Investing in top-quality dividend stocks can be a great way to grow your wealth over time. One of the side benefits of investing in these kinds of companies is that you don't have to constantly worry about their business models or the markets in which they operate. These set-it-and-forget-it kinds of investments can go a long way toward easing your stress about owning stocks during volatile times.
We asked three of our contributors to each highlight a stock they think is built to be a near-worry-free investment -- one you probably only need to check on to see how much those dividend payments have grown. Here's what they had to say.
Insuring a steady stream of income
Dan Caplinger: One company that flies under the radar screen for many dividend investors is Aflac (NYSE:AFL), the provider of specialty insurance products. By providing supplemental policies for specific diseases like cancer as well as for accidents and short-term disability, Aflac is able to tailor its offerings to be the most useful for customers and the most profitable for the company. What many people also don't realize is that Aflac does the majority of its business in Japan, and similar products there have been equally lucrative for the insurance carrier over the long run.
Aflac is a Dividend Aristocrat, sporting a 33-year track record of raising its dividends each and every year. Its most recent dividend increase came last November, when the company rewarded shareholders with a 5% boost. That's particularly impressive when you consider that the strong U.S. dollar has held back its earnings from its Japanese operations. But now that the Japanese yen has reversed course and started to strengthen, Aflac can expect even better results in the future. Demographic trends in both Japan and the U.S. favor the company and its specialty products, and the resulting strong prospects for sales growth should make the insurance company a good long-term holding that dividend investors can rely on for years to come.
This utility stock won't disappoint you
Neha Chamaria: A dividend stock that'll give you a good night's sleep should ideally be a steady business that doesn't ebb and flow with the broader economy. Utilities like Consolidated Edison (NYSE:ED) are a great example for the simple reason that you'll need electricity and gas no matter what.
Con Ed is a regulated utility, currently providing electricity to nearly 3.3 million and gas service to roughly 1.1 million customers. That ensures steady demand and near-predictable income, which has allowed Con Ed to not only pay a dividend every year, but also increase it annually for more than four decades.
The dividend increases may be modest, but they're likely to continue coming in as long as people need basic services like electricity. If you're worried about changing regulatory frameworks, Con Ed is ensuring it stays ahead in the game by having invested $1.8 billion in renewable energy projects in the past year and a half. Last month, Con Ed revealed its "virtual power plant" program in partnership with SunPower to provide battery-powered rooftop solar panels that will double as energy storage devices.
Overall, Con Ed offers you slow yet steady earnings growth -- a combination that works well for risk-averse dividend investors in the long haul. Despite the stock's steady climb this year, it still yields an attractive 3.4% in dividends. Combine that with the fact that Con Ed is a defensive stock that is less sensitive to market swings, and you needn't look further.
Piping cash into your wallet
Tyler Crowe: When looking for a stock you don't need to babysit, there are two critical qualities that company must possess: 1) a business model that can handle any variability that its respective market can throw at it, and 2) a management team you can trust to not muck it up. One company that fits this criteria rather well is refined petroleum product logistics specialist Magellan Midstream Partners (NYSE:MMP).
Magellan's business model has the ability to handle the ups and downs of the oil and gas market because much of it acts like a regulated utility. The company owns and operates the nation's largest network of refined petroleum product -- think gasoline and diesel -- pipelines. In many instances, those pipes deliver refined product to parts of the country where there is no other adequate means of transporting those essential products. Therefore, like a utility, it's granted a de-facto monopoly in exchange for a regulated price. That helps the company collect a stable but modestly growing tariff for a good portion of its system that provides an immense amount of stability.
Having a regulated business model is great, but a reckless management team that spends too much on questionable acquisitions or loads the company up with debt can throw that competitive advantage out the window. Luckily, Magellan has a conservative management team that focuses on maintaining a strong balance sheet and consistently growing the payout to shareholders. These two elements have combined into a stock that is one you don't have to babysit, and one that has generated market-beating returns over the long term.