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

By Reuben Gregg Brewer – Updated Jun 24, 2020 at 9:07AM

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If you are looking for dividend-paying stocks that have what it takes to get through tough times (and more), then this trio is for you.

There are no guarantees in investing, especially when it comes to dividends. Dividends are often among the first things to go when times get tough. However, there are companies that combine vibrant business models with a long-term commitment to returning value to shareholders, setting themselves apart from peers. That's exactly the case at 3M (MMM 0.01%), W.P. Carey (WPC -4.73%), and The Southern Company (SO -2.45%) -- and here's why you can expect these dividend stocks to pay you for the rest of your life.

1. Research leads the way at 3M

Once known as Minnesota Mining and Manufacturing, 3M is a globally diversified industrial powerhouse. Although it breaks its business down into just four divisions (Safety & Industrial, Transportation & Electronics, Health Care, and Consumer), it's products span a huge spectrum. From face masks to specialty adhesives, 3M has its fingers in a massive array of products and industries. You likely touch something that this $90-billion-market-cap giant made every single day. 

A piggy bank with word dividend on it

Image source: Getty Images

But the really big issue here is how the company goes about doing business. For starters, it has a long-term commitment to research and development, creating technologies that drive the future. However, it also makes sure to make the best use of those technologies across its businesses, getting every mile out of its research. This helps set the company apart and tends to give it a notable edge in the market, because it can charge top dollar and drive margins. In fact, each of its four divisions had 20%-plus adjusted operating margins in the first quarter, despite the headwind from COVID-19.

On the dividend front, 3M has increased its disbursement annually for an incredible 62 consecutive years. Remember, this is a company operating in a cyclical industry, so that streak is even more impressive than it initially looks. Today the industrial giant's payout ratio is a not-unreasonable 66% or so, with a yield of 3.7%, which is toward the high end of its historical range. That suggests that now could be a good time to take a closer look at 3M. 

2. A diversified landlord

W.P. Carey is a real estate investment trust (REIT) that is anything but your typical property owner. It uses a net-lease model, meaning it owns buildings but the lessees have to pay most of the assets' operating costs. This relatively low-risk approach is pretty common. But what W.P. Carey does from this base sets it apart.

For starters, the REIT is an active and opportunistic investor. That means that it is always buying and selling properties, using sales to help self-fund new acquisitions and ground-up development efforts. To make sure it has the broadest possible set of opportunities, meanwhile, it doesn't focus on just one sector like many peers. Its portfolio includes industrial (24% of rent), office (23%), warehouse (22%), retail (17%), self storage (5%), and "other" (the rest). In addition to this, W.P. Carey generates about a third of its top line from Europe. It's a unique portfolio that allows an incredible amount of flexibility. For example, the vast majority of its retail exposure is in Europe, where the sector is less overdeveloped than in the United States.  

MMM Dividend Yield Chart

MMM Dividend Yield data by YCharts

The model has worked incredibly well over time, and the dividend has increased for 23 years -- every year since the REIT's IPO. In fact, despite the huge headwinds that landlords are facing today, which have led many REITs to cut their dividends, W.P. Carey just inched its dividend higher as a show of strength. With a generous 6% yield, it's well worth getting to know this REIT while investors are worried about the broader REIT sector. 

3. A slow but steady utility

The last name, U.S. utility giant The Southern Company, is the most boring on the surface. It's a utility, which puts it in a highly regulated industry. That's good and bad: On the one hand, Southern has government-granted monopolies in the regions it serves, providing a solid business foundation. But that means that it has to get regulator permission when it sets customer rates, which limits growth. However, this process tends to pull capital spending and growth plans out of the general Wall Street cycle, meaning that Southern will often keep moving forward on plans no matter what's going on in the broader market. 

But The Southern Company is truly focused on the long term, doing the things it believes are right regardless of the market's opinion. At times it misses the mark, like its failed attempt to build a coal power plant with carbon capture technology. But these risks, built on a solid utility foundation, can set it up for a brighter future. Today that involves being the only company constructing a domestic nuclear power plant. Although controversial in other ways, nuclear power is a clean energy source. You can argue that these are risky ventures, which is true. But they are also vital efforts to adjust to a changing world, in which global warming is considered an increasing threat. Over the past decade, Southern has more than halved its use of coal. 

Meanwhile, the company has paid a dividend at an equal or greater rate for more than 70 consecutive years. The payout ratio, at roughly 74%, is in line with the company's historical range and those of its closest peers. And the yield, at nearly 4.8%, is toward the high end of the utility sector. Using its boring business to build for the future, Southern is a good option for long-term dividend investors looking to add a little diversification to their portfolios.  

Time for some deep dives

With sizable yields and differentiated approaches within the various industries in which they operate, 3M, W.P. Carey, and Southern are all the types of companies that can keep paying you dividends for the rest of your life. If that sounds good, you should dig into the details on these companies. If you take the time to get to know this trio, it's likely that one or more of these stocks could end up in your portfolio today.

Reuben Gregg Brewer owns shares of 3M, Southern Company, and W. P. Carey. The Motley Fool recommends 3M. The Motley Fool has a disclosure policy.

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Stocks Mentioned

3M Company Stock Quote
3M Company
$113.00 (0.01%) $0.01
The Southern Company Stock Quote
The Southern Company
$73.15 (-2.45%) $-1.84
W. P. Carey Inc. Stock Quote
W. P. Carey Inc.
$74.76 (-4.73%) $-3.71

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