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3 Dividend Stocks That Could Make You Rich Over the Long Term

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The one-two punch of compounding and an appropriate time horizon can help investors generate long-term wealth.

There's little question that owning quality stocks and holding them is the surest path to long-term financial security. Solid dividend payers can help boost those results, increasing the value of a portfolio at regular intervals like clockwork. Adding an investing timeline of years, if not decades, allows the power of time and compounding to work for you. This creates a virtual trifecta of wealth creation.

On this clip from Motley Fool Live, recorded on Feb. 12,"The Wrap" host Jason Hall and contributors Danny Vena and Jamal Carnette recommend three dividend stocks that could make investors a fortune over the long term.

Jason Hall: I've got one that I'm going to grab real quick here that we can all chime in on. This is Richard Oz, "Creating a dividend growth portfolio for young adults should lead to compounding wealth creation later in life." Preach it, preach it. "Can you comment on portfolio creation for young adults?"

This is what I want to do. We are going to answer your question here each of us. Give us your best dividend growth companies in your respective wheelhouse.

I'm going to use the stock that I just talked about as my potential 10-bagger over the next 10-15 years, CareTrust REIT (CTRE -0.33%), it's a $2 billion dollar real estate investment trust, pays a 4% dividend yield at recent prices. They've increased the dividend every year since going public. They've doubled the dividend in five years. It's a $2 billion dollar company with incredible leadership in an industry that's going to probably double in size or more over the next decade, and it's going to keep growing from there. Who wants to go next here, Jamal?

Jamal Carnette: I'll jump in here and for a long-term, I look at long-term drivers whenever I'm trying to buy stocks, particularly if you're looking at buying stocks for kids or children. I think a stock that has a long runway. It's obviously one of the bigger stocks right now, Microsoft (MSFT 1.29%).

But right now, you're sitting at multi-decade returns from the Internet of Things and from just increased cloud usage. I remember, I guess it was many decades ago, when they started to institute their dividend and it's grown like a weed ever since. When you're looking to buy stocks for young kids, and you're looking for those dividend growers with multi-decades worth of growth story, and I think Microsoft with the dividend it currently pays now, it's low, but that will continue to grow rather significantly.

Hall: I love that. You don't have to find a high yield, right?

Carnette: Right.

Hall: A lower yield but enormous double-digit annual [laughs] growth can really, really pay off over time because it also signifies a company that's growing its cash flows so that's really important. Danny, bring us home here on your favorite dividend growth stock.

Danny Vena: When you talk cash flow, it's hard to talk about cash flow without talking about my favorite dividend stock which is Apple (AAPL 2.32%). If you look at Apple since it reinstituted its dividend, the dividend that it pays, even though the yield is very low, the reason the yield is low is because the company has grown so much, the stock price has grown so much, the market cap has grown so much, but the dividend has more than doubled.

I would say if you look at the things that are going on with Apple right now, they've got nearly a billion iPhones out in the wild. Estimates are that about 350 million of those iPhones are in the window to be replaced. The more iPhones you get out there, the larger that market grows, the more people that are going to be interested in buying wearables, the more people are going to be interested in hooking up into Apple's ecosystem of services, which keeps getting larger every year. I think that for the next decade, at least, you really would be hard-pressed to find a better, more secure dividend stock than Apple.

Hall: Absolutely love it guys. Well, there you have it. We have CareTrust REIT, Microsoft, and Apple. I think those are three [laughs] really strong choices here.

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Stocks Mentioned

Apple Inc. Stock Quote
Apple Inc.
$143.78 (2.32%) $3.26
Microsoft Corporation Stock Quote
Microsoft Corporation
$265.90 (1.29%) $3.38
CareTrust REIT, Inc. Stock Quote
CareTrust REIT, Inc.
$18.25 (-0.33%) $0.06

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

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