Owning great dividend stocks can be a way to both beat the market and generate income from your portfolio. But with the world changing quickly, not all dividends are what they used to be.
If you're in search of dividends you can count on for decades to come, Apple (AAPL 1.27%), Disney (DIS 0.18%), and NextEra Energy Partners (NEP 2.99%) are a great place to start.
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1. Apple
Smartphones have arguably been the most revolutionary product introduced so far this century, and the dominant player in the industry is Apple. The company has become one of the most valuable companies in the world not only by selling iPhones, but by expanding its ecosystem to other hardware (iPad, Apple Watch, and AirPods) and software (iCloud and the App Store). I don't see this changing anytime soon. Smartphones have become standard devices for billions of people around the world, and they likely will be for the foreseeable future.
From a dividend standpoint, Apple is a perfect dividend stock for investors. The company generated $66.6 billion in free cash flow over the past year, but still only pays out about a quarter of its earnings as a dividend. There's room to both reinvest and grow the dividend long-term.
AAPL Free Cash Flow data by YCharts
Apple isn't the biggest dividend payer, with a yield of just 1% today, but it's a great business in a booming tech industry and I think we can count on dividend payments for many decades to come.
2. Disney
It's hard to argue that any media company has made the transition to the streaming business model more successfully than Disney. The company's Disney+ streaming service has already attracted 50 million subscribers just a few months after launch, and Hulu has over 30 million subscribers. That's in addition to revenue the company already generated from movie theaters, TV stations, theme parks, cruises, and more.
What's great about Disney's business model is that it uses an asset over and over again to make money. A Marvel movie, for example, can generate $1 billion in revenue at the box office, but then it becomes a ride at a theme park, a movie on Disney+, and can run on Disney's other media services.
Like Apple, Disney doesn't have the biggest dividend, currently yielding 1.4%, but the company has built a media empire with earnings power that's built to last for decades.
3. NextEra Energy Partners
Electric energy consumption is one part of the economy that hasn't changed much as seemingly every part of the world changes, but it is changing where our energy comes from. Coal is quickly being phased out as an energy source, and renewable energy from wind and solar is filling the gap. Companies like NextEra Energy Partners have been created to own and operate these renewable energy power plants, generating consistent, contracted revenue for decades that drives their dividends.
The company owns 5,330 MW of renewable energy assets with an average contracted life remaining of 15 years to sell electricity to utilities. It has an expected dividend of $2.40 to $2.46 per share by the end of 2020, management still expects to grow cash flow enough to increase the dividend by 12% to 15% each year through at least 2024, while maintaining about 25% of available cash to acquire growth projects.
Energy demand isn't going to fade, and renewable energy generation is going to grow for the foreseeable future. NextEra Energy Partners is positioned to profit from that transition, and that's why I like the dividend long-term.
A diverse set of long-term dividends
Each of these companies are giants in their industries for different reasons. But they each have defensible businesses that are going to grow given the technology and economic trends we're seeing today. That's why I think they're great growth dividends and stocks to buy and hold long-term.
