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

By James Brumley - Jan 29, 2021 at 6:40AM

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Income investors looking for true long-term reliability should consider these companies.

Never say never. Plenty of companies that were once seen as permanent pillars of their respective industries are now all but gone, as are their dividends. Blockbuster Video, Eastman Kodak, and J.C. Penney are some of these names that come to mind, and they're just a sampling of the stocks that were once income stalwarts, but aren't any longer.

The fact of the matter is, however, some dividend-paying companies are simply better positioned to adapt to an unpredictable future than others. Among the most malleable businesses that income-minded investors may want to keep in their portfolios for decades are Johnson & Johnson (JNJ -1.19%), American Tower (AMT -0.80%), and The Southern Company (SO 0.05%).

Man holding a box with dollar bills flying out of it.

Image source: Getty Images.

Johnson & Johnson is so much more than shampoo and bandages

Dividend yield: 2.4%

Dividend CAGR (5-year): 6.1%

You likely know Johnson & Johnson as the maker of a popular baby shampoo. If you've looked a bit closer, you may also know it's the company behind Tylenol, Band-Aid brand bandages, Listerine mouthwash, and more. These consumer-oriented products are only a small slice of what it does though, accounting for around 15% of its revenue. Medical devices provide around 30% of Johnson & Johnson's top line, and prescription drugs produce a little more than half of it.

In fact, the company owns the immunosuppressives Remicade and Stelara, and co-owns leukemia drug Imbruvica with AbbVie, all three of which rank among the world's best-selling drugs. Never even mind the 12 drug approval filings it's got lined up for the next three years, or the 32 phase 3 clinical trials it has currently underway.

It is true that Johnson & Johnson does face some headwinds. It's still fighting a complicated wave of lawsuits over the sale of talcum powder contaminated with asbestos. Those could ultimately cost it billions of dollars. It has also been implicated in recent opioid-related lawsuits, with the plaintiffs asserting that the company downplayed their addiction risks.

These headwinds, however, don't pose a real threat to the company's dividend or the growth of the payout. J&J has a lot of levers it can pull and adaptations it can make to drive progress. As an example, in October, it completed its $6.5 billion acquisition of Momenta Pharmaceuticals, which brought several prospective blockbuster drugs into its portfolio.

American Tower, because mobile phones aren't going away

Dividend yield: 2.1%

Dividend CAGR (5-year): 18.4%

You may not be familiar with American Tower, but you're probably benefiting from its service. The real estate investment trust owns 181,000 cellphone towers, leasing space on them to more recognizable names like AT&T and T-Mobile. The company isn't limiting itself to the U.S. market though. It has been working on overseas growth for some time under the assumption that markets that are less developed now will eventually rely on wireless service as much as the U.S. does already. The only risk to this business would be an unexpected decision by people all over the world to stop using their mobile phones.

The odds of that happening, of course, are practically nil. Indeed, telecom company consortium GSMA estimates that only a little less than half the world's population is connected to the web with a web-enabled phone right now. Similarly, GSMA estimates that only 67% of the world's population are currently mobile subscribers. But buckle up. The addition of 600 million more users -- which it anticipates by 2025 -- should bring the total wireless customer tally up to 5.8 billion, or 70% of the world's population, while the advent of 5G should drive an explosion of web-enabled phone users well beyond 49%. This market growth outlook translates into revenue and income growth potential for American Tower.

We're already seeing plenty of evidence that this growth is underway. American Tower has increased its dividend payout every quarter -- not just every year -- since early 2012, from $0.21 per share then to $1.14 as of last quarter. Take the hint.

The Southern Company keeps the lights on

Dividend yield: 4.4%

Dividend CAGR (5-year): 3.4%

Finally, add utility name Southern Company to the list of dividend stocks you can count on for a lifetime.

Southern Company provides power for 9 million customers in six states. It also has footprints in the gas-storage and fiber optic businesses, diversifying its revenue streams and boosting the profits that it ultimately passes along in the form of dividends to shareholders. But, electricity production and delivery is its core business. That's why it's a reliable income investment, and will remain one into the distant future. People may skip vacations or postpone big purchases. But unless their situations get particularly dire, they're going to keep the lights on by paying their electricity bills.

The corresponding dividend resilience isn't difficult to spot either. The Southern Company has raised its payout for 19 consecutive years, and while that growth has been less than thrilling at an annualized clip of 3.3%, investors buying the stock today can step in at an above-average yield of 4.4%. That's not a bad trade-off for a stock you'll never have to worry about.

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Stocks Mentioned

The Southern Company Stock Quote
The Southern Company
$74.19 (0.05%) $0.04
Johnson & Johnson Stock Quote
Johnson & Johnson
$176.69 (-1.19%) $-2.13
T-Mobile US, Inc. Stock Quote
T-Mobile US, Inc.
$125.31 (-2.57%) $-3.31
AT&T Inc. Stock Quote
AT&T Inc.
$20.23 (-1.63%) $0.34
American Tower Corporation Stock Quote
American Tower Corporation
$231.13 (-0.80%) $-1.87
AbbVie Inc. Stock Quote
AbbVie Inc.
$152.91 (-1.21%) $-1.87
Eastman Kodak Stock Quote
Eastman Kodak
$4.46 (-3.57%) $0.17

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

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