It takes money to make money. However, you don't need a lot to get started. Many top-notch dividend stocks have share prices below $100 right now.
That's worth noting, given the powerful returns that dividend stocks have produced over the long term. According to data from Ned Davis Research and Hartford Funds, dividend-paying stocks have grown a $100 investment into around $8,750 over the past 50 years. That's 10 times more than the average non-payer, at less than $850. The best returns came from companies that increased their dividends. They grew a $100 investment into more than $14,100, compared with around $2,790 for companies with no change in their dividend policies.
Given that data, investing in companies that grow their dividends is a smart move. Realty Income (O +0.49%), Brookfield Infrastructure (BIPC 1.32%)(BIP 2.62%), and Medtronic (MDT 1.79%) are three great options. They all have share prices below $100; dividend yields above 3%, which is more than double the S&P 500's 1.2%; and excellent records of growing their dividend. With more dividend growth ahead, they look like wise investments.
A dividend growth superstar
NYSE: O
Key Data Points
Realty Income has been a model dividend growth stock. The real estate investment trust (REIT) has increased its payment 128 times since its public market listing in 1994, which includes 30 straight years of dividend growth and 109 quarters in a row.
The REIT should have no trouble increasing its high-yielding dividend of 5.8% in the future. It has a conservative dividend payout ratio for the sector, at around 75% of its adjusted funds from operations (FFO), and one of the best balance sheets in the industry. It's just one of eight REITs with two bond ratings of A3/A- or better. Those features give it tremendous financial flexibility to expand its portfolio of income-generating properties.
Realty Income typically invests billions of dollars every year to expand its portfolio. Meanwhile, it has a long growth runway, given that there are around $14 trillion of properties it could acquire in the future across the U.S. and Europe within its current investment focus of net lease retail, industrial, gaming, and data centers.
Lots of fuel to continue growing
NYSE: BIPC
Key Data Points
Brookfield Infrastructure has increased its dividend every year since its formation 15 years ago. The globally diversified infrastructure operator, with its hands in utilities, energy midstream, transportation, and data, has grown its payout at a 9% compound annual rate during that period.
The company expects to grow its high-yielding payout of 4% at a 5% to 9% annual rate in the future. It shouldn't have any trouble achieving that target. Its organic growth drivers, consisting of inflation-indexed rate increases, volume growth as the global economy expands, and internally funded capital projects, are estimated to grow its FFO per share by 6% to 9% annually. Meanwhile, it believes that accretive acquisitions will push its growth rate above 10% per year.
Brookfield Infrastructure has a strong financial profile that supports its growth. It has a conservative dividend payout ratio, at 60% to 70% of its FFO, along with an investment-grade balance sheet and an active capital recycling strategy. It also has a robust investment pipeline, including $8 billion of secured capital projects and $4 billion more under development, and its biggest merger-and-acquisition pipeline in two years.
A healthy dividend stock
NYSE: MDT
Key Data Points
Medtronic has been a fantastic dividend stock. The medical technology company has increased its dividend for 47 straight years. It has grown its payout at a 16% compound annual rate during that period, including by 30% over the past five years.
The healthcare company should be able to continue increasing its high-yielding dividend of 3.1%. Even after investing heavily in research and development, it generates healthy free cash flow, 50% of which it returns to shareholders through dividends and share repurchases. It sent investors $5.5 billion in its 2024 fiscal year, primarily through its dividend payment.
Medtronic uses the cash it retains to maintain a strong financial profile. That gives it the flexibility to make acquisitions as opportunities arise. Along with research and development, these deals help Medtronic grow its cash flow, enabling it to continue increasing its dividend.
Brilliant dividend stocks to buy
Realty Income, Brookfield Infrastructure, and Medtronic have excellent records of increasing their dividends, which should continue. That bodes well for their ability to grow value for their shareholders in the future. It makes them look like smart dividend stocks to buy right now.
