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3 Dividend Stocks You Can Buy and Hold Forever

By David Jagielski – Oct 5, 2021 at 10:30AM

Key Points

  • Walgreens, Coca-Cola, and Toronto-Dominion Bank all pay more than 3% yields.
  • While not all are Dividend Aristocrats, investors can expect to see their dividends increase.
  • These companies all have strong financials that can support their payouts.

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All of them offer solid, recurring income to investors.

If you're looking for a good way to grow your portfolio without worrying too much about the markets as a whole, consider buying dividend stocks. Income investments can go a long way in increasing your portfolio's balance, and businesses that pay a dividend are often safer than your average stock.

Three of the best income stocks you can buy now are Walgreens Boots Alliance (WBA -1.70%)Coca-Cola (KO -0.13%), and Toronto-Dominion Bank (TD -1.49%). They all offer above-average payouts and can be safe investments to just buy and hold.

Pharmacist wearing a surgical mask.

Image source: Getty Images.

1. Walgreens Boots Alliance

Global pharmacy giant Walgreens pays investors an annual yield of 4% -- or triple the 1.3% you would earn from the broad S&P 500 stock index. And with 46 years of consecutive dividend increases, those payouts will only likely get bigger. In fact, the stock is well on its way to becoming a Dividend King in just a few more years. That's an important milestone for income stocks and for investors who are looking for stable, dividend investments.

Walgreens has historically not been a highly profitable business (its net margins are typically less than 4% of revenue), but the company generates ample cash to support its dividend. For the trailing 12 months, Walgreens reported $5 billion in free cash flow compared to the $1.7 billion it paid out in dividends during that time.

It's also a fairly cheap stock to own, trading at a forward price-to-earnings multiple of less than 10  vs. 11 for rival CVS Health. And although investors may be tempted to think of Walgreens as just a pharmacy retailer with no growth potential, the company is expanding its horizons -- launching medical clinics with primary care provider VillageMD. The two plan to open 600 locations within four years.

Walgreens is an attractive buy for both value-oriented investors as well as those looking for some stable, recurring cash flow.

2. Coca-Cola

Soft-drink titan Coca-Cola is an another safe dividend stock to consider holding. When the company announced it was raising its dividend payment by 2.4% earlier this year, this marked the 59th year in a row that the stalwart has hiked its payouts. Currently, the stock yields about 3.1%.

Coca-Cola's bottom line is consistently strong with a net profit margin of more than 20% in each of the past three years. After a pandemic-related rough patch, revenue is also now on the mend. For 2021, the business anticipates organic revenue growth of 12% to 14% as it recovers from last year's stay-at-home orders in so many places.

Meanwhile, the dividend's outlook continues to looks secure. For the most recent quarter, the company earned $0.61 per share, which is 45% higher than its dividend payment of $0.42. And with business results only likely to improve as the recovery continues, there remains little concern about the future of that dividend -- making this another safe income stock to hold in your portfolio for years. 

3. Toronto-Dominion Bank

Bank stocks normally make for safe dividend investments, and Toronto-Dominion (TD) is no exception. Not only is it safe, but it also pays an attractive 3.7% yield. While not a Dividend Aristocrat -- as the pandemic and financial crisis of the 2000s made it difficult to increase payouts consistently -- TD is still worthy of consideration as a long-term dividend investment.

TD's sheer size makes it a great way to invest in the financial services sector; it is the fifth-largest bank in North America. And although it is a Canadian-based bank, what makes it stand out is the company's strong presence south of the border -- it has more branches in the U.S. than in its home country (1,142 vs. 1,073 as per its most recent results).

That strong competitive position has put TD in good stead. Despite the uncertain environment, the company has banked a profit margin of 36% over the trailing 12 months and no less than 26% in each of the past five fiscal years. For the latest period ended July 31, the bank's earnings soared to 3.5 billion Canadian dollars -- 58% higher than the prior year -- thanks to much stronger economic activity in both Canada and the U.S.

The gradual economic recovery has also allowed the bank to return to a more normal financial posture. Last year, worried about a general business slowdown and the possibility of defaults, TD set aside a CA$2.2 billion provision for credit losses -- something it has not had to do this year.

TD has shown that it can perform well even under tough economic conditions. While its dividend may not always increase during such periods, it offers an above-average yield and could still make for a top dividend stock for investors to hold.

David Jagielski has no position in any of the stocks mentioned. The Motley Fool recommends CVS Health. The Motley Fool has a disclosure policy.

Stocks Mentioned

Walgreens Boots Alliance Stock Quote
Walgreens Boots Alliance
WBA
$40.51 (-1.70%) $0.70
Coca-Cola Stock Quote
Coca-Cola
KO
$63.38 (-0.13%) $0.09
Toronto-Dominion Bank Stock Quote
Toronto-Dominion Bank
TD
$66.16 (-1.49%) $-1.00

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

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