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

By Todd Campbell, Jamal Carnette, CFA, and Nicholas Rossolillo – Updated Apr 10, 2019 at 2:30PM

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Stashing these top stocks in your income portfolio could pay off big in the coming decades.

Dividend-paying stocks provide investors with another important source of income, and reinvesting dividends to buy more shares can give long-term returns a welcome boost. Not every dividend stock deserves a spot in long-haul portfolios, though. Many top dividend stocks from the past have had to cut their dividends because innovation has disrupted demand for their products or services.

To lower the risk of picking the wrong dividend stock, we asked three Motley Fool contributors what their favorites are for forever-style portfolios. Read on to find out why they recommend Verizon (VZ 1.66%), Waste Management (WM 1.87%), and Target (TGT 3.47%).

Mobility is here to stay

Nicholas Rossolillo (Verizon): It's a tall order to recognize companies that will be on solid footing for decades to come. If I had to pick an industry that's not likely to go away anytime soon, though, mobile telecom would be one of them.

A man sitting in a yoga pose as $100 bills fall from the sky around him.


As America's largest and consistently ranked most reliable mobile network, Verizon tops my list of generous dividend payers that have staying power for the foreseeable future. It's not as if Verizon and the mobile industry are free of disruptive changes. On the contrary, new mobile network technology like 5G keeps companies like Verizon on their toes, constantly needing to upgrade infrastructure to satisfy the world's insatiable demand for faster internet connectivity.

And that's the case right now with Verizon, which is in the midst of a race to 5G supremacy with its telecom peers. Management said it will raise capital expenditures to $17 billion to $18 billion this year -- much of that associated with building the 5G infrastructure -- which equates to a 2% to 8% increase over 2018. However, that spending should eventually lead to further growth as 5G could open up connectivity services in new areas like vehicles, virtual reality, and smart cities. Verizon can afford the upgrades, too, as it generated $34.3 billion in operating cash flow last year. It's also in process of scaling back its media and entertainment endeavors to refocus on its next-gen services and maintain its leadership in the U.S.

After subtracting capital expenses, there's about $17 billion in free cash flow left over from which to pay its current 4.3% dividend yield. Servicing that dividend cost Verizon $9.77 billion last year, so there's plenty of headroom for the company to continue to invest in itself or increase its investor payday. With mobility only gaining in importance over time, I like Verizon's chances to maintain its lead and keep rewarding shareholders along the way.

Check out the latest earnings call transcripts for Verizon, Waste Management, and Target.

A recession-resistant industry Goliath

Todd Campbell (Waste Management): Its 2% dividend yield isn't as high as those of other companies on this list, but Waste Management's addressable market isn't going to disappear anytime soon.

A garbage Goliath, Waste Management boasts industry-leading market share and it's proven itself to be a top-notch operator through good times and bad. It has over 21 million customers and manages 244 active landfills, and its contracts offer shareholder-friendly clarity into its cash flow. In 2018, its annual revenue totaled $14.9 billion, up from $13 billion in 2015, and $11.8 billion during the recession in 2009.

The company's dividend has increased for 16 consecutive years, including a 10% increase in February, and its current quarterly dividend payout works out to $2.05 per year, up 173% from the company's payout in 2004.  A record financial performance allowed it to return $802 million to investors via dividends and an additional $1 billion via share repurchases last year.

Admittedly, there's no telling what happens in the future for any company. Waste Management is no exception. Nevertheless, its dominant position in a recession-resistant industry and solid history of rewarding shareholders make it a top stock that's worth owning in long-term income portfolios.

An arrow in the bulls eye of a target.


Dividend investors should put a bull's-eye on Target

Jamal Carnette, CFA (Target): Despite the cacophony of death knells for retailers, better operators are starting to differentiate themselves. What has occurred is a shift in retail thinking to omnichannel retailing, where brick-and-mortar stores will complement online commerce. Although Walmart is at the forefront of this revival acquisition, Target is starting to see dividends from its $7 billion digital and storefront makeover.

Although Target reported strong sales in the third quarter -- posting a 5.1% comparable-store increase on the back of 49% digital sales growth -- investors sold off the stock on account of lower margins. Target expects strong top-line growth to continue, preannouncing comparable and digital sales growth of 5.7% and 29%, respectively, in the busy November/December period. As a Target shareholder, I'm willing to sacrifice margins in the short term to grow the digital channel.

One thing that's not in dispute is the company's impeccable history of returning cash to investors. This month, Target paid out its 206th consecutive dividend, a streak that spans more than 50 years. Last year's dividend increase marked the 47th consecutive year of increases. Still, Target remains cheap due to overblown concerns about margin. At a current forward P/E ratio of 13 versus the greater market's 16.5 multiple, value-oriented income investors should try Target on for size.

Jamal Carnette, CFA owns shares of Target. Nicholas Rossolillo owns shares of Verizon Communications. Todd Campbell has no position in any of the stocks mentioned. His clients may have positions in the companies mentioned. The Motley Fool recommends Verizon Communications. The Motley Fool has a disclosure policy.

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Stocks Mentioned

Target Corporation Stock Quote
Target Corporation
$157.06 (3.47%) $5.27
Verizon Communications Inc. Stock Quote
Verizon Communications Inc.
$39.81 (1.66%) $0.65
Waste Management, Inc. Stock Quote
Waste Management, Inc.
$168.18 (1.87%) $3.09

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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