What is the top priority for income investors? That’s an easy question. The answer is income – preferably a reliable and growing income.
Dividend stocks offer one of the best ways to generate income. Once you find great stocks with reliable and growing dividends, you can rake in money over the years. While there are many good alternatives for income investors, some stocks in particular stand out. Here are three great dividend stocks you can buy and hold forever.
1. Johnson & Johnson
Johnson & Johnson (NYSE: JNJ) has been a favorite among income investors for decades. It is one of the largest healthcare companies in the world, with huge pharmaceutical and medical technology businesses.
Only a handful of companies can boast more impressive dividend track records than Johnson & Johnson. The healthcare giant has raised its dividend for 62 years in a row, putting the company among the top Dividend Kings. J&J offers an attractive forward dividend yield of over 3.4%.
Johnson & Johnson has shown remarkable resilience. Founded in 1886, the company has weathered economic recessions, wars and global pandemics. Today, it generates annual revenues of nearly $90 billion and has a cash inventory of more than $26 billion.
To remain successful, Johnson & Johnson must continuously roll out new products. That shouldn’t be a problem. The company leads the industry in research and development expenditure. J&J also regularly strengthens its offerings through acquisitions, with recent examples including deals to acquire privately held biotech company Proteologix and medical device maker. Shockwave Medical.
2. Purpose
Goal (NYSE: TGT) has been in business since 1902. It is now one of the largest discount retailers with nearly 2,000 stores in the US. Target also has a growing e-commerce business.
Like Johnson & Johnson, Target is a dividend king. The company has increased its dividend for 52 years in a row – every year since it first went public in 1967. It could quickly extend that range to 53 years. Target’s forward dividend yield is almost 3%.
Investors should be able to count on Target’s dividend for a long time to come. The company’s business model of selling a wide variety of products at discounted prices is unlikely to be disrupted.
Target continues to find new ways to increase sales. For example, Roundel’s advertising business is now the fastest growing part of the company. The Target Circle loyalty program, one of the largest customer loyalty programs in the U.S. with more than 100 million members, helps retain customers and drive spending.
3. Verizon Communications
Verizon Communications (NYSE: VZ) is the new kid on the list. The telecommunications provider was formed in 2000 from the merger of Bell Atlantic and GTE. However, these two companies had a long history. Verizon now offers data, voice and video services around the world.
The company has increased its dividend for seventeen years in a row. While that’s not as impressive a record as J&J’s and Target’s, Verizon has had the longest streak of dividend increases in the US telecommunications sector. Income investors should be especially happy with the ultra-high forward dividend yield of over 6.7%.
Verizon needs to generate strong free cash flow to keep the dividends flowing and growing. There’s good news on that front: the telecom giant reported free cash flow of $2.7 billion in the first quarter of 2024, compared to $2.3 billion in the year-ago period.
Don’t expect Verizon to deliver overwhelming growth. However, the company’s wireless business is strong. Most importantly, Verizon must be able to provide income investors with the reliable and growing income they want.
Should You Invest $1,000 in Johnson & Johnson Now?
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Keith Speights holds positions at Target and Verizon Communications. The Motley Fool holds and recommends positions in Target. The Motley Fool recommends Johnson & Johnson and Verizon Communications. The Motley Fool has a disclosure policy.
3 Great Dividend Stocks to Buy and Hold Forever was originally published by The Motley Fool
