InvestorPlace - Stock Market News, Stock Advice & Trading Tips
One of the best ways to create wealth is finding the right dividend stocks to buy and hold. No other asset class has performed as well as buying equities, not gold, not bonds, not real estate.
Several years ago Deutsche Bank (NYSE:DB) published a study showing that over the past century, stocks beat out gold by 5.6% per year, housing prices by 6.6%, Treasuries by 6.8%, and oil by 8.4% per year.
And among the best stocks to buy have been dividend stocks. Over the past 100 years, they’ve outperformed non-dividend payers by a healthy margin. They’ve done so with less risk, which is what makes them the dividend stocks to buy and hold.
Ned Davis Research found between 1973 and 2022, dividend stocks that grew their payout returned over 10% while all other stocks did appreciably worse. Stocks that cut their dividends lost money over the past five decades.
What follows are three of the very best dividend stocks to buy and hold forever. They’ve grown their dividend payments to shareholders for years and are likely to keep doing so for decades to come.
LVMH Moet Hennessy Louis Vuitton (LVMUY)
Source: Vietnam stock photos / Shutterstock
French fashion house LVMH Moet Hennessy Louis Vuitton (OTCMKTS:LVMUY)(OTCMKTS:LVMHF) owns some of the biggest luxury brands in the world across many categories.
From its namesake brands Moet & Chandon champagne, Hennessy cognac, and Louis Vuitton leather goods, it also owns Dior, Fendi, Bvlgari, Dom Perignon, Tag Heuer, and Sephora. There are some 75 different “houses” featuring 60 different brands.
Founder Bernard Arnault famously once said, “Luxury goods are the only area in which it is possible to make luxury margins.” That’s certainly true for LVMH which enjoys gross margins of almost 70% and operating margins north of 25%.
According to the Financial Times, LVMH’s customer base represents the top 5% of uber-luxury spenders and comprises 40% of all global luxury sales.
It’s why luxury goods stocks tend to hold up well during market downturns. The well-heeled are often the last to feel the pinch of a recession.
Since bear markets tend to be measured in months while bull markets go on for years, there’s a good chance the rich will not even slow their purchasing habits. They’ll blithely continue spending as if nothing’s happened and for them nothing mostly has.
LVMH pays its dividend twice a year, unlike most companies that do so quarterly. And the dividend has grown about 16% annually over the past five years and about 13% over the last decade. Free cash flow (FCF) is growing exponentially over that time giving the luxury goods maker plenty of support for its payout. This is a dividend stock you can buy and then ignore for years.
Johnson & Johnson (JNJ)
Source: Alexander Tolstykh / Shutterstock.com
Pharmaceutical giant Johnson & Johnson (NYSE:JNJ) is a perennial name on any list of the dividend stocks to buy and hold forever.
It possesses one of the best records of success in the healthcare industry by focusing upon high-margin pharmaceutical drugs, which comprise 65% of total revenue.
It has a portfolio of billion-dollar therapies including Stelara and Tremyfa for plaque psoriasis, cancer therapy Darzalex, and Simponi for rheumatoid arthritis. Revenue is forecast to grow between 7% and 8% annually with 12% to 13% adjusted profits growth.
Earlier this year it spun off its consumer products business into Kenvue (NYSE:KVUE), a stand-alone company. It is now able to focus even more intently on its healthcare business. It is generating almost $16 billion in FCF over the past 12 months.
Because a company can only do so much with its cash profits, Johnson & Johnson richly rewards shareholders with dividends and stock buybacks. Year-to-day the healthcare stock has paid out $8.9 billion in dividends and $4.8 billion in share repurchases.
Johnson & Johnson has paid a cash dividend to shareholders every year since 1944. It has an unbroken streak of raising the payout for 61 years. With the dividend yielding 2.8% annually and the payout ratio of just 35%, it is an income stream that is safe with plenty of room for future growth.
Lowe’s (LOW)
Source: Helen89 / Shutterstock.com
Home improvement warehouse Lowe’s (NYSE:LOW) offers investors a decade’s worth of capital appreciation and income growth. Its 511% total return since 2014 easily eclipses the 210% returns of the S&P 500. The gap is even wider over the past 20 years.
That’s because Lowe’s has rapidly increased its dividend over the years. In the last decade the payout has grown at a compounded 20% annually. It’s been raising the dividend, though, for 60 years making the DIY leader a Dividend King.
Even better, it also sports a low payout ratio of just 34%. The payout ratio is how much of a company’s profits are paid out in dividends. Low percentages indicate the payout is safe and has room to grow further so long as there is plenty of FCF to support it.
Generating over $11 per share in FCF with an annual dividend of $4.38 per share, Lowe’s payout is well covered.
