Retiring early is a prospect that looks bleak amid inflation. In some cases, retirees are even coming back to work to help make ends meet.
However, one way to improve your financial prospects and potentially make early retirement a reality is by investing in stocks. Dividend stocks, in particular, could offer you a path to some significant wealth in your future. The good news is you can invest in safe, blue-chip stocks that won't put your money overly at risk.
A couple of stocks that are ideal for long-term dividend investors are Eli Lilly (LLY 0.42%) and Coca-Cola (KO 0.15%). Their businesses are strong, and they both have excellent track records of paying dividends.
1. Eli Lilly
You may initially scoff at Eli Lilly's 1.2% yield. At that kind of payout, you would normally not expect to earn much in dividend income. But the real value in Eli Lilly is from holding the stock over the long term. Its yield is low, but that's because the stock has done so well, rising significantly in value.
In 10 years, shares of Eli Lilly have climbed an incredible 650% (the S&P 500 is up just 178% during that time frame). As the share price rises, the dividend yield declines because it costs you more to collect the same dividend payment.
However, the top drugmaker has been increasing its dividend payments over the years, as seen in the chart.
In five years, management has bumped up the payouts by more than 88%. That averages out to a compound annual growth rate (CAGR) of 13.5%. That doesn't mean you can expect to receive a rate hike that high every year, but it shows the company's willingness to generously raise its payouts -- a key feature you should look for in dividend stocks that you want to hold for decades.
Although there's no certainty around future dividend increases, it's likely that investors will collect something; Eli Lilly has been paying dividends since the 19th century. Add on the potential gains you can earn from the stock's rising value, and you can see how you could quickly be generating some significant profits over the years.
Eli Lilly's growth prospects continue to look strong. The company's diabetes treatment, Mounjaro, has shown impressive results in helping people lose weight, and it could be a game changer for the business. Eli Lilly's Alzheimer's drug, donanemab, also shows promise and may be a future blockbuster for the company.
Year to date, the healthcare stock has risen 18% while the S&P 500 has declined 20% as its market-beating ways continue. And there's little reason to expect that will change in the years ahead. Whether you buy it for growth or dividends, Eli Lilly is a top stock for any investor to consider for their portfolio.
Coca-Cola may not have as impressive growth prospects as Eli Lilly does, but it still makes for a solid, stable dividend stock to buy and hold. One distinction it has over Eli Lilly: it's a Dividend King. Coca-Cola has been increasing its dividend payments for 60 years in a row.
That impressive track record makes it incredibly likely that your dividend income will rise from holding this stock. And at 2.7%, its yield is already higher than the healthcare giant's. Coca-Cola raised its dividend payments from $0.42 to $0.44 this year. Over the course of five years, the company has increased its payouts by 19%, averaging a modest CAGR of 3.5%.
That's a realistic, steady rate of increase that investors can expect from a consistent dividend growth stock like this one. Coca-Cola's payout ratio of 72% isn't terribly low, and large rate hikes wouldn't make a lot of sense for the business.
The soft drink company's business has evolved over the years as Coca-Cola has continued to find ways to grow. Now, with 200 brands and a global reach that includes 200-plus countries around the world, the company has even more potential ways to expand. And it is more diverse than ever before, making it a strong investment to hang on to for the long haul. And like Eli Lilly, it has also been a market-beating stock this year, rising by 9% thus far.