There are no guarantees in investing. The capital you place in a stock is always at risk of declining as the company loses ground to rivals or makes a series of wealth-destroying acquisitions.
Income investors try to protect against that risk by stacking their portfolios with companies that pay a large portion of their earnings each year in tangible -- and growing -- dividends. This investment style has several other advantages, including its reliance on the power of dividend reinvestment and compounding returns to supercharge growth.
With these benefits in mind, let's take a closer look at three dividend stocks that should deliver growing income levels for decades to come.
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Sherwin-Williams
Warren Buffett has famously cited Coca-Cola's near unchallengeable authority in the soda business as a chief reason he has loved that stock for so many decades. "If you gave me $100 billion and said 'Take away the soft-drink leadership of Coca-Cola,' I'd give it back to you and say it can't be done," Buffett has said.
A similar case can be made for Sherwin-Williams (SHW -0.07%). The paint and coatings giant owns an unmatched manufacturing, distribution, and retailing network that last year helped it book $17.5 billion of revenue compared to $5 billion a year earlier. On an organic basis, sales rose 5%, and operating income shot higher by 23%.
Sherwin-Williams has been busy pouring cash into its supply network and paying down the debt it took on to buy the Valspar brands. Yet the profitable business still generates plenty of cash available for dividend payments. Executives raised the dividend to $3.44 per share in 2018 compared to $1.40 per share a decade ago. That success is part of a longer streak of annual dividend increases that goes back 40 years for Sherwin-Williams investors.
Apple
The biggest knock on the consumer tech industry is that it is too competitive to support strong, sustainable profit growth. Apple (AAPL -1.17%) looks like a glaring exception to that rule.
The iPhone maker's brand power and innovation wins have allowed it to win a disproportionate piece of the annual global smartphone market. Pair that unique industry position with high profit margins, and you have a recipe for some staggering cash flow figures. In 2018, Apple produced $77 billion of operating cash flow, or a whopping 29% of sales.
CEO Tim Cook and his team are increasingly directing those cash flows toward shareholders, with tens of billions of dollars going out as dividend payments since the payout began in 2012. But the best news is that Apple still pays less than one-third of earnings in dividends, giving it plenty of room to continue hiking the payment over the years to come.
Home Depot
You don't need to predict how homes will look in 30 years to know that they'll require lots of ongoing investments in upkeep and modernizing. For exposure to that core consumer discretionary market, consider picking up some Home Depot (HD 0.28%) shares.
That home improvement giant checks all the boxes for retailing outperformance, including steady market share growth, elevated gross and net profit margins, and a flourishing multichannel selling approach. Home Depot is also one of the most efficient businesses on the market when it comes to capital allocation.
Unlike rival Lowe's, Home Depot isn't a member of the Dividend Aristocrat club, which requires an unbroken streak of 25 or more years of annual dividend raises. The company held its dividend steady during the worst of the housing crisis in 2008-2010, resetting the clock on that record.
But while it lacks a bit in consistency, the Home Depot dividend is more generous -- 55% of earnings compared to Lowe's 35% -- and faster growing over the last five years. Look for these favorable comparisons to continue through the next industry cycle as you collect dividend payments you can put toward your next home remodeling project.
