Safe, Reliable Dividend Stocks Seem Boring and Obvious. But Over Time, They Can Transform Your Portfolio.
Interest rates are on the way down again, starting with the late-July cut in the federal funds rate. Thus, traditional avenues for income – U.S. Treasury bonds, certificates of deposit (CDs), money market accounts (MMAs) – remain unappealing. Dividend stocks are a much better place to invest your money if you want yield. And the most reliable dividend stocks are your best bets.
Last month, at our seventh annual Cabot Wealth Summit, 80 of our most devout readers joined us at our headquarters in Salem, Massachusetts for some seaside cocktails, delicious meals and, most important, presentations from each of our nine investment analysts featuring their latest market wisdom and stock recommendations. One of the highlights of this year’s conference was the debut of Tom Hutchinson, chief analyst of our Cabot Dividend Investor advisory.
Cabot Dividend Investor solves the biggest problem investors face—generating enough income to meet your retirement income needs in this low-interest environment (with tons of market risk) without selling your investments to make ends meet.
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Tom is a dynamic speaker, full of great information, bravado and clever quips – he had our entire back row cracking up for the first 10 minutes of his presentation. But the most eye-popping slide from Tom’s speech, titled, “How Dividends Will Save Your Future,” was a list of the returns you could have earned on some of the market’s most obvious, reliable dividend stocks if you had owned them for the last 10 years.
More specifically, Tom showed how a $20,000 investment in the S&P 500 10 years ago would have compared to buying and holding several mainstream, popular dividend stocks during that same span. Here’s what that looked like:
5 Reliable Dividend Stocks from 10 Years Ago
If you had simply put $20,000 in the S&P 500 a decade ago, you’d have more than tripled your money. That’s good!
However, if you had invested $20,000 in any of these reliable dividend stocks, and had the dividends reinvested every quarter via a DRIP plan, you would have made even more money – in most cases, LOTS more. Note that, with the possible exception of Visa (V), none of these are exactly off-the-beaten path, diamond-in-the-rough types of companies whose share prices suddenly took off in the last 10 years.
McDonald’s stock has been a staple of most income investors’ portfolios for decades, and the past 10 years weren’t exactly its best decade. Altria is a tobacco company at a time when fewer people are buying and smoking cigarettes. And Caterpillar has had its share of wobbles with the global economy. Yet, if you bought any of those stocks 10 years ago and simply held on to them, you would have roughly quintupled your money thanks in large part to the dividend payments (and annual growth).
So, that got me thinking: what are some of the most obvious, reliable dividend stocks today? If you bought them now, had the dividends reinvested every quarter, and held on to them for the next 10 years, would you beat the market? Chances are the answer is yes.
Here are five candidates that I like. Note that none of these five are currently recommended in Tom’s Cabot Dividend Investor advisory. For those, you have to subscribe – and can do so by clicking here.
Nonetheless, all of them are steady dividend growers (all of them, in fact, are Dividend Aristocrats) that feature a much higher yield than the S&P 500. Odds are good that you already have at least one of these stocks in your long-term portfolio.
5 Reliable Dividend Stocks for the Next 10 Years
Current Yield: 2.90%
Consecutive Years of Dividend Growth: 56
Current Yield: 4.03%
Consecutive Years of Dividend Growth: 31
Consolidated Edison (ED)
Current Yield: 3.25%
Consecutive Years of Dividend Growth: 44
Lowe’s Companies (LOW)
Current Yield: 1.92%
Consecutive Years of Dividend Growth: 56
Current Yield: 2.40%
Consecutive Years of Dividend Growth: 47
With the exception of perhaps Consolidated Edison – a utility company that’s the longest-tenured member of the New York Stock Exchange, dating back to 1824 when it debuted as the New York Gas Light Co. – these are household names. They’re sitting in plain sight. They’ve been paying a dividend for decades, and growing that payment every year for at least 30 years.
And while their share prices aren’t accelerating the way they used to, the performance is still respectable: their average return over the past year is 12.6%, or nearly four times the 3.26% return in the S&P 500 during that time. Sprinkle in the better-than-average, and perennially growing, dividend payouts, and there’s a good chance if you bought any of these reliable dividend stocks today and held them for the next 10 years, you’ll make a lot of money – and possibly beat the market.
On the other hand, if you’re looking to make money now, I highly recommend you tune in to this Thursday’s free webinar, “High-Yield Dividend Stocks to Boost Your Income Now,” featuring the aforementioned Tom Hutchinson. I’ll be hosting, and Tom will be revealing what dividend stocks he likes not for the next 10 years, but today. The webinar starts at 2 p.m. ET, this Thursday, September 12. To sign up (again – it’s free!), click here.
Investment analyst and Chief Analyst of Cabot Wealth Daily, Chris Preston brings you all the latest from the investing world. Sign up to get updates and breaking news delivered FREE to your inbox. Get unlimited access to our library of complimentary investing reports.Sign up now!
*This post has been updated from an original version.