Please ensure Javascript is enabled for purposes of website accessibility

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

By Rachel Warren - Apr 4, 2021 at 6:30AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Here are the best stocks for dividend investors to buy in 2021.

Investors love dividends, and with good reason. Whenever you buy a stock, it should complement your overall investing strategy and portfolio goals. The great thing about quality dividend stocks is that you can both create a second stream of income and expand your cash availability for future investments.

If you're hunting for top stocks that you can rely on to fuel dividend income and portfolio growth for decades to come, you'll want to take a second look at the following three stocks.

Smiling man in suit looking at laptop

Image source: Getty Images.

1. Johnson & Johnson

Johnson & Johnson (JNJ 1.09%) is hardly a new name. The pharmaceutical stock is a reliable, recession-resistant investment that consistently adds value and growth to shareholders, plus its dividend yields 2.5%.

The most attractive aspect of Johnson & Johnson's dividend isn't its numerical yield so much as its history. The company has raised its dividend for nearly 60 consecutive years meaning Johnson & Johnson is a rare Dividend King. In fact, this club of stocks is so small that fewer than 30 companies snagged this title last year.

Johnson & Johnson entered the economic landmine of the pandemic environment on solid footing. In 2018 and 2019, the company reported operational sales growth of 6% and 3% on a respective basis. And while a notable drop in medical procedures at the height of the pandemic adversely affected medical device segment sales, the company's pharmaceutical and consumer health businesses helped it achieve positive full-year sales growth in 2020. Household names like Tylenol, Listerine, OGX, Stelara, and Darzalex are just a few among Johnson & Johnson's stable of products and brands that fueled meaningful growth last year.

Johnson & Johnson celebrated a significant win when the Food and Drug Administration granted its single-dose COVID-19 vaccine emergency use authorization in February. But it won't be enjoying immediate effects from the vaccine on its bank account, as it agreed to distribute doses without taking a profit during the pandemic. In any case, this is huge progress in the front to defeat COVID-19, and the vaccine could bring substantial profits in the long-term. Phase 3 trial data showed the vaccine to be 85% effective in preventing individuals from becoming severely ill with COVID-19, and 100% effective in preventing hospitalization or mortality about a month after the patient was vaccinated.

Johnson & Johnson's stellar track record of increasing and maintaining its dividend, underlying financial strength, and diverse product portfolio has enabled it to survive many of the worst financial crises of the modern age. The crises of the last year was no different, and investors who are in it for the long haul should not hesitate to buy shares of this incredible value stock.

2. 3M

3M (MMM 0.95%) also qualifies as a Dividend King having raised its dividend annually for a whopping 62 consecutive years. The conglomerate's dividend yields a robust 3% right now.

In 2020, 3M's sales grew by a modest 0.1%, but adjusted free cash flow shot up 18%. The company made notable strides toward post-pandemic recovery in the fourth quarter, indicating momentum ahead.

During the fourth quarter, the company reported roughly 6% sales growth. Not only did 3M boost its adjusted free cash flow by 16% in this three-month period, but its earnings per share (EPS) also shot up by double digits. Each of 3M's individual business segments saw positive growth as well in the fourth quarter of 2020. For example, sales in the company's consumer, safety and industrial, and health care segments grew at respective rates of 11%, 13%, and 5%.

Management is forecasting continued positive sales growth in the mid-single digits for 2021. While 3M has demonstrated mixed financial performance in recent years, it has remained unwavering in its commitment to consistently raising its dividend. Plus its individual segment growth and positive sales and cash flow increases during the pandemic are all reasons this stock is a worthy contender for the long-term investor's portfolio.

3. Lowe's

Last but not least is Lowe's (LOW -0.88%), another stock that's been crowned a Dividend King. Lowe's pays a dividend that currently yields approximately 1.3%. Although that's not the highest yield on this list, with 58 years of consecutive dividend increases, dividend-seeking investors can still find plenty to like about Lowe's.

While many brick-and-mortar retailers have struggled during the pandemic, Lowe's has enjoyed the fruits of essential-business status and delivered exceptional growth. In the fourth quarter, total comparable sales shot up 28%, while sales derived from spiked by more than 120%. The company's full-year sales grew 24% from 2019, and Lowe's amassed total sales of close to $90 billion over the 12-month period.

Lowe's also paid out $452 million in dividends in the fourth quarter of 2020 alone, and nearly $2 billion to shareholders in the full-year. The company has plenty of cash to work with to continue covering its dividend obligation to investors. At the end of 2020, Lowe's reported roughly $5 billion in cash and cash equivalents on its balance sheet along with $3 billion in untapped revolving credit.

The products and services that Lowe's provides generate consistent consumer demand year-round and regardless of the state of the economy. If anything, demand for Lowe's products and services has only grown throughout the past year. If you're a more risk-averse investor looking for a top-notch stock that is primed for both continued dividend and balance sheet growth, Lowe's is a no-brainer buy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Johnson & Johnson Stock Quote
Johnson & Johnson
$181.40 (1.09%) $1.96
3M Company Stock Quote
3M Company
$145.75 (0.95%) $1.37
Lowe's Companies, Inc. Stock Quote
Lowe's Companies, Inc.
$184.62 (-0.88%) $-1.63

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

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 05/25/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.