If you are risk averse and plan to retire solo, there aren't many ways to put together a decent income stream right now.
We live in an environment of persistently low interest rates, where savings accounts pay out close to zero and government bond yields are extremely low. This situation is likely to persist as central banks keep interest rates close to zero to support the economy against the effects of the coronavirus pandemic.
Investing in dividend growth stocks, however, provides a way to build wealth for your golden years. Companies that regularly offer dividend increases tend to run mature companies that can provide stability and growth for your portfolio.
In view of these benefits, and taking into account the own risk appetite, here are our picks for the three largest dividend growth stocks to consider for adding to a long-term portfolio.
1. Microsoft
Many investors confuse Microsoft (NASDAQ 🙂 for a pure technology game in a great growth mode that can be traded in for quick profits. But in our opinion, Microsoft is also a great income to buy and hold over the long haul.
There is no doubt that the company has rewarded its investors with massive profits over the past five years as its stock has risen by more than 400%. The company has benefited from a surge in technology investment, its leading market share in cloud computing and the power of its core Office products.
Microsoft also has an 82% share of the desktop operating systems market and generates huge amounts of recurring cash for this company. Office, which is now a subscription-based service for Microsoft's millions of home and business users, remains a powerful driver of.
If you are an income investor, you need to find companies like Microsoft. These are the giants who have the power to defend their businesses and pay you for the rest of your life.
Microsoft has an excellent track record of rewarding investors. Since 2004, when it first started paying out dividends, the company's payout has increased fivefold.
Dividend growth was supported by a low payout ratio and strong underlying business.
Microsoft 1 Year Review.
With an annual dividend yield of less than 1%, Microsoft pays a quarterly dividend of $ 0.51 per share. That return may seem small to many investors, but don't forget that Microsoft is still growing, while also offering great upside potential.
Including dividend payments, Microsoft has achieved a total return of 420% over the past five years. Microsoft's stock closed at $ 227.27 yesterday.
2. Procter & Gamble
Consumer giant Procter & Gamble (NYSE 🙂 is a high-income stock worth putting in a buy-and-hold portfolio. where it can sit still and earn growing payouts.
Procter & Gamble 1 Year Review.
The P&G stock, which closed at $ 138.18 yesterday, is currently yielding 2.29%. It has increased its dividends for 61 consecutive years, a track record few companies can match.
This consistent dividend growth also shows just how powerful the company's cash flow is. The product line, which includes globally recognized brands – such as Pampers diapers, Tide laundry detergent and Charmin toilet paper – is strong enough to support sales growth during wars, recessions and market declines.
The strength of P & G's consumer brands was evident during the current health crisis. The consumer giant was one of the few companies to maintain its lead during the pandemic, benefiting from the panic buying of toilet paper and cleaning products as the COVID-19 virus spread.
With a payout ratio of 66%, the company has plenty of leeway to further grow its investor income stream. Over the past ten years, payouts have doubled to $ 0.79 per quarter per quarter.
3. Johnson & Johnson
When making dividend growth decisions, investors should focus on three key factors to rule out bad choices: the dividend yield over time, the payout ratio (the percentage of free cash flow dividends) and track record of dividend growth.
The world's largest manufacturer of both consumer and pharmaceutical healthcare products, Johnson & Johnson (NYSE :), meets all three requirements. The company has increased its dividend every year for the past 58 years.
The current public health climate further strengthens J & J's position, benefiting from strong demand for over-the-counter products. J&J makes everything from innovative cancer therapies to medical devices and over-the-counter staples like pain reliever Tylenol.
In April, J&J increased its share by 6.3% from $ 0.95 to $ 1.01 per share. Trading at $ 151.52, the annual dividend yield translates to 2.63%.
Johnson & Johnson 1 Year Review.
Bottom Line
Buying Dividend Growth Stocks should be a critical part of your retirement investment strategy. Their steadily increasing payouts will help increase wealth, while at the same time providing a hedge against economic uncertainty.