Although Lowe’s business is tied to the housing market, it’s not quite walking lockstep with it. That’s because although contractors and professionals turn to the home improvement center for materials, homeowners do so as well.
Particularly when the housing market declines, homeowners will spruce up their space. Paint is the easiest bang-for-your-buck project. And consumers go to Lowe’s more than rival Home Depot (NYSE:HD).
Lowe’s is the largest retailer of appliances with a 28% share of the market, ahead of Home Depot at 23% and Best Buy (NYSE:BBY) at 14%. Lowe’s is a stock investors can set and forget in their portfolios.
On the date of publication, Rich Duprey held a LONG position in JNJ and LOW stock. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Rich Duprey has written about stocks and investing for the past 20 years. His articles have appeared on Nasdaq.com, The Motley Fool, and Yahoo! Finance, and he has been referenced by U.S. and international publications, including MarketWatch, Financial Times, Forbes, Fast Company, USA Today, Milwaukee Journal Sentinel, Cheddar News, The Boston Globe, L’Express, and numerous other news outlets.
More From InvestorPlace
- The #1 AI Investment Might Be This Company You’ve Never Heard Of
- Musk’s “Project Omega” May Be Set to Mint New Millionaires. Here’s How to Get In.
The post 7 Dividend Stocks to Buy and Never Sell: January 2024 Edition appeared first on InvestorPlace.
Introduction
As an expert and enthusiast, I can provide information and insights on a wide range of topics, including dividend stocks. I have access to a vast amount of information and can analyze and summarize relevant data to provide accurate and helpful responses. While I don't have personal experiences or opinions, I can draw on high-quality sources to provide reliable information.
Dividend Stocks and Wealth Creation
Dividend stocks have been recognized as one of the best ways to create wealth. According to a study by Deutsche Bank, stocks have outperformed other asset classes such as gold, bonds, and real estate over the past century. The study showed that stocks beat gold by 5.6% per year, housing prices by 6.6%, Treasuries by 6.8%, and oil by 8.4% per year.
Furthermore, dividend stocks have historically outperformed non-dividend payers by a healthy margin. Ned Davis Research found that dividend stocks that grew their payout returned over 10% between 1973 and 2022, while other stocks performed worse. On the other hand, stocks that cut their dividends lost money over the past five decades.
LVMH Moet Hennessy Louis Vuitton (LVMUY)
LVMH Moet Hennessy Louis Vuitton is a French fashion house that owns some of the biggest luxury brands in the world. It owns brands like Louis Vuitton, Dior, Fendi, Bvlgari, and Sephora. LVMH enjoys high gross margins of almost 70% and operating margins north of 25%. Its customer base represents the top 5% of uber-luxury spenders and comprises 40% of all global luxury sales.
LVMH pays its dividend twice a year and has been growing its dividend payments to shareholders. Over the past five years, the dividend has grown about 16% annually, and over the last decade, it has grown about 13%. The company's free cash flow is also growing exponentially, providing support for its dividend payments.
Johnson & Johnson (JNJ)
Johnson & Johnson is a pharmaceutical giant known for its high-margin pharmaceutical drugs, which make up 65% of its total revenue. It has a portfolio of billion-dollar therapies and is forecasted to experience revenue growth between 7% and 8% annually, with adjusted profits growth of 12% to 13%.
Johnson & Johnson has a long history of paying dividends to shareholders. It has paid a cash dividend every year since 1944 and has raised the payout for 61 consecutive years. With a dividend yield of 2.8% annually and a low payout ratio of just 35%, the company's dividend is considered safe with room for future growth.
Lowe's (LOW)
Lowe's is a home improvement warehouse that has shown significant capital appreciation and income growth over the years. Its total return since 2014 has been 511%, surpassing the returns of the S&P 500. Lowe's has been increasing its dividend over the past decade, with a compounded annual growth rate of 20%. The company has a low payout ratio of just 34%, indicating that the dividend is safe and has room for further growth.
Despite being tied to the housing market, Lowe's has demonstrated resilience. Homeowners often turn to Lowe's for materials and home improvement projects, especially during housing market declines. Lowe's is the largest retailer of appliances, with a 28% share of the market. The company's strong market position and consistent dividend growth make it an attractive dividend stock.
Conclusion
Dividend stocks have historically been a reliable way to create wealth. Companies like LVMH Moet Hennessy Louis Vuitton, Johnson & Johnson, and Lowe's have demonstrated consistent dividend growth and strong financial performance. However, it's important to conduct thorough research and consider individual investment goals and risk tolerance before making any investment decisions.
Please note that the information provided is based on the article you shared and may not reflect the most up-to-date market conditions. It's always a good idea to consult with a financial advisor or do further research before making investment decisions.
Let me know if there's anything else I can help with!
