There's no sugarcoating it: This has been a challenging year to make money on Wall Street. Since hitting their respective all-time highs, the widely followed Dow Jones Industrial Average, broad-based S&P 500, and tech-driven Nasdaq Composite have tumbled as much as 18%, 23%, and 33%. This places both the S&P 500 and Nasdaq firmly in a bear market.
Although bear markets can tug on investors' emotions and test their resolve, they're historically the ideal time to put your money to work. Over time, every notable crash, correction, and bear market has eventually been wiped away by a bull market.
Arguably the smartest way to invest your money during a bear market decline is in dividend stocks. Companies that regularly pay a dividend are usually profitable on a recurring basis and time-tested. In other words, they're just the type of businesses we'd expect to increase in value over the long run.
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What's more, income stocks have a history of outperforming nonpayers by a significant amount. According to a study conducted by J.P. Morgan Asset Management, a subsidiary of our nation's largest bank by assets, JPMorgan Chase, dividend stocks averaged an annual return of 9.5% between 1972 and 2012. By comparison, the non-dividend-paying stocks clawed their way to a meager 1.6% annualized return.
Buying high-quality income stocks can be your golden ticket to fighting inflation and navigating a sizable market downturn. What follows is a group of four sensational dividend stocks that can help patient investors turn $300,000 into $1 million in 10 years, or less.
Enterprise Products Partners: 7.31% yield
This first passive-income powerhouse that can help long-term investors more than triple their money by 2032, or possibly sooner, is midstream oil and gas stock Enterprise Products Partners (EPD -0.31%). At 7.3%, it has the highest yield among the companies listed here, and has had a 23-year streak of increasing its base annual payout.
Though some investors might be leery of putting their money to work in energy stocks with the historic demand drawdown of 2020 still fresh in their minds, Enterprise Products Partners was virtually immune to this drawdown. That's because it's an energy intermediary that operates transmission pipelines, storage, and in some instances refining capacity.
Most midstream energy companies rely on fixed-fee or volume-based contracts that provide highly transparent cash flow. It's this transparency that allows Enterprise Products Partners the confidence to undertake new infrastructure projects, acquisitions, and pay its distribution, all without adversely impacting its profitability.
If you need more proof that Enterprise Products Partners can be a rock in your portfolio, consider this: Its distribution coverage ratio (DCR) never fell below 1.6 in 2020. The DCR is the amount of distributable cash flow generated relative to what's actually distributed to shareholders. A figure below 1 would imply an unsustainable payout.
With crude and natural gas prices expected to remain elevated for the foreseeable future, Enterprise Products Partners is in perfect position to grow its already massive midstream network.
Innovative Industrial Properties: 6% yield
A second sensational dividend stock that can turn $300,000 into a cool $1 million over the next decade is cannabis-focused real estate investment trust (REIT) Innovative Industrial Properties (IIPR 2.21%). IIP, as the company is more commonly known, sports a 6% yield and has increased its quarterly payout by 1,067% over the past five years.
The beauty of IIP's operating model is that it's highly predictable. As of June 15, the company owned 111 properties spanning 8.4 million square feet of rentable space in 19 states Although the company recently stopped reporting its weighted-average lease length, it did announce earlier this year that 100% of its owned assets were fully leased, with a weighted-average lease length of more than 16 years.
To build on this point, Innovative Industrial Properties passes along inflationary rent hikes to its tenants each year, as well as collecting a 1.5% property management fee tied to the base annual rental rate. Even though acquisitions are its key growth driver, there is a modest organic growth component built in.
The interesting thing about IIP is that a lack of cannabis reform on Capitol Hill has actually helped grow its asset portfolio. The company's sale-leaseback program purchases properties for cash, putting money in the coffers of cannabis operators that might not otherwise have access to traditional bank loans. In return, Innovative Industrial Properties leases the property back to the seller, thereby netting a long-term tenant. As long as marijuana remains federally illegal, IIP should continue to thrive.
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Broadcom: 3.11% yield
A third amazing income stock that can deliver gains of 233% over the next 10 years (or possibly less) is semiconductor chip stock Broadcom (AVGO 1.98%). Since 2010, Broadcom's quarterly dividend has increased by more than 5,700% -- and that's not a typo.
Although semiconductor stocks are cyclical and tend to ebb and flow with the U.S. and global economy, Broadcom is less inclined to struggle during these ebbs thanks to a number of competitive advantages.
For example, the company is well positioned to benefit from the push to 5G wireless download speeds. It's been about a decade since wireless download speeds were last meaningfully improved. With telecom companies spending billions to upgrade their infrastructure to 5G capability, the expectation is that we'll see a steady device replacement cycle. That's good news for Broadcom, which generates most of its sales from next-generation wireless chips found in smartphones.
The company has abundant ancillary growth opportunities as well. It provides access and connectivity chips for data centers, as well as solutions for next-generation vehicles. The former is particularly intriguing considering that data is being moved into the cloud at an accelerated pace in the wake of the pandemic.
But what really shores up Broadcom is its backlog. The company ended 2021 with a $14.9 billion backlog and was booking orders well into 2023. This backlog provides operating cash flow transparency and stability that few semiconductor stocks can offer.
Visa: 0.76% yield
A fourth and final sensational dividend stock that can turn $300,000 into $1 million by 2032, or sooner, is payment processor Visa (V 0.66%). Even though Visa's 0.76% yield might appear paltry next to some of the other companies on this list, consider this: Its quarterly payout has increased by 1,326% in the last 14 years, and its share price has gained 1,280% since its March 2008 initial public offering.
One of the top reasons for long-term investors to buy Visa is its cyclical ties. Although weaker consumer and business spending during recessions can hurt Visa, it's important to recognize that recessions typically only last for a couple of quarters. In contrast, periods of expansion are almost always measured in years. Visa gives patient investors a way to take advantage of the natural expansion of the U.S. and global economy.
It's also a company that's purposely avoided becoming a lender. While I doubt that Visa would have any trouble leveraging its well-known brand to collect interest income, being a lender would expose the company to loan losses during recessions. Sticking strictly to payment processing means the company doesn't have to set aside capital to cover loan delinquencies, and that's a key reason that it bounces back earlier than most financial stocks following an economic downturn.
The Visa growth story isn't anywhere close to complete, either. Despite controlling a whopping 54% of credit card network purchase volume in the U.S. (among the four major networks as of 2020), the vast majority of global transactions are still being conducted in cash. This gives Visa a long runway to organically or acquisitively expand its network into fast-growing emerging markets.
