For many people, “I invest in dividend stocks” doesn’t have the same meaning as investing in “the next big thing.” But the former is often just as profitable, if not more so. Even relatively small dividends can grow over time.
There’s also a sense of calm that comes from knowing that holding a stock will pay off no matter how the price moves. That’s why you shouldn’t just go for high yields; You should invest in companies that can sustain their dividends over the long term. This is how you truly get the most value from dividend stocks.
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If you’re looking to add dividend stocks to your portfolio, each of the following three options is a top pick that you can confidently hold for the next 20 years.
Image source: Getty Images.
Chevron(NYSE: CVX) It is the second largest oil company in the United States, with operations spanning three major segments of the value chain: upstream, midstream and downstream. Upstream involves exploration and mining; midstream involves transportation, processing, and storage; and downstream involves refining products and selling them to consumers.
Being present in all three segments helps Chevron respond to segment-specific downturns, price fluctuations and disruptions caused by geopolitical events. It’s not foolproof, but in many cases it’s better than relying on oil as part of the business.
Over the past decade, Chevron’s average dividend yield has been about 4.2%, more than 2.5 times that of U.S. companies. S&P 500 Index The average value over the span. It provides high income and stability, with annual payment increases for 38 consecutive years.
CVX dividend yield, data from YCharts.
The oil industry may be cyclical, but you don’t have to worry about Chevron’s dividend at any time. Its financial position is strong enough to support a dividend and it says it is committed to improving operating efficiency. This includes prioritizing profit over expansion and working to maximize shareholder returns.
If you’re investing for the long term, you generally can’t go wrong by choosing a business with strong cash flows and strong financial discipline.
Even the name Procter & Gamble(NYSE: PG) Won’t set off anyone’s alarm bells, but the products it has probably will. In its product portfolio, the company has dozens of well-known brands such as Tide, Pampers, Old Spice, Febreze, and Crest.
Procter & Gamble is the poster child for a defensive and recession-resistant stock because it has products that sell no matter what. If there’s a recession and money is tight, people will cut back on a lot of things before they stop buying laundry detergent, disposable diapers, and toothpaste.
You won’t get explosive earnings or stock growth from P&G, but you will get solid financials and dividends. It’s a Dividend King, a company that has grown its dividends for at least 50 consecutive years. In fact, it has won the award for 69 consecutive years. Only five companies on the U.S. stock market have posted longer winning streaks.
Procter & Gamble may be a “boring” stock, but these are generally stocks you can safely hold for decades. Flashiness isn’t always sustainable.
Johnson & Johnson(NYSE: JNJ) is one of the largest healthcare companies in the world, but its business looks much different now than it did two and a half years ago. In August 2023, the company spun off its consumer division (which included products like Tylenol and Band-Aid) to focus on pharmaceuticals and medical devices.
Even with its reorganization, it barely missed a beat. Revenue is down in 2023 due to the spin-off, but the two years since have been good. Revenue in 2025 will be $94.2 billion, up 6% from 2024 and 17% from 2023. It’s not a huge increase, but for a company as mature and large as Johnson & Johnson, it’s all you can ask for.
JNJ revenue (annual) data is provided by YCharts.
Similar to Procter & Gamble, Johnson & Johnson has a stake in its favor, but it’s not a hygiene or cleaning product, it’s healthcare. Chronic and age-related illnesses are here to stay. They are unfortunate, but they are also responsible for the company’s longevity.
Healthcare will be different in 20 years, but you can bet Johnson & Johnson will be involved. You can also bet that its dividend will remain strong. This is now the 63rd consecutive year of annual growth.
Before buying Chevron stock, consider the following factors:
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Stefon Walters has no position in any of the stocks mentioned. The Motley Fool has a position in and recommends Chevron. The Motley Fool recommends Johnson & Johnson. The Motley Fool has a disclosure policy.
3 Dividend Stocks to Own for the Next 20 Years Originally published by The Motley Fool
