Whether you're a new investor or a seasoned professional, dividend stocks can be a good way to diversify a portfolio and generate passive income. And dividend-paying businesses with strong prospects for future growth can make for even better investments.
Passive income combined with share price appreciation can turbocharge your portfolio, and companies like Texas Instruments (TXN -1.23%) and Lowe's (LOW -0.03%) check both boxes. Let's find out a bit more about these two dividend stocks that might just be right to buy now and hold for the next decade.
Image source: Getty Images.
1. Texas Instruments
Texas Instruments is a semiconductor company that serves more than 100,000 customers across a number of industries, though the majority of revenue comes from the industrial, automotive, and consumer electronics sectors. As the long-standing market leader in both analog chips and embedded processors, the company has raised its dividend at an annualized pace of 25% since 2004.
Better yet, analog chips are present in all electronic devices and embedded processors are present in most, meaning its market opportunity will continue to expand as the world becomes more digital. Thanks to a few key advantages, Texas Instruments is unlikely to lose its foothold in the market. Of particular note, it owns several fabrication facilities that support 300-millimeter wafer production -- a term that describes the diameter of the silicon wafer on which semiconductors are made. Chips built on a 300-millimeter wafer cost 40% less than those built on a 200-millimeter wafer, which is the size used by most rivals.
Additionally, Texas Instruments handles a good portion of testing and assembling in-house, which gives the company a great deal of control over its supply chain.
Last year, that competitive edge once again fueled impressive financial results. Revenue climbed 27% to $18.3 billion, and free cash flow jumped 15% to $6.3 billion.
Going forward, Texas Instruments should benefit from the proliferation of electronic devices, and the company is working to reinforce its competitive edge. It currently has two operational 300-millimeter fabrication facilities, but it will have four by 2023 and (potentially) six by 2025.
Currently, Texas Instruments' quarterly payout sits at $1.15 per share, which puts the dividend yield at 2.46%. On top of that, the stock price is up 437% over the last 10 years. Given its strong competitive position in a critical industry, I think Texas Instruments will continue to beat the market over the next decade. That's why this dividend-paying semiconductor stock looks like a great long-term investment.
2. Lowe's
Lowe's is the world's second-largest home improvement retailer, and one of only 39 Dividend Kings. The company operates nearly 2,000 stores across the U.S. and Canada, offering products and services to both do-it-yourself and professional customers. Last year, Lowe's continued to execute on its Total Home strategy, a growth initiative that aims to boost online sales, improve logistics, and further penetrate the pro market.
Of particular note, the company added several new distribution and fulfillment centers to its already extensive logistics network last year. That infrastructure helps it move products efficiently, creating a better experience for customers through faster shipping and better management of in-store inventory. Lowe's also continued to enhance its installation and repairs services, and its online product assortment.
Those efforts translated into another solid financial performance. In 2021, revenue rose 7.4% to $96.3 billion, due to a 6.9% increase in same-store sales and 12% increase in average ticket price. Additionally, operating margin improved 179 basis points to 12.6% -- something management attributes to better cost control and pricing power -- and earnings rose 35% to $8.77 per diluted share.
Going forward, Lowe's has plenty of room to grow. Management puts its addressable market at $900 billion, and the company's past execution should give shareholders confidence. The stock has surged 525% over the last 10 years, and in light of the company's strong competitive position, I think the stock will continue to outperform over the next 10 years. Additionally, Lowe's has paid a dividend for 59 consecutive years, and while the yield is just 1.51%, the quarterly payout has increased by 19% per year over the last decade. It currently sits at $0.80 per share.
In short, Lowe's looks like the full package -- a stable source of passive income and a market-beating investment. That's why this dividend stock could be a great addition to any portfolio.
