There are lots of get-rich-quick schemes out there. Unfortunately, most lose their investors' money rather than make them rich. A far better approach is to take things slow and grow your wealth over time.
A great way to do that is to invest in dividend stocks, which can be very enriching investments over the long term. The average dividend payer in the S&P 500 index has delivered a 9.2% average annual total return over the last 50 years, according to Ned Davis Research and Hartford Funds. That has outperformed the 7.7% average annual total return of an equal-weight S&P 500 index. It's also worth noting that the best returns have come from dividend growers and initiators. This sub-group has delivered a 10.2% average annual total return, significantly outperforming companies with no change to their dividend policies (6.6% average annual total return).
As far as enriching dividend growth stocks go, Chevron (CVX 0.37%), Coca-Cola (KO), and Medtronic (MDT 0.62%) are among the cream of the crop. This trio has delivered decades of dividend growth, which should continue in the future. A $1,000 investment in these stocks could grow into a much larger future payday.
The fuel to continue growing its payout
Chevron has increased its dividend for 36 straight years. During that time, the oil giant has delivered an 11.3% average annualized total return. That would have grown a hypothetical $1,000 investment made in 1987 into over $52,000 today.
Chevron should continue enriching its investors in the future. The oil giant expects its investments to grow its traditional and lower-carbon energy businesses, along with its acquisition of Hess and PDC Energy, to more than double its free cash flow by 2027. That assumes oil averages $70 a barrel, which is below the current price point. Chevron's growing cash flow will give it more fuel to increase its dividend. It expects to raise its payout by 8% next year, an acceleration from the 6% average annual growth rate it delivered in the recent past.
Meanwhile, Chevron is already planning for a future when oil isn't the world's dominant fuel source. It intends to invest $10 billion by 2028 on lower-carbon projects like carbon capture and storage, renewable fuels, and hydrogen. These investments will drive earnings growth in the future, helping offset the potential decline in oil demand while giving it the fuel to continue increasing its dividend.
Plenty of pop left to produce enriching returns
Coca-Cola increased its dividend by 4.6% earlier this year, marking its 61st straight year of dividend growth. That kept the beverage giant in the elite group of Dividend Kings.
That steadily growing payout has helped enrich Coca-Cola's investors over the years:
KO Total Return Level data by YCharts
Coca-Cola has lots of growth still ahead. Its long-term target is to deliver organic revenue growth of 4% to 6% annually as it continues to capitalize on the growing global beverage market and its pricing power. The company expects to complement organic growth with consumer-centric acquisitions as compelling opportunities arise. Those catalysts should increase its earnings per share by 7% to 9% per year. That should enable Coca-Cola to continue growing its dividend at a decent pace. With its dividend yield currently above 3%, Coca-Cola's earnings growth positions it to produce total returns in the low double digits from here.
A very healthy dividend
Medtronic hit its 46th straight year of dividend growth in 2023. The healthcare technology company has delivered robust dividend growth over the years (35% over the last five years, 146% in the past decade, and 16% compound annual dividend growth over the last 46 years).
The company's rapidly rising dividend has made its investors a lot richer over the years. It has delivered a 12.2% average annual total return over the last five decades, growing a $1,000 investment into over $350,000.
Medtronic expects to continue growing at a healthy rate in the future. While it aims to return at least half of its free cash flow to shareholders each year (primarily through dividends, though it does repurchase shares), it uses the cash it retains to make innovation-driven growth investments. It's investing heavily in research and development and has a long history of making strategic acquisitions to accelerate innovation. These investments should grow its cash flow so Medtronic can continue increasing its dividend.
Be the tortoise, not the hare
We'd all love to find that one home run investment that made us all very rich virtually overnight. However, that's not a very realistic investment strategy. Investing in stocks that slowly build your wealth is a far better and likely more successful approach. Dividend growth stocks like Chevron, Coca-Cola, and Medtronic are proven wealth creators. With more growth ahead, they look like smart ways to invest $1,000 right now for a richer future.
