Far too many people think the stock market is a great way to get rich quick. But as many of the world's best investors will tell you, there is no better method to predictably generate wealth than by doing so over long term. And even then, arguably the best way to build long-term wealth is by purchasing and holding shares of strong dividend stocks with a history of increasing their payouts, as well as a high likelihood of extending that history.
So we asked three Motley Fool contributors to each pick a growth dividend stock they believe investors would be wise to buy this month. Read on to see which businesses they chose and why.
A dividend growth stock to cure your ills
Sean Williams: Income seekers looking to add a company with solid growth prospects for both profits and future dividends should get Bristol-Myers Squibb (BMY 0.03%) -- whose stock is currently trading at a 52-week low -- on their radar.
The drug giant was hammered in early August after the company surprisingly announced that its blockbuster cancer immunotherapy Opdivo failed to reach its primary endpoint of a statistically significant improvement in progression-free survival in the CheckMate-026 study. This trial was testing Opdivo as a monotherapy for patients with previously untreated advanced non-small cell lung cancer (NSCLC) whose tumors had PD-L1 expression of at least 5%. Some analysts have suggested that this surprising failure could cost Bristol-Myers $4 billion in peak annual sales for Opdivo.
However, I'd opine that this failure could be the perfect time to buy. Keep in mind that the CheckMate-026 study examined Opdivo as a monotherapy. Cancer immunotherapies, which work by blocking the immunosuppressant quality of cancer cells and supercharging the immune system, often work best when used as combination therapies with existing chemotherapies. I'd take this disappointing trial with a grain of salt.
Opdivo has the opportunity to remain a standard-of-care therapy in quite a few indications, including second-line renal cell carcinoma and second-line NSCLC. Opdivo is also being studied in dozens of additional combination studies, so closing the door on Opdivo's potential now after a single study failure simply isn't prudent.
Given Bristol-Myers' focus on oncology, Wall Street anticipates that its full-year EPS could double between 2015 and 2019. With Bristol-Myers historically paying out between 50% and 75% of its profits as a dividend, this would imply the possibility of big dividend increases to come. Meanwhile, investors can relish Bristol-Myers' superior 2.7% yield and above-average growth prospects.
Process this market beater
Steve Symington: Even after watching shares of NVIDIA (NVDA 1.48%) double so far in 2016 as of this writing, I think the graphics chip specialist offers a compelling option for investors looking for a balance between share price appreciation and generous capital returns. Of course, the former speaks for itself. And as I wrote last month, NVIDIA has a long history of both repurchasing shares (including 151 million shares bought back for $2.9 billion since fiscal 2013) and rewarding investors through its small but growing quarterly dividend (currently $0.115 per share, after being increased three times from $0.075 since NVIDIA initiated it in 2012).
But perhaps more important is that NVIDIA's GPU technology is playing a central enabling role for multiple fast-growing industries, helping total revenue last quarter to grow 24% year over year to a new company record of $1.43 billion. That included a 25% increase in NVIDIA's core GPU business, thanks to strength in datacenter and GeForce gaming GPU sales. And revenue from NVIDIA's younger Tegra processor business climbed 30% year over year to $166 million, driven primarily by a 68% increase in automotive sales.
To that end, the majority of NVIDIA's automotive revenue currently comes from chips powering infotainment systems in dozens of vehicle models. But with the help of new partnerships and its latest Drive PX self-driving car technology, NVIDIA is on track to crack the multi-billion dollar market for ADAS (advanced driver assistance systems). Over the past month, for example, NVIDIA struck separate collaborative agreements with TomTom for driverless-car mapping and with Baidu for a cloud-connected, AI-centric self-driving car platform.
All things considered, I think NVIDIA is ideal for investors with the foresight to get in early and hold the stock while its multiple growth stories play out.
A trend that could produce decades of income growth
Jason Hall: One of the best ways to invest in dividend growth is to find a company that is set to benefit from a long-term secular trend, and CareTrust REIT Inc. (CTRE 1.86%) is certainly in that position. The company, which owns long-term care, rehab, and senior housing facilities, is an investment on the lack of housing to meet the needs of a retiring baby boomer generation.
Over the next 15 years or so, 10,000 baby boomers will retire every day, on average, and most studies indicate that there are too few facilities operating today to meet the needs of this growing, aging population. Furthermore, baby boomers are expected to live longer than their parents, and there's a strong correlation between old age and increased need for rehabilitation and long-term care.
Today, CareTrust is a relatively small player, with fewer than 150 facilities in its portfolio -- but that number is 50% bigger than it was only two years ago. And while it's probably not reasonable to expect the company to continue growing its property portfolio at that kind of rate, CareTrust is in a nice position to grow its business both faster than many of its much larger peers and certainly at a quicker rate than the greater economy.
There is some risk that CareTrust could get drowned out by its bigger peers, but on balance its small size should make its path to growth easier. Add in the fact that a lot more care and housing facilities will be needed in the coming decades, and the opportunity for years of dividend growth is very compelling.