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If you want to teach your children the power of making their money work for them (instead of the other way around), what better way to do so than by introducing them to a few solid, big-name dividend stocks?
After all, billionaire investor Warren Buffett bought his first stock at 11 years old, and he's built his fortune riding the success of some of most famous dividend stocks in history. Of course, Buffett's father was also a stockbroker at the time, but it still highlights what can be accomplished when we start early teaching our kids the potential held in the greatest wealth-building medium in existence.
To get you started, here are three such dividend stocks both you and your kids can love.
More than just the House of Mouse
First up, Disney (NYSE: DIS ) has raised its dividend seven times over the past decade, and it now offers a reasonable 1.2% yield. In large part, Disney achieved that growth by successfully leveraging its incredible range of character properties into films, video games, theme parks, and merchandising, thereby building itself into arguably the most comprehensive entertainment company the market has to offer.
Of course, those properties include the more traditional princesses and cartoon characters but have also recently been bolstered by the dozens of characters resulting from its 2006 acquisition of Pixar, as well as thousands upon thousands of names and storylines Disney can now develop thanks to both its 2009 acquisition of comics powerhouse Marvel Entertainment and its 2012 purchase of Star Wars and Indiana Jones creator Lucasfilm.
Needless to say, then, Disney has more than enough material to keep consumers entertained for a long, long time.
Of course, Disney also owns its flagship Disney Channel along with ABC Family and SOAPnet, and it boasts significant stakes in ESPN and A&E Networks. In fact, more than three-quarters of Disney's total revenue came from its strong media-networks and theme-parks divisions last year.
What's more, thanks to its annual theme-park admission-price increases earlier this month amid record attendance, along with the fact Disney repurchased more than 38 million of its own shares for $20 billion during the first half of this fiscal year, there's no reason this dividend stock shouldn't be able to continue outperforming for the foreseeable future.
The Cupertino effect
Next, what kid wouldn't enjoy the thought owning a piece of Apple (NASDAQ: AAPL ) , which quite possibly serves as the enabler of their thousands of monthly text messages, given the 37.4 million iPhones the company sold last quarter alone?
That's also not to mention that Apple created a new revolutionary market with the advent of the iPad -- of which it sold 19.5 million units last quarter -- or that it rakes in additional billions from digital-goods sales from its iTunes platform.
Or consider the $12.5 billion in cash flow from operations Apple created last quarter, and its obscene cash balance of $145 billion (yes, with a "b") with zero debt on its balance sheet.
Finally, shares of Apple currently trade for only 9.5 times last year's earnings and 9.1 times next year's estimates -- that is, assuming the company doesn't boost its earnings by introducing any innovative new "game changers," as Tim Cook teased last month. Add to that a 3% dividend and a massive share-repurchase authorization included in Apple's plan to return $100 billion to shareholders, and this looks like one dividend stock that's simply too good to pass up.
The pervasive swoosh
Finally, I'm offering Nike (NYSE: NKE ) as another great dividend stock both you and your children can love.
To be sure, few businesses enjoy a more significant global presence and greater brand visibility than Nike, which pays a 1.4% dividend while sporting a healthy 9.2% net profit margin. In addition, Nike has more than $4 billion in cash and equivalents, with just $161 million in long-term debt on its balance sheet.
And, like both Apple and Disney, Nike has been buying back its own stock, repurchasing 4.9 million shares for around $253 million last quarter. Better yet, that still leaves more than $7.4 billion remaining on its existing four-year share repurchase authorization.
Then again, Nike does trade at a higher premium than both Apple and Disney at 24.2 times last year's earnings and 20.4 times next year's estimates, but that seems more than fair, considering the company boosted its diluted earnings per share by 20% last quarter on 9% revenue growth, an incredible feat for a company that turned in revenue of nearly $25 billion last year.
If that's not a testament to Nike's staying power as a stalwart dividend stock, I don't know what is.
In the end, all three of the dividend stocks above represent amazing long-term businesses, which can not only hold our children's attention but also teach them the power investing in great dividend-paying businesses.