Dividend-paying stocks are the gift that keeps on giving. They pay you a recurring stream of passive income that you can use to make new investments or cover some of your expenses. The best dividend stocks will send you more money each year by increasing their payments.
Anybody can gift oneself with a multiyear supply of passive income by purchasing shares of a high-quality dividend-paying company. Three great ones to consider buying are Coca-Cola (NYSE: KO), Johnson & Johnson (NYSE: JNJ), and NextEra Energy (NYSE: NEE).
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Coca-Cola has treated its investors like royalty over the years. The beverage giant has increased its dividend payment for 62 years in a row. That puts it in an elite group of dividend stocks. It qualifies as a Dividend King, a company with 50 or more years of consecutive annual dividend increases.
The company’s dividend yield is currently over 3%. That’s a lot higher than the average dividend stock, considering that the S&P 500 yields around 1.2% these days.
Coca-Cola should have plenty of pop to continue pushing its payout higher. The beverage company’s long-term goal is to grow its revenue at a 4% to 6% organic rate each year, which should drive 7% to 9% annual earnings-per-share growth. The company’s growing earnings and cash flow should enable it to continue increasing its dividend at a solid annual rate.
Johnson & Johnson is a financial fortress. The healthcare giant has a higher credit rating than the U.S. government. It ended the last quarter with $20 billion of cash on its balance sheet, giving it only $16 billion of net debt, and that’s after spending $18 billion on acquisitions over the past year. The healthcare company generated $14 billion in free cash flow through the third quarter, easily covering the $8.8 billion it paid in dividends.
The company’s healthy financial profile has enabled it to steadily increase its dividend. Like Coca-Cola, Johnson & Johnson has delivered 62 years of annual dividend increases. Meanwhile, it offers a higher dividend yield that’s approaching 3.5%.
Johnson & Johnson should be able to continue growing its dividend in the future. Those $18 billion in acquisitions over the past year should enhance its medical technology capabilities and pipeline of innovative medicines. The company has also invested nearly $12 billion in research and development. These investments should boost its revenue and earnings as it launches new products, which should allow it to continue increasing its dividend.
NextEra Energy has delivered three decades of dividend growth. The utility has grown its payout at an impressive 10% compound annual rate over the last 20 years. It currently offers a yield approaching 3%.
The utility currently expects to grow its dividend by around a 10% annual rate through at least 2026. Powering that plan is its conservative financial profile and strong growth prospects.
NextEra Energy expects to grow its adjusted earnings per share at or near the top end of its 6% to 8% annual target range through at least 2027. A big driver is its robust backlog of renewable energy projects. The company expects to grow its renewables and energy storage capacity from around 38 gigawatts (GW) today to 81 GW by 2027, more than doubling its capacity. It’s capitalizing on robust demand for renewable energy, driven by climate change concerns, falling costs, AI data centers, and other factors. Those catalysts should enable the utility to continue growing at a strong rate into the next decade.
Coca-Cola, Johnson & Johnson, and NextEra Energy pay their investors’ above-average dividends that have risen steadily over the years. That makes buying these stocks like a gift that keeps on giving. They should supply their investors with a growing stream of passive dividend income in 2025 and beyond, making them great dividend stocks to buy right now and hold for the long term.
Ever feel like you missed the boat in buying the most successful stocks? Then you’ll want to hear this.
On rare occasions, our expert team of analysts issues a “Double Down” stock recommendation for companies that they think are about to pop. If you’re worried you’ve already missed your chance to invest, now is the best time to buy before it’s too late. And the numbers speak for themselves:
Nvidia: if you invested $1,000 when we doubled down in 2009, you’d have $349,279!*
Apple: if you invested $1,000 when we doubled down in 2008, you’d have $48,196!*
Netflix: if you invested $1,000 when we doubled down in 2004, you’d have $490,243!*
Right now, we’re issuing “Double Down” alerts for three incredible companies, and there may not be another chance like this anytime soon.
*Stock Advisor returns as of December 23, 2024
Matt DiLallo has positions in Coca-Cola, Johnson & Johnson, and NextEra Energy. The Motley Fool has positions in and recommends NextEra Energy. The Motley Fool recommends Johnson & Johnson. The Motley Fool has a disclosure policy.
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