A general principle of investing is the old saying: buy low and sell high .
But many investors who have made fortunes rarely sell once they have bought a money-generating asset.
This investment strategy is also very productive if your goal is to build a solid cash flow for your retirement. You can use your dividend stocks for regular income when you need it.
And if you don't need passive income, you can use these cash flows to reinvest and unlock the power of compound income.
Buy-and-hold stocks are generally companies that consistently pay dividends. Their payouts survive peaks and troughs, wars, depressions and asset bubbles.
Their products and services are so crucial that we cannot imagine a normal life without them. This quality has made these companies ATMs that never run out.
Below we've compiled a list of three dividend stocks that we believe can support their dividends over the next ten years and provide a steady stream of income.
1. Lowe's
The home improvement giant, Lowe's Companies (NYSE:) offers one of the best opportunities for long-term investors.
The No. 2 home seller has taken the broader market this year, taking advantage of the home environment that prompted many Americans to put more money into their homes.
Analysts expect this trend to continue as we see more people move from the big cities to the less crowded suburbs, as working from home becomes the norm after the pandemic.
This de-urbanization, low interest rates and the massive savings Americans have amassed during the pandemic point to continued gains for home improvement stocks.
Lowe's shares have outperformed their main rival, Home Depot (NYSE:) since the start of the year, but Lowe's is still cheap on a P/E ratio, according to a recent report from Oppenheimer.
The note said:
"We remain optimistic that ongoing internal initiatives at LOW should support continued increases in profit rates for the company, especially as the disruptions in [near-term] disappear."
Oppenheimer set a price target of $235 per share for Lowe's, 22.5% higher than where the stock closed Tuesday. Lowe's has gained about 50% in the past year.
2. Nextera Energy
For buy-and-hold investors, we love long-term utilities for one simple reason: they invest billions of dollars in building assets that generate solid income for their investors.
As long as customers continue to pay their energy bills, the money will keep flowing in.
In this space, we especially like Nextera Energy (NYSE:), the Florida-based utility scaled by providing clean energy.
Nextera is the largest U.S. provider of renewable energy, providing 22 gigawatts of clean electricity to homes and businesses in North America.
It also operates a large natural gas pipeline company and a growing energy storage company.
Nextera Energy Weekly Chart.
The major difference between Nextera and other traditional utilities is that it was not funded by a massive injection of debt.
Instead, the company made clever use of the government subsidies and tax breaks offered to clean energy producers. It usually sells its output to utilities, many of which must draw power from green sources to meet state mandates.
Nextera has the regulated utilities, which is a major attraction for dividend-oriented investors.
With a 2% dividend yield, Nextera pays a quarterly dividend of $0.385 per share. The company plans to increase that by 10% annually, at least until the end of 2022.
3. Johnson & Johnson
The New Jersey-based health giant is exactly the kind of investment that buy-and-hold investors prefer.
Johnson & Johnson (NYSE:) is one of the world's most powerful brands. Through its three business units, the conglomerate manages more than 260 companies worldwide.
When it comes to rewarding investors, few companies have done better than Johnson & Johnson. The company has increased its quarterly dividend rate each year for 59 consecutive years.
This remarkable achievement places the health care provider in an elite group known as Dividend Kings, companies with at least five decades of annual dividend increases.
JNJ Weekly Chart.
The current public health environment further strengthens JNJ's position, where it benefits from strong demand for its over-the-counter products.
The company makes everything from innovative cancer therapies to medical devices and over-the-counter staples, such as the pain reliever Tylenol.
In April, JNJ announced a 5% increase in its quarterly dividend to $1.06 per share, after reporting a recovery in the medical device sector.
Overall, J&J reported adjusted earnings per share of $2.59, up from $2.30 a year earlier.
