Dividend stocks are proven creators of wealth. Since 1973, the average dividend stock in the S&P 500 generated total annual returns of 12.83%, according to data from Ned Davis Research and Hartford Funds. This exceeded the 12.56% annualized return of the overall index. Meanwhile, companies that steadily increased their dividends produced even better total returns of 13.2% per year. The powerful returns of dividend growth stocks make them ideal investments for those who don’t have a lot of money to invest.
While there are many stocks with high dividend growth, Chevron (NYSE: CVX), Brookfield infrastructure (NYSE: BIP)(NYSE: BIPC), and US States Water (NYSE: AWR) stood out among our contributors. Here’s why they believe this trio can make investors a little richer one dividend payout at a time.
I’m doing very well
Reuben Gregg Brewer (Chevron): The integrated energy giant with a market capitalization of over $ 200 billion Chevron has increased its dividend each year for 34 consecutive years. That makes this oil and gas giant a dividend aristocrat, which is impressive in itself. However, the industry in which it operates is highly cyclical, with rapid and dramatic increases and decreases in energy prices the norm, not the exception. Setting up a dividend record like Chevron’s in the energy industry is nothing short of amazing and speaks to a company that places return shareholder value at the top of its list of priorities.
What’s interesting today is that Wall Street is concerned that clean energy could quickly replace fossil fuels in the larger energy landscape. While this is the general trend, getting rid of oil and gas will likely take decades. This means that Chevron has ample time to continue milking its cash cow business and take the necessary steps to adjust to a cleaner future. when the time comes. But, in the meantime, investors are punishing the stock, which offers a historically high 4.9% dividend yield, even after stocks rose sharply thanks to rising oil prices.
This suggests that investors can not only buy Chevron at a relatively cheap price, but, given its dividend history, they can continue to collect a big dividend check for years to come. And if the oil giant starts to turn to cleaner alternatives, as is highly likely, there could be some benefits in the years to come as well.
A long history of rewarding investors
Matt DiLallo (Brookfield Infrastructure): Brookfield Infrastructure has created a lot of value for its investors over the years. The Global infrastructure company has generated an average annual return of 18% since its inception over ten years ago. This crushed the S&P 500’s total annualized return of around 11% over that 13-year period, and would have taken an investment from $ 500 to almost $ 4,300.
One of the keys to Brookfield’s success in enriching its investors is its dividend. He increased his payout at an annual rate of 10%, making his investors a little richer with each Payment dividend. The company has been able to steadily increase its dividend through a combination of organic growth and acquisitions. Brookfield has invested billions of dollars over the years in expansion projects and to acquire scalable infrastructure platforms.
The company believes it will be able to continue to grow at a sustained rate in the years to come. He currently expects organic growth to increase his cash flow per share by 10% this year. Meanwhile, its asset rotation program of selling mature companies and reinvesting the proceeds in higher-yielding opportunities will add 12% more to its profits. Over the longer term, Brookfield expects to grow its cash flow at a rate that should support annual dividend growth of 5-9%. That’s impressive considering the company is already sending out big dividend checks to investors, given its 3.6% dividend yield. His forecast suggests that these payments are likely to continue to rise in the years to come, making his investors a bit richer with each.
Don’t Underestimate This Multibagger Dividend Growth Action
Neha Chamaria (US Water States): If you have money on the side and love dividends, one of the best uses for your money right now is to invest in dividend-paying stocks that not only pay regular and regular dividends, but do. grow steadily. If you can reinvest those higher dividends year after year, your investment could eventually compound well over the years. Dividend growth stocks are, in fact, so powerful that even the seemingly boring ones can make you rich if you can patiently hold them for years. Concrete example: the water of the American states. See the table below.
US States Water is as boring as it can get – it’s a utility stock of water, after all. Yet if you had bought shares of American States Water five years ago, you would have more than doubled your money already. And if you had bought them 10 years ago, you would be sitting on a return six times. All you had to do was just buy stocks, collect dividend checks, and diligently reinvest them without worrying about the daily performance of the stock.
The point is, money accumulates over time, and when a stock earns you more every year, you’re in good hands. As a regulated water utility, American States Water can generate stable cash flow and comfortably increase dividends. The company can increase its cash flow in two ways: tariff increases and expanding the footprint of its subsidiary, which serves US military bases on 50-year contracts.
In July, American States Water announced a 9% increase in dividends and said it aims for compound annual dividend growth of more than 7% over the long term. In fact, American States Water has the longest streak of dividend growth – of 67 consecutive years – of all Dividend Kings. This makes this action an almost foolproof get rich bet if you can buy it and just forget it.
This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are heterogeneous! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.