If you want to build a solid and profitable portfolio, you can't go wrong with dividend stocks. These stocks reward you with regular cash payments just for holding them. Moreover, dividends have accounted for the bulk of total returns from the U.S. stock market since 1900, a fact that often gets overlooked in today's growth-oriented market.
However, not all dividend stocks are table-pounding buys. Some are much better than others in terms of their quality, growth potential, and risk profile. The best dividend stocks are those that come from companies with a strong competitive advantage, reliable and increasing revenue, and healthy free cash flows.
Image source: Getty Images.
Here are four dividend stocks that are proven wealth creators, making them top buys for the buy-and-hold crowd.
These four dividend stocks are rock-solid buys
1. Visa (V -0.23%) is a juggernaut in the digital payments space. As a result, the company has been able to generously reward its shareholders with a stunning dividend growth rate of 15.7% over the past five years.
This superb dividend growth rate also appears sustainable due to two key factors. First, Visa has a formidable competitive advantage in the digital payments industry. Second, it is a leader in a market that is growing by double digits annually right now.
So, while its yield of 0.75% may not be eye-catching, Visa's ultra-fast dividend growth rate and strong organic growth potential are solid reasons to buy its stock right now.
2. ExxonMobil (XOM -2.78%) is an oil and gas stalwart. Unlike Visa, ExxonMobil's five-year dividend growth rate of 1.77% isn't anything special. However, the oil and gas titan's stellar 3.73% annualized yield is more than twice that of the average stock listed on the S&P 500 index.
Plus, its smart cost-cutting strategies should keep its already robust free-cash-flow generation moving in the right direction, even with challenges from the industry's ongoing shift to renewables. In short, Exxon is a high-yield dividend stock that stands out as a reliable passive income play.
3. Walmart (WMT -0.08%) is not just a big box retailer; it's a dividend powerhouse. The company has been rewarding its loyal shareholders with annual dividend increases since 1974, making it one of the most consistent dividend payers in the market. And that's not all.
Walmart is also planning to split its stock 3-for-1 later this month, which will make it more accessible and attractive to a wider range of investors. This move could boost its share price and deliver even more value to long-term holders.
Some people might overlook Walmart's dividend because of its low 1.35% yield and sluggish growth rate of 1.85% over the past five years. But they would be missing out on a great opportunity. Walmart's business is highly profitable and resilient, and its dividend is a proven commodity. In fact, the retail giant has markedly outperformed the broader market since 1990, thanks in no small part to its robust dividend program.
WMT Total Return Level data by YCharts
4. Microsoft (MSFT 1.82%) arguably deserves more recognition as a dividend stock. The tech giant has transformed itself into a leader in cloud computing and artificial intelligence, boosting its revenue by a staggering 558% and its earnings by a mind-blowing 2,000% since it initiated its dividend program in 2003.
MSFT Revenue (Annual) data by YCharts
Compared to those scorching metrics, though, Microsoft's meager 0.71% yield might seem insignificant, but don't let that fool you. Microsoft is a fantastic dividend growth stock.
To wit, the company has increased its dividend by an impressive 10.2% annually over the past five years, and its free cash flows have also doubled in that time.
That's an amazing combination that should appeal to dividend growth investors. So, don't overlook Microsoft as a mere large-cap growth stock; it's also an incredible dividend play.
