Dividend stocks can be wonderful investments. As a group, they have outperformed the broader market over the last 50 years (with a 9.2% average annual total return versus 7.7% from an equal-weighted S&P 500 index).

And the best returns come from companies that steadily increase their payouts -- 10.2% a year on average. Chevron (CVX 0.37%), Coca-Cola (KO), and Medtronic (MDT 0.62%) have elite track records of growing their dividends. Those payouts currently yield over 3% -- double the 1.5% dividend yield on the S&P 500 -- and should continue rising. Because of that, investors don't need to think twice about buying them this July. 

A well-fueled payout

Chevron currently yields 3.8%. The company has an exceptional track record, increasing its payout annually for 36 straight years, the second-longest streak in the oil patch. It has risen at a 6% compound annual rate over the last 15 years -- and twice as fast as its closest peer over the last five years. 

And it has plenty left in the tank to continue raising its dividend. It can generate enough cash at an average oil price of $60 a barrel through 2027 (even assuming $50 oil in 2025 to 2027) to cover its investment program and a growing dividend with room spare.

Those investments will grow its free cash flow more than 10% annually at that price point -- with enough balance-sheet flexibility to repurchase shares at the low end of its $10 billion to $20 billion annual range. That would retire about 3% of its outstanding shares each year at the current price.

While the bulk of Chevron's investments are going into its legacy fossil fuels business, the company is also building out lower-carbon operations. It's becoming a leader in renewable fuels while also taking steps to capitalize on the potentially massive carbon-capture and hydrogen markets. These lower-carbon investments could allow it to continue growing its dividend for decades to come.

A dividend growth machine

With a 3% dividend yield, Coca-Cola can add some pop to anyone's passive income stream. The beverage giant has a phenomenal record: It gave investors a 4.6% raise earlier this year, notching its 61st straight year of increasing the payout. That kept Coca-Cola in the super-elite group of Dividend Kings, companies with 50 or more consecutive years of dividend increases. 

Coca-Cola is a cash flow machine. It expects to produce $9.5 billion of adjusted free cash flow this year, easily covering its $7.6 billion dividend outlay. The company also has a cash-rich balance sheet. It ended the first quarter with $13.2 billion of cash, equivalents, and short-term investments, giving it a low net leverage ratio of 1.8 times.

The company uses its excess cash and its balance sheet to make growth-focused investments. It expects its organic revenue to rise by 4% to 6% annually. That should support 7% to 9% increases in earnings per share, giving Coca-Cola plenty of fizz to continue pushing its payout higher.

Very healthy income growth

Medtronic currently yields 3.2%. The medical technology company has done a tremendous job boosting its dividend, increasing it for 46 straight years, at a 16% compound annual rate during that time. 

The company aims to return at least 50% of its robust and growing free cash flow to shareholders through dividends (the primary method) and share repurchases. It set a target of sending them $4 billion during the current fiscal year, after paying $3.6 billion in dividends last year. 

Medtronic uses the cash it retains to make innovation-driven growth investments. Its strong cash-rich balance sheet gives it additional flexibility, including making acquisitions. For example, it recently agreed to buy South Korean healthcare technology company EOFlow for $738 million. It makes a wearable, waterproof insulin delivery device.

Medtronic's continued investments in innovation should allow it to keep pushing its dividend payment higher. 

High-quality dividend stocks

Given their current yields, Chevron, Coca-Cola, and Medtronic pay at least twice as much dividend income as an S&P 500 index fund. Meanwhile, they have excellent track records of increasing their payouts, which seems likely to continue, creating the potential for attractive total returns in the future. That makes them look like ideal stocks to buy this July.