10 Dividend Stocks for the Next Decade and Beyond

Following two roller-coaster markets over the past decade, it's natural for investors to seek more stable and less stressful stock strategies. Dividend-paying stocks provide you with an opportunity to achieve both.

Among other things, dividend-paying stocks:

  • Are less volatile as a group than their non-dividend-paying counterparts.
  • Provide you with a real return right away; with non-dividend-paying stocks, returns aren't realized until you sell.
  • Allow you to choose what to do with the cash payouts -- reinvest in the stock, put them into savings, or buy groceries ... it's up to you.
  • Offer you an inflation hedge when companies increase their payouts.

With this in mind, I've set out to find 10 of the most promising dividend-paying stocks for the next decade and beyond. Five of them will be focused on dividend growth, while the other five will be focused on higher dividend yields. You want to have a helping of both types in your portfolio to promote both payout growth and payout stability.

Dividend growth
High dividend yields are always nice right away, but smart long-term income investors will also plant the seeds for future dividend growth. These stocks may not have the juiciest yields on the market, but they generate more than enough free cash flow to boost their payouts and reinvest in the business for years to come.

Company

Dividend
Yield

5-Year-Trailing
Dividend Growth Rate

Free Cash Flow
Payout Ratio

Intel (Nasdaq: INTC  )

2.9%

17%

34%

Target (NYSE: TGT  )

1.8%

18%

13%

Yum! Brands (NYSE: YUM  )

2.0%

33%

40%

Lowe's (NYSE: LOW  )

2.0%

33%

23%

Procter & Gamble (NYSE: PG  )

2.9%

12%

51%

Source: Capital IQ, a division of Standard and Poor's.

High yield
Super-high dividend yields can be very tempting -- all a stock yielding 10% has to do is not lose value, and you've made 10% in one year! In more cases than not, however, a stratospheric yield is a bad sign for the stock.

Because dividend yields and stock prices move in opposite directions, a high yield usually means a depressed stock price based on market concerns about the underlying business. Remember: Dividends are not guaranteed, so you need to make sure the business is generating enough cash to pay the dividend, or else your investment loses its luster.

The yields on the following five stocks are more than double the S&P average yield of 1.8%. They may not grow as fast as the previous five stocks, but they have enough free cash to fully fund their higher yields.

Company

Dividend Yield

Free Cash Flow
Payout Ratio

CenturyLink

6.9%

75%

Exelon

5.1%

64%

Bristol-Myers Squibb (NYSE: BMY  )

4.9%

61%

H.J. Heinz

3.7%

50%

Lorillard (NYSE: LO  )

5.1%

58%

Source: Capital IQ, a division of Standard and Poor's.

Reach for the sky, but diversify
With stock prices still down from their 2007 peak and a number of quality companies trading with attractive dividend yields, now is the perfect time to double down on dividends and build a lower-cost, lower-stress stock portfolio worthy of holding for the next decade and beyond.

There are plenty of great businesses with rich dividend histories trading with yields we haven't seen in years, but in addition to owning a few "dividend growth" and "high-yield" stocks, please remember to diversify your picks across various sectors. As we learned with the implosion of the financial sector, no matter how nice the dividends are, you never want to put all your eggs in one basket.

If you'd like more help building a complete portfolio of great stocks, enter your email in the box below to get "Motley Fool Top Picks & Perspectives 2011," a new free report with stock recommendations and portfolio guidance for the year ahead. We'll also tell you more about Million Dollar Portfolio, our real-money portfolio service that buys the best of our investing ideas, opening for the last time this year. To get started, just enter your email in the box below.

This article was originally published Jan. 22, 2009. It has been updated.

Fool analyst Todd Wenning thinks Blades of Steel hockey on the NES was way ahead of its time. He owns shares of Procter & Gamble. Exelon, Intel, and Lowe's Companies are Motley Fool Inside Value picks. H.J. Heinz and Procter & Gamble are Motley Fool Income Investor selections. The Fool owns shares of and has bought calls on Intel. The Fool owns shares of and has written covered calls on Procter & Gamble. Motley Fool Options has recommended buying calls on Intel. The Fool owns shares of Exelon, Lowe's Companies, and Yum! Brands. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.


Read/Post Comments (0) | Recommend This Article (17)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

DocumentId: 1367514, ~/Articles/ArticleHandler.aspx, 4/24/2014 7:08:18 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement