The right dividend stocks can shower investors with reliable passive income. This can be used to cover bills and secure financial independence for investors.
But how can investors be sure they are picking companies that will pay dividends for many years? Picking companies that are well-established in thriving industries with track records of dividend growth is as close to a guarantee of future dividend growth as possible.
Here are three quality dividend stocks that appear positioned to grow their dividends for many more years.
Image source: Getty Images.
1. Abbott Laboratories
With a greater than $180 billion market capitalization, Abbott Laboratories (ABT 1.91%) is one of the largest medical devices companies in the world. And if Abbott's size and scale weren't enough, the medical devices industry forecast is very promising.
The market research firm Precedence Research anticipates that the medical devices industry will generate 5.5% annual growth, from $550 billion in 2021 to $850 billion by 2030. This is due to the growing and aging global population. As a result of its dominance and a positive industry forecast, analysts believe that Abbott will deliver 12.6% annual earnings growth over the next five years.
Abbott comes with a 1.8% dividend yield, which tops the S&P 500 index's 1.6% yield. And with the dividend payout ratio expected to be 38.6% in 2022, the Dividend King should be able to hand out strong dividend raises in the years ahead.
The cherry on top is that Abbott is trading at a forward price-to-earnings (P/E) ratio of 21.8. This is slightly below the medical devices industry's average forward P/E ratio of 21.9. That's not a massive discount to its industry. But any discount is worth jumping on with a Dividend King like Abbott.
2. Lowe's
Homeownership is a major component of the American dream for many people. And as the second-largest player in the $900 billion home improvement retail industry, Lowe's (LOW 0.63%) should remain a large beneficiary of the American dream.
Even with the housing market expected to cool off in the near future, analysts still expect Lowe's to put up 11.7% annual earnings growth through the next five years. Increasing interest rates will likely pressure new home builds. On one hand, this will be a headwind to Lowe's. However, on the other hand, other consumers will likely turn to renovations rather than buying their dream home. This will be a tailwind for the company.
Given that Lowe's dividend payout ratio will be 27.4% in 2022, the stock's 2.3% dividend yield is quite safe. This should give Lowe's the flexibility to extend its six-decade streak of dividend growth moving forward.
And the stock's forward P/E ratio of 13.6 is moderately lower than the home improvement retailer industry's average forward P/E ratio of 15.3. This makes Lowe's a great dividend stock to buy and hold over the long run.
3. Philip Morris International
Philip Morris International's (PM 2.82%) roughly $140 billion market cap makes it the largest tobacco company in the world by far. And due to the company's leadership in smoke-free products like IQOS (which heats tobacco rather than burning it), the company's future looks to be bright.
Despite the company's permanently discontinued operations in Russia (and Ukraine until stability returns to the area), analysts are still projecting 3.1% annual earnings growth for the next five years.
Philip Morris International's predicted 90.8% payout ratio for 2022 is on the high end for a tobacco company. This will probably translate into dividend growth lagging earnings growth for the next few years. Although the stock's massive 5.5% dividend yield makes up for lower dividend growth potential for the foreseeable future.
Best of all, Philip Morris International is trading at a forward P/E ratio of 15.6. For context, this is slightly lower than the tobacco sector's average forward P/E ratio of 16.4. This makes the stock a compelling buy for income investors.
