In this (still)-low-interest-rate environment (at least for now), 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.
Every year, Tom Hutchinson, chief analyst of our Cabot Dividend Investor and Cabot Income Advisor newsletters, presents a slide in one of his webinars that is essentially 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 shows how a $10,000 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 the one he showed in a recent webinar:
5 Reliable Dividend Stocks from 10 Years Ago
If you had simply put $10,000 in the S&P 500 a decade ago, you’d have basically quadrupled your money. That’s good!
However, if you had invested $10,000 in any of these reliable dividend stocks, and had the dividends reinvested every quarter via a DRIP plan, in three out of five of them you would have made even more money – LOTS more. The other two, you’d have at least tripled your money. Note that 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. Home Depot (HD) is the leading home improvement chain in America. Eli Lilly (LLY) and Visa (V) are leaders in their respective fields and have been top dividend stocks for decades. And while PepsiCo (PEP) underperformed by quite a bit, you would have still tripled your money if you’d bought and held it for 10 years. All of those big returns are 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 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: 2.89%
Consecutive Years of Dividend Growth: 60
Current Yield: 3.38%
Consecutive Years of Dividend Growth: 35
Consolidated Edison (ED)
Current Yield: 3.30%
Consecutive Years of Dividend Growth: 48
Lowe’s Companies (LOW)
Current Yield: 1.72%
Consecutive Years of Dividend Growth: 48
Current Yield: 2.32%
Consecutive Years of Dividend Growth: 50
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 (particularly Target’s after last week’s disastrous post-earnings sell-off), the performance is still more than respectable: their average return in the last two years is 49.1%, better than the 32% 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 (especially TGT, at such a depressed price) and held them for the next 10 years, you’d make a lot of money – and possibly beat the market.
*This post has been updated from an original version, published in 2019.