While most of Wall Street is focused on the next few quarters, your main advantage as an investor is the ability to look past that volatility and focus on the bigger picture. Retirement portfolios are built over decades, after all, and so there's no pressure on you to show positive results in any given three-month period.
Dividend stocks help an investor maintain this long-term focus. These companies tend to be well-established businesses with predictable earnings streams. And reinvesting their regularly growing payouts can amplify returns over the decades.
With these positive factors in mind, let's look at two excellent dividend options for your portfolio. Read on for some reasons why Procter & Gamble (PG -0.78%) and Home Depot (HD 0.94%) might be worth holding for many years to come.
1. Procter & Gamble
To find the last year in which Procter & Gamble failed to pay a dividend, you'll have to go all the way back to the 80s -- the 1880s. The consumer staples company has been sending out dividend checks since it was established in 1890, and it has raised that payout for 67 consecutive years.
A lot has changed about the consumer spending landscape in that period, but P&G's core strengths remain stable. These include its dominant market share position across dozens of large niches such as paper towels, laundry care, and diapers. P&G has been expanding on its lead in these areas for decades, mainly thanks to competitive assets like branding, pricing power, and innovation.
You aren't likely to see soaring income growth from this business. P&G's last dividend boost was just 3%, in fact. But holding the stock for decades is still likely to generate impressive returns over time.
P&G generates ample cash flow that management directs back toward shareholders through dividends and stock buyback spending. Add those gains to the consumer staples giant's predictably expanding earnings, and you have the key ingredients you need for market-beating growth.
2. Home Depot
Wall Street is avoiding the home improvement market today, which could mean great returns for investors willing to buy during this period of elevated pessimism. It's a fact that Home Depot has thrived through many previous downturns, including the deep pullback that occurred as part of the Great Recession.
Some investors are fearing another slump in the housing market, and Home Depot is indeed seeing weaker sales trends and declining customer traffic. Yet the year is unfolding right along with management's predictions. Home Depot still expects comparable-store sales to drop by between 2% and 5% this year while profit margins hold steady at more than 14% of sales.
The long-term outlook for the housing industry is bright, pushed along by huge positive factors like aging housing stock, remote working trends, and demographic shifts. Both Home Depot and rival Lowe's highlighted these reasons to remain bullish on their businesses even though higher mortgage rates are pressuring home improvement demand in 2023.
In the meantime, you can collect Home Depot's growing dividend and reinvest the proceeds to collect more shares while stock prices are depressed. You'll get an almost 3% annual yield from the purchase today and will likely see that rate climb significantly over the next few decades.
