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3 Dividend Stocks That Should Pay You the Rest of Your Life

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Here's why we think Anheuser-Busch InBev, Lowe’s, and Medtronic can shower their investors with income for decades to come.

Every income investor dreams about owning a portfolio of "one-decision" stocks, which are businesses that are so strong that they can be purchased with a set-it-and-forget-it mindset. Of course, capitalism is brutally competitive, so finding a company that is capable of standing up to the test of time is easier said than done. 

So, which dividend stocks do we think can be safely held over the next half century? We asked that question to a team of investors, and they picked Anheuser-Busch InBev (BUD 0.53%)Lowe's (LOW -0.12%), and Medtronic (MDT 2.32%)

businessman handing over hundreds

Image source: Getty Images.

A high-energy stock for years to come

Rich Duprey (Anheuser-Busch InBev): The power Anheuser-Busch InBev wields comes not just from its massive market share here in the U.S. and around the globe, though that's considerable, but rather from its distribution network. The envy of its rivals -- and a sore point with them, too -- A-B has the ability to get a beer on store shelves and in a bar because of its vast web of distributors. It can take the many small, regional craft beers it has been buying up and turn them into national brands relatively quickly.

While A-B has the beer world covered, from mass produced to craft and now even down into homebrew, the mega brewer just made a move into energy drinks with its purchase of Hiball. But it's a diversification move with a twist.

Hiball differs from other energy drink makers because its drinks are natural and organic without and sugars or sweeteners of any kind added. And as Anheuser-Busch has shown it likes to do, it bought the leading manufacturer in this niche with sales of around $40 million over the past year.

That allows A-B to buy its way into the trend toward healthier beverages that consumers are gravitating toward, and although Hiball's sales are negligible in terms of the brewer's overall take, it adds to its deal with Starbucks (SBUX -0.08%) last year to begin selling non-alcoholic teas and further diversifying its streams of revenue.

Anheuser-Busch also pays a dividend of $3.90 per share that currently yields a tasty 3.4%. Analysts are forecasting A-B will continue growing earnings at better than 15% annually for the next five years, so investors can be assured this stock will pay them for the rest of their lives -- and maybe beyond, too.

Home remodels never end

Demitri Kalogeropoulos (Lowe's): Lowe's trails its larger retailing rival Home Depot (HD -0.31%) in a few key operating metrics, including sales growth and profitability. But the home-improvement runner-up offsets many of its operating weaknesses with a reliable dividend that has a good chance of outlasting you as a shareholder.

Lowe's pays out just 35% of earnings as dividends, compared to Home Depot's 55% payout target. Some of the gap can be explained by comparing the two retailers' profitability figures. Home Depot, after all, enjoys a 14% operating margin, while Lowe's is below 9%.

Yet Lowe's management team is also far more conservative when it comes to capital allocation. That's a good quality to have when you're looking for long-term dividend appreciation. It's also a key reason Lowe's is the only home-improvement retailer that's a Dividend Aristocrat, having boosted its payout in each year since it went public in 1961. Home Depot, in contrast, was forced to pause its dividend hikes during the worst of the financial crisis and thus has a much shorter track record for income investors to rely on.

Once management is done spending aggressively on expanding its store footprint, Lowe's will have room to raise its payout ratio closer to the 50% mark. Its profitability and sales growth figures, meanwhile, should eventually close the gap between it and its larger rival -- given that Lowe's is poised to benefit from the exact same positive industry trends. Those shifts suggest a Lowe's stock purchase today could pair strong price appreciation with consistent, healthy income growth over the long term.

History is on this company's side 

Brian Feroldi (Medtronic): I think medical device juggernaut Medtronic has a good shot at paying out a rising dividend over the next few decades. My reasoning is that this company has already managed to increase its dividend payment for 40 years in a row. Very few other businesses can make that claim, so clearly this company has developed a winning business model.

What has made Medtronic's business so reliable? One answer to that question is the company's diversification strategy. Medtronic sells hundreds of products in four main categories: cardiac and vascular, minimally invasive therapies, restorative therapies, and diabetes. Generating revenue from so many different product lines helps keep the company's overall pie growing even when results are weak in a few business segments. What's more, Medtronic is diversified geographically as about 40% of its sales come from international markets. When combined, these factors help to keep the company's financial statements moving in the right direction even during periods of economic stress.

Another key factor in Medtronic's stability is the fact that it focuses exclusively on selling medical devices. Learning how to use a medical device can take a long time. For that reason, once a provider gets comfortable, they tend to remain very brand-loyal, especially since there is little financial incentive for them to switch. That fact keeps a lot of providers locked in to Medtronic ecosystem.

Looking ahead, Medtronic's growth plan is to launch new products, improve margins, expand geographically, and make occasional tuck-in acquisitions. When combined with regular share buyback, management believes double-digit earnings growth is possible. Add in the company's dividend yield of 2.2% -- which only consumes about 40% of trailing earnings -- and I think Medtronic stands a good chance at showering investors with a rising dividend for decades to come. 

Brian Feroldi owns shares of Starbucks. Demitrios Kalogeropoulos owns shares of Home Depot and Starbucks. Rich Duprey has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Anheuser-Busch InBev NV and Starbucks. The Motley Fool recommends Home Depot and Lowe's. The Motley Fool has a disclosure policy.

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