day-to-day lives. People are creatures of habit, and steady, repeat purchases can create recurring income for the companies, enabling them to pay their shareholders.
Here are five top dividend stocks that can pay you for decades.
1. Coca-Cola

Consecutive dividend increases: 61 years
Beverage giant Coca-Cola (KO -0.17%) is a Warren Buffett favorite and a staple in the dividend investing world. The company sells billions of dollars worldwide in soda, tea, juices, water, and coffee. You’ll find Coca-Cola products at almost every restaurant, store, event, and vending machine. The company’s exceptional distribution footprint keeps its products in front of customers and blocks out competitors.

KO Dividend data by YCharts.
There are more than 8 billion people worldwide, a slowly growing customer base for the company. Throw in the occasional price increase, and Coca-Cola has a path to decades of steady earnings growth. The company’s dividend is well-funded at just 64% of cash profits and yields roughly 3% at today’s prices. Coca-Cola is genuinely a stock that you can sleep well at night owning, just as Buffett has for decades.
2. Mastercard
Consecutive dividend increases: 12 years
Most people don’t think much of swiping their credit cards to pay for stuff, but you might be putting money in Mastercard’s (MA -2.54%) pocket when you do. Whenever you see Mastercard’s red and orange logo on your card, the payment network company takes a small slice of every transaction it processes. Mastercard has an estimated 25% market share of U.S. credit cards and about 24% globally.

MA Dividend data by YCharts.
Mastercard has enjoyed rampant growth as more people move away from cash. Since the payment network doesn’t require a lot of ongoing investment, shareholders have enjoyed a rapidly growing quarterly dividend that’s ballooned from less than $0.08 per share to $0.57 in just a decade. The dividend payout ratio is still just 19%, meaning many years of potential dividend growth are ahead.
3. Procter & Gamble

Consecutive dividend increases: 67 years
Check the labels of your shampoos, detergents, soaps, and lotions in your home, and you may see Procter & Gamble (PG 0.09%) come up at least once. The conglomerate owns many consumer goods brands, including Tide, Gain, Pampers, Bounty, Charmin, Tampax, Old Spice, and many more. People buy these products often and don’t typically cut them from their budgets, even when times get tough.

PG Dividend data by YCharts.
The recurring revenue of selling hundreds of different household products has made Procter & Gamble an excellent dividend stock, earning the title of Dividend King with more than 50 consecutive increases. The payout ratio is manageable, and the company has nearly $8 billion in cash. In other words, you can buy Procter & Gamble with confidence that the dividend checks will continue cashing.
4. Philip Morris International
Consecutive dividend increases: 15 years
Tobacco is a famously profitable industry, and Philip Morris International (PM -0.14%) is the world’s largest publicly traded tobacco company, formed in 2008 as a spinoff from Altria. Most people know that not only are cigarettes terrible for your health, but smoking rates have declined for decades. Philip Morris still sells cigarettes worldwide (except for the United States), but its market-leading smokeless products will help pay years of dividends coming up.

PM Dividend data by YCharts
Philip Morris spent years developing the heat-not-burn tobacco device IQOS, which has helped smokers transition from cigarettes in dozens of international markets. Additionally, the company recently acquired the Zyn (via Swedish Match) brand of nicotine pouches, the top-selling brand in the United States. Today, smoke-free revenue makes up just over a third of Philip Morris’ business, which management wants to push to 50% by 2025. The dividend yield is 5.6% today, and the payout ratio should come back down after it digests the Swedish Match acquisition.
5. Home Depot

Consecutive dividend increases: 14 years
Homeownership is a cultural staple in America. For most people, a house is the largest purchase of their lives, and homes require steady investment for maintenance, repairs, and upgrades. Home Depot (HD 1.28%) is America’s largest home improvement retailer. The company sells materials, tools, and appliances to homeowners and professional contractors.

HD Dividend data by YCharts.
The company’s aggressively raised its dividend, more than quadrupling it this past decade, yet the payout ratio remains under control at just 60%. Additionally, investors get a solid starting dividend yield of 2.8%. The average house in America is nearly 40 years old, and a housing shortage could fuel new builds too. In other words, Home Depot has plenty of opportunity to continue growing and paying its shareholders over the coming decades.

Justin Pope has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Home Depot and Mastercard. The Motley Fool recommends Philip Morris International and recommends the following options: long January 2024 $47.50 calls on Coca-Cola, long January 2025 $370 calls on Mastercard, and short January 2025 $380 calls on Mastercard. The Motley Fool has a disclosure policy.

https://www.fool.com/investing/2023/06/07/top-dividend-stocks-buy-decade-passive-income/

Recommended For You